Sri Ram Builders Vs State of M.P. .

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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4896 OF 2014 (Arising out of S.L.P. (C) No. 35001 of 2012)

Sri Ram Builders …Appellant

VERSUS

State of M.P. & Ors. ...Respondents

WITH

CIVIL APPEAL NO. 4897 OF 2014 (Arising out of S.L.P. (C) No. 35017 of 2012)

WITH

CIVIL APPEAL NOS.4898-4899 OF 2014 (Arising out of S.L.P. (C) Nos. 35027-35028 of

2012)

WITH

CIVIL APPEAL NO. 4900 OF 2014 (Arising out of S.L.P. (C) No. 36887 of 2012)

J U D G M E N T

SURINDER SINGH NIJJAR, J.

1. Leave granted.

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2. The Civil Appeal …………of 2014 arising out of S.L.P.

(C) No. 35001 of 2012 impugning the judgment of

the M.P. High Court at Jabalpur rendered in Writ

Petition No. 2937 of 2009. The Writ Petition has

been disposed of along with Review Application MCC

No. 99 of 2009 and MCC No. 893 of 2008 as well as

Contempt Petition No. 469 of 2008. The writ petition

has been disposed of with certain directions.

Whereas the aforesaid Contempt Petition and the

two Review Petitions have been disposed of in view

of the order passed in Writ Petition No. 2937 of 2009.

3. The relevant facts leading to the filing of the

aforesaid SLP are as follows:-

4. In 1979, Respondent No.2 / Madhya Pradesh Road

Transport Corporation (hereinafter referred to as

“MPRTC”) proposed to construct a bus stand at Vijay

Nagar, Indore. To this end, an Agreement for Lease

dated 2nd November, 1981 was entered into between

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the Transport Corporation and Respondent No.5/

Indore Development Authority (hereinafter referred

to as “IDA”), by which the land belonging to IDA,

admeasuring 10 acres situated at Vijay Nagar, Indore

(hereinafter referred to as “proposed site”) was

agreed to be allotted to the Transport Corporation,

initially, for 30 years. In pursuance of the Lease

Agreement, possession of the proposed site was

handed over to the MPRTC.

5. The Council of Ministers, State of Madhya Pradesh,

vide order dated 8th November, 2001, authorised the

Transport Corporation to construct a commercial

complex on the land owned by it or allotted to it on

lease, under a Build, Own-Operate and Transfer

(“BOT”) Scheme through open tenders. The revenue

generated from the said project(s) was to be used to

discharge the liability of the MPRTC. On 13th April,

2003, a notice inviting bids for selection of a

developer under the BOT Scheme was issued and

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published in the leading newspapers. In response to

this notice, a total number of ten applications were

received; and out of those ten applications, five were

found to have satisfied the eligibility criteria.

Appellant was placed at Sr. No.1 in the list of the

candidates satisfying the eligibility criteria.

Thereafter, a Special Committee was constituted for

the scrutiny of tenders received for construction of

the bus stand/commercial premises under the B.O.T.

Scheme. On 3rd July, 2003, the Special Committee

recommended that since the premium amount

offered by the bidders was less, further negotiations

be held with all the qualified bidders. Accordingly,

the Special Committee held negotiations with the

qualified bidders on 7th July, 2003, wherein the

Appellant’s bid for the B.O.T. Scheme was found to

be the highest.

6. MPRTC, after scrutiny of the financial bid and the

proposal submitted by the Appellant for B.O.T.

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scheme, approved its bid vide Acceptance Letter

dated 3rd October, 2003. In the Acceptance Letter,

the Appellant was directed to deposit 25 per cent

amount of the total premium amount of Rupees One

Crore Sixteen Lac Thirty Seven Thousand Seven

Hundred and Fifty (Rs.1,16,37,750/-) within 15

days of the issuance of the Acceptance Letter.

Accordingly, Appellant deposited the first installment

of Rs.1,16,37,750/-. The appellant also have to pay a

further sum of Rs.7,33,320/- demanded by MPRTC as

consultancy fees.

7. In pursuance of the Acceptance Letter, an Agreement

dated 4th February, 2004 was entered into between

the Appellant and the MPRTC. This agreement inter

alia provided that the tender document with scope of

work general conditions, special conditions, general

specifications, list of brands and offer price bid shall

form part of the agreement.

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8. The MPRTC issued a work order dated 16th March,

2004 to the Appellant for demolishing the existing

structure on the land; to be replaced by the

commercial complex. On 11th May, 2004, the State

Government issued a notification, in exercise of

powers under Sections 35(2) and 35(3) of the

Madhya Pradesh Nagar Tatha Gram Nivesh

Adhiniyam, 1973 (hereinafter referred to as

“Adhiniyam”), by which out of 10 acres of land at

Vijay Nagar which had been earmarked for the bus

stand (proposed site), 3.59 acres of land was

permitted to be used for commercial purposes.

9. On 14th May, 2004, the Appellant requested the

MPRTC to hand over the possession of the proposed

site, so that the structure existing thereon could be

demolished and new bus stand-cum-commercial

complex could be constructed, in accordance with

the terms and conditions of the tender/agreement.

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10. On 27TH May, 2004, a lease deed was executed in

favour of MPRTC by the IDA upon payment of

Rs. 24,27,052/- by the Appellant. This payment was

made by the Appellant in order to let the Transport

Corporation pay its arrears to IDA. Subsequently

on 24th June, 2004, IDA gave a No Objection

Certificate (“NOC”) to the MPRTC for the proposed

BOT project. Also, the Deputy Director, Town and

Country Planning granted approval to the MPRTC for

the construction of the Bus Stand and Commercial

Complex.

11. On 28th June, 2004, Writ Petition No. 801 of 2004

came to be filed by one Suresh Seth, before the

Indore Bench of the High Court of Madhya Pradesh,

assailing the Notification dated 11th May, 2004. By

this notification, as observed earlier, reservation of

land use of 3.59 acres was changed by the State

Government. The High Court, vide order dated 9th

September, 2004, sought reports from the State

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Government as well as the MPRTC and IDA. In their

respective reports, the State Government, MPRTC

and IDA stated that the said BOT project was in

public interest and justified the Notification dated

11th May, 2004.

12. Meanwhile on 6th January, 2005, the Joint Director,

Town and Country Planning sanctioned the detailed

site plan of proposed BOT project. The Appellant also

applied the Municipal Corporation, Indore for

sanction of the building plan, but the same was not

granted on the ground that Writ Petition No. 801 of

2004 was pending before the High Court.

13. On 23rd February, 2005, IDA issued a certificate

indicating therein that in respect of the proposed

B.O.T. Project, premium as well as 15 years’ lease

rent had already been deposited. On the basis of the

above, the IDA indicated that there shall be no

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objection, if land in question is mortgaged with any

bank, financial institution or the Government.

14. In the meanwhile, there was a move by the State

Government for closure of the MPRTC. In this

context, the Government of India granted no

objection to the State Government on 23rd March,

2005, subject to the condition that the State

Government shall ensure and be fully responsible for

ensuring compliance of any existing/future order(s)

passed by various Courts, including Tribunals, in

any/all matters relating to MPRTC.

15. The Appellant filed Writ Petition No. 636 of 2005 in

the High Court seeking a direction to the MPRTC to

immediately hand over possession of the land in

question to the Appellant and grant permission to

demolish the existing structure. On 5th August, 2005,

the Writ Petition No. 636 of 2005 was disposed of by

the High Court with the following directions:

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i.“That petitioner shall deposit the entire

balance amount within a period of one month

alongwith interest @ 18% per annum, w.e.f.

July 2004 when the 2nd installment became

due

ii. Upon depositing entire amount the

respondent shall handover the vacant

possession to the petitioner, within two

weeks, with a permission, to demolish the

structure as per the agreement. Respondent

shall also pursue the matter with the

Municipal Corporation to handover all part of

the premises, which is in their occupation.

iii. Respondent shall deposit the map

for sanction before the competent authorities

immediately, if not submitted, so far. In case

the map has already been submitted the

respondent shall give the authority to the

petitioner, to pursue the matter before the

competent authorities for obtaining the

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permission and shall extend all the

assistance for the purpose of obtaining

permission.

iv. After taking possession, the

petitioner shall construct and hand over the

construction property to the respondent as

per terms of the tender notice/agreement.

v. The competent authorities shall

consider the application of the respondent for

permission and shall grant the permission in

accordance with law.”

The Appellant deposited Rs.2,95,03,752/- towards

premium and a further sum of Rs.27,53,536/- towards

interest to the MPRTC, in terms of the aforesaid order.

Thereafter, again, the Appellant requested the

Respondents herein to hand over the possession of the

proposed site to the appellant. A Notice was issued by

the appellant to the MPRTC dated 12th September, 2005,

requesting to hand over possession of the land, in terms

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of the directions of the High Court dated 5th August,

2005.

16. At that stage, the Principal Secretary, Transport

Department/Respondent No. 2 herein, recorded a

note dated 15th September, 2005, questioning the

justification for constructing bus stand and observed

that the construction was not in public interest

particularly when a decision had been taken by the

State Government to wind up the MPRTC. Soon

thereafter, the MPRTC filed Special Leave Petition No.

20038 of 2005 before this Court challenging the

order dated 5th August, 2005 passed by the High

Court. This SLP was dismissed by this Court vide

order dated 7th October, 2005.

17. Possession of the proposed site still not having been

delivered, the Appellant filed Contempt Petition No.

466 of 2005 (renumbered as Contempt Petition No.

469 of 2008) before the High Court of Madhya

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Pradesh. In this Contempt Petition, the Appellant

moved an application for injunction on 11th

November, 2005 (I.A. No. 1060 of 2005) restraining

the MPRTC from handing over the possession of the

proposed site to the State Government for

establishing the Regional Transport Office. The High

Court on 14th November, 2005, directed MPRTC to

maintain status quo and not to handover the

possession of the proposed site or to create any 3rd

party interest. In spite of the aforesaid order, the

possession of the proposed site was handed over by

the MPRTC to the Transport Department on 16th

November, 2005, for opening the R.T.O. A test

centre for driving licences has been established on

the land meant for the commercial complex.

18. In the meantime, State of Madhya Pradesh moved

an application, MCC No. 1072 of 2005, before the

High Court, seeking recall of the order dated 5th

August, 2005 passed in Writ Petition No. 636 of 2005.

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The MPRTC also filed MCC No. 5 of 2006, seeking

identical relief, i.e. recall of order dated 5th August,

2005. It was claimed that a decision had been taken

by the M.P. State Government to wind up MPRTC. On

23rd March, 2005, MPRTC had been issued a notice of

demand for recovery of Rs.2387/- crores as Tax dues.

The property earmarked for the commercial complex,

was one of the properties seized by the State

Authorities on 19th July, 2005. Since the possession

was already taken by the State, no direction for

delivery of possession to the Appellant could have

been issued on 5th August, 2005. These facts could

not be placed before the High Court, as the State

was not impleaded as a party in Writ Petition No. 636

of 2005.

19. Thereafter, Appellant moved I.A. No. 7064 of 2006

in the Contempt Petition before the High Court to

implead the Transport Department - Respondent No.

2 herein, as a respondent in the Contempt Petition.

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This I.A. was allowed by the High Court by order

dated 6th October, 2006. During the course of hearing

of this Contempt Petition, Appellant moved another

I.A. No. 6906 of 2007, seeking a direction to the

respondents to place on record the following:

“1(a) On what date and which inward number

the order of the government directing the

RTO, Indore to attach the MPSRTC Property at

Indore was received by RTO, Indore pursuant

to which the so called attachment dated

9.7.2005 was made.

1(b) On what date, by which letter number

and under what dispatch number the fact of

attachment and acquisition of property/land

was sent by RTO, Indore to the State

Government (Original Letters, original

dispatch register). And on what date, by

which the inward number this information

was received.”

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According to the Appellant, the respondents could

not furnish the said information to the Court, despite

having sought a number of opportunities in that regard.

20. Meanwhile on 2nd November, 2007, the IDA

cancelled the lease of the MPRTC for violation of the

lease terms by running the RTO. Cancellation of the

lease was challenged by the MPRTC through Writ

Petition No. 6770 of 2007 in the High Court of

Madhya Pradesh. On 11th December, 2007, the

High Court without issuing notice to the Appellant,

who was impleaded as Respondent No.3, disposed of

the Writ Petition with the following observations:-

“When two instrumentalities of the State, such as in the present case, choose to bring their disputes in open court, the loss is of the general public. The public confidence in the credibility of the State Govt. and its various wings/functionaries and its instrumentalities comes at stake.

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In these circumstances, I do not find that this Court should continue with the proceedings in the present Petition. I deem it appropriate to request the Chief Secretary, State of Madhya Pradesh, to take up the matter at his level and after holding a meeting with the Principal Secretary, Transport Department, Principal Secretary, Housing and Environment Department and the Managing Director of the M.P. Road Transport Corporation Ltd. take such further action, as may be deemed appropriate, in the facts and circumstances of the case. However, the Chief Secretary shall ensure that the officers of the State Government and various other instrumentalities of the State Government are not allowed to bring out their inter se disputes in public in future”.

21. On 17th November, 2008, the Central Government,

Department of Transport & Highways informed the

State Government of Madhya Pradesh that the

request for permission for closure of MPRTC under

the provisions of the Road Transport Corporation Act,

for which earlier no-objection had been given, was

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being declined keeping in view the decision of

Ministry of Labour & Employment, and that it would

now have to continue its current operations.

22. The Appellant submitted representation

dated 20th February, 2009, wherein attention of the

Chief Secretary was drawn to the pendency of the

review petitions filed by the State of Madhya Pradesh

and the MPRTC; and the Contempt Petition filed by

the Appellant and the order passed therein, whereby

status quo was ordered to be maintained.

23. In spite of the aforesaid representation, Respondent

No. 1 held the meeting on 4th March, 2009 as

directed by the High Court, wherein it was inter alia

decided as under:

“I. Order dated 02.11.2007 and

notice dated 30.06.07 for cancellation of

lease of the land in question of the

Transport Corporation by the I.D.A. be

cancelled.

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II. R.T.O. be ordered for releasing

the land by the Transport Department

for attachment.

III. The M.P. Road Transport

Corporation shall hand over land in

question to I.D.A.

IV. The amount which has been received by

the Transport Corporation from Sh. Ram

Builders shall be returned along with

interest to Sh. Ram Builder.

V. Decision with respect to further use and

management of the land shall be taken

by I.D.A.”

24. Aggrieved by Clause (III), (IV) and (V) of the

aforesaid decision, Appellant preferred Writ Petition

No. 2937 of 2009 before the High Court of Madhya

Pradesh. It was inter alia contended that the

directions in aforesaid clauses were in violation of

order dated 5th August, 2005 of the High Court and in

violation of the principles of natural justice.

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25. The High Court disposed of the Writ Petition

on 27th September, 2012 with the following

observations:-

“15. The order dated 5.8.2005 passed in Writ Petition No. 636/2005 directing the corpora- tion to deliver possession of site to the peti- tioner cannot be implemented after the lease deed was cancelled by the IDA. It is this can- cellation which became the subject matter of writ petition No.6770/2007 and the writ peti- tion was decided vide order dated 11.12.2007 by another Single Judge Bench di- recting the Chief Secretary for resolving the dispute. As already mentioned above, the petitioner did not challenge the order dated 11.12.2007 and submitted a detailed repre- sentation dated 20.02.2009 to the Chief Sec- retary. The impugned decision taken by the Chief Secretary is in pursuance of the direc- tions given by the High Court in Writ petition No. 6770/2007 in which the petitioner was also a party. There is, thus, no violation of the principles of natural justice. The decision reached by the Chief Secretary directs that the entire amount paid by the petitioner be returned to it with interest. The decision does not fix the rate of interest but we feel that 9% will be the proper interest having re- gard to all the circumstances. In view of the direction to return the amount with interest, as decided by us, there would be apparently no loss to the petitioner. The respondents are directed to return the amount with inter- est within four months from today. If the pe-

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titioner still feels that there has been a breach of contract, it can pursue the remedy of specific performance or damages before a competent civil court. We, therefore, decline to interfere with the decision of the Chief Sec- retary except fixing the rate of interest, as in- dicated above.”

26. In view of the aforesaid directions, the High Court

also disposed of the Contempt Petition No. 469 of

2008, Review Application Nos. MCC No. 99 of 2009

and MCC No. 893 of 2008 without any further

directions.

27. We have heard the learned counsel for the parties.

28. Mr. R.F. Nariman and Mr. P.S. Patwalia, learned

senior counsel, appearing for the appellant submitted

that the reasoning adopted by the High Court in

Paragraph 15 of the impugned judgment, which has

been reproduced above, was not even supported by

the respondents. The first reason given by the High

Court is that the Order dated 5th August, 2005 in Writ

Petition No. 636 of 2005 can not be implemented

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after cancellation of lease deed by the IDA. This,

according to the learned senior counsel, is without

any basis as by the order dated 22nd February, 2009,

the Chief Secretary had cancelled the lease deed.

Therefore, the order dated 2nd November, 2007

having been nullified, the lease in favour of MPRTC

revived. This would also revive the application of

MPRTC to cull the agreement with the appellant. The

second reason given by the High Court, according to

Mr. Nariman and Mr. Patwalia is that the order dated

11th December, 2007 passed in Writ Petition No.

6770 of 2007 was not challenged by the appellant,

can not be supported in law. It is pointed out by the

learned senior counsel that the aforesaid writ

petition was filed by MPRTC challenging the order of

cancelling the deed in its favour by the IDA. The

appellant was not at all involved in the aforesaid lis.

In any event, the High Court had not passed any

order on merits. It had merely left it for the Chief

Secretary to decide the issue. Therefore, no cause

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had arisen to the appellant to challenge the order

dated 11th December, 2007. It is further pointed out

that the Chief Secretary in fact decided the

substance of the writ petition. Substance of the

grievance raised in the writ petition was decided in

favour of MPRTC by setting aside the order of

cancellation of the lease by the IDA. It is pointed out

by the learned senior counsel that IDA has not

challenged the order of the Chief Secretary

cancelling the direction of IDA with regard to the

cancellation of the lease.

29. Learned senior counsel further submitted that the

Chief Secretary was expected to take a decision in

accordance with law, i.e., in accordance with the

order of the High Court that has become final and

binding and not contrary to that. Furthermore, the

order of the Chief Secretary on directions (III), (IV)

and (V), which affect the rights of the appellant was

challenged in the writ petition in which the impugned

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judgment has been passed. According to the

appellant, the decision Nos. (I) and (II) were correct

and, therefore, there were no occasion to challenge

the same. The directions (III), (IV) and (V) are

contrary to Directions (I) and (II) and were beyond

the scope of the controversy raised in Writ Petition

No. 6770 of 2007, which had been referred to the

Chief Secretary by the High Court. The order of the

Secretary has been passed without issuing any

notice to the appellant, even though in the writ

petition, the appellant was impleaded as Respondent

No. 3. It is pointed out by the learned senior counsel

that by way of abundant caution, the appellant has

challenged the order dated 11th

December, 2007, passed in Writ Petition No. 6770 of

2007 in S.L.P.(C) No. 36887 of 2012.

30. Next it was submitted by the learned senior counsel

that the actions of Madhya Pradesh Road Transport

Corporation (Respondent No.3) are in gross contempt

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of the orders dated 5th August, 2005, which have not

been purged till date. The aforesaid order has

become final after the dismissal of SLP (C) No. 20038

of 2005 on 7th October, 2005. It is

submitted that the Review Petition MCC No. 99 of

2009 filed on 2nd January, 2006 after dismissal of the

aforesaid SLP on 7th October, 2005 is an abuse of

process and not maintainable. In support of this

submission, learned senior counsel relies on

Meghmala & Ors. Vs. G. Narasimha Reddy &

Ors. 1 (Paras 25 and 26). Similarly, the Review

Petition MCC No. 893 of 2008 is not maintainable for

the same reason. In any event, the Review Petition

was not decided on merits, which was disposed of in

view of the impugned order passed in the Writ

Petition with regard to the cancellation of the lease.

31. Thereafter, very detailed submissions have been

made on the construction of the lease deed.

However, it must be noticed here that the manner in

1 (2010) 8 SCC 383

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which these submissions have been advanced before

us bear no resemblance to the manner in which

these submissions were made before the High Court.

32. Mr. R.F. Nariman has also submitted that the term

of lease has to be understood to have commenced

from 26.05.2004, when the IDA executed a formal

lease in favour of MPRTC. Further, learned senior

counsel submitted that the possession of the site in

terms of the lease cannot be held to be given on

22.1.1982, when the agreement to lease was

executed. It was further submitted that where a

literal reading of the lease leads to an absurdity, the

court has the power to read it reasonably. Such a

reasonable reading, according to Mr. Nariman,

would support the aforesaid submission, i.e. the

lease commences from 26.05.2004. In this context,

learned senior counsel rely upon the following cases:

DDA vs. Durga Chand Kaushish 2 ; Ramkishore

2 (1973) 2 SCC 825

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Lal vs. Kamal Narian 3 and Sahebzada

Mohammad Kamgar Shah vs. Jagdish Chandra

Deo Dabhal Deo 4 . These cases reiterate the well

established principles of law relating to the

construction of deeds, which are as follows: first, that

the intention of the parties to a grant must be

ascertained first and foremost from the disposition

clause. Second, clear disposition by an earlier clause

will not be allowed to be cut down by a later clause;

and third, that a deed, being a grantor’s document,

has to be interpreted strictly against him and in the

favour of the grantee.

33. Mr. Nariman also submitted that the Respondents

cannot rely upon Clause 5E of the Agreement to

Lease, after the execution of the Lease Deed.

Substantiating this, it was submitted that the

Renewal Clause in the Agreement to Lease stood

superseded by the express terms of the Lease Deed 3 (1963) Supp (2) SCR 417 4 (1960) 3 SCR 604

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dated 26.05.2004. In this context, he relied upon

Provash Chandra Dalui vs. Biswanath Banerjee 5

and State of U.P. vs. Lalji Tandon. 6

34. Further according to Mr. Nariman, the terms of the

Agreement to Lease cannot be relied upon when a

specific provision has been provided in the Lease

Deed itself, which provides for extension of the lease.

Clause (1) of the Lease enables the IDA to extend the

lease for which neither the renewal nor permission of

the State Government is necessary.

35. The argument of the Respondents that the

Agreement of the MPRTC with the Appellant has been

frustrated was sought to be countered by Mr.

Nariman. It was submitted that self induced

frustration cannot be a basis to frustrate a valid

agreement. In this context, it was contended that the

submission of the Respondents that MPRTC is being 5 (1989) Supp (1) SCC 487(Para14) 6 (2004) 1 SCC 1 (Para 13).

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wound up is not tenable since such winding up is the

result of an act of the Party itself. Reliance placed

upon Boothlinga Agencies vs. V.T.C.

Poriaswami Nadar 7 , wherein it was inter alia held

that “the doctrine of frustration of contract cannot

apply where the event which is alleged to have

frustrated the contract arises from the act or election

of a party.” It was also contended that commercial

exigencies can never lead to frustration. Reliance

was placed upon Pollock and Mulla, 14 th Ed. Pgs.

887-889.

36. Mr. Nariman also submitted that the submission of

the IDA that the Appellant has no privity of contract

with the Petitioner is not correct. Further, the

submission of the IDA that the Agreement to Lease

was only for a bus stand and no permission was

granted by the IDA to MPRTC for constructing a

commercial project has been submitted to be

7 (1969) 1 SCR 65, at Page79

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incorrect by Mr. Nariman. Another factual submission

advanced by the Appellant is that the submission of

the Respondents that MPRTC is being wound up is

not correct.

37. Lastly, Mr. Nariman contended that on the balance

of equity, the MPRTC ought to be directed to comply

with the directions of the High Court contained in

order dated 05.08.2005, and put the Appellant in

possession of the plot.

38. Mr. J.P. Cama, learned senior counsel appearing for

the 5th Respondent - Indore Development Authority

has submitted that by an agreement dated 2nd

November, 1981, IDA entered into a lease in respect

of 10 acres of his property situated in its Scheme No.

54 at Indore in favour of MPRTC. Possession of the

land was handed over on 22nd January, 1982. The

first installment of the premium and leased rent was

deposited on 3 rd October, 1980. The

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lease was to be for a period of 30 years subject to

renewal. The lease was to subsist in the first

instance upto 21st January, 2012 but was terminated

on 2nd July, 2007, i.e., before the expiry of the period

of 30 years from the date of possession. MPRTC had

challenged the aforesaid decision in Writ Petition No.

6770 of 2007. Since the appellant had no privity of

contract with IDA, it could not have challenged the

termination of the lease on 2nd July, 2007 and did not

do so. Since the dispute was between two

Government organizations, the High Court rightly

remitted the matter to the Chief Secretary of the

State of Madhya Pradesh for resolution. Even

though, the appellant was not a party to the

aforesaid writ petition filed by MPRTC, it had

submitted a representation on 22nd February, 2009.

The directions issued by the Chief Secretary were

challenged in Writ Petition No. 2937 of 2009 in which

the impugned judgment has been passed. The

submissions of Mr. Cama in brief are:-

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(i) That there was no privity of contract between

IDA and Sri Ram Builders, i.e., the appellant.

Therefore, the High court has rightly granted

liberty to the appellant to file a Civil Suit, if so

advised.

(ii) The cancellation of the lease by IDA has

become final. This has not been challenged

by the appellant. Therefore, no Mandamus

can be issued to IDA, to permit the appellant

to construct the Bus Stand and commercial-

cum-residential complex. Mr. Cama further

submitted that the lease commences

from 22nd January, 1982 when possession was

handed over and expired on 21st January,

2012 upon completion of 30 years period of

the lease. It is further submitted that MPRTC

can not claim automatic renewal of the lease.

It would be subject to the consent of IDA and

the State Government. No application had

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been filed for such extension. In any event,

the lease has come to an end by the efflux of

time. Mr. Cama further submitted that IDA

had given a lease in favour of MPRTC. Under

the said lease, MPRTC had no authority to

create further third party rights. Wrongly,

according to Mr. Cama, MPRTC under the

tender conditions / contract entered into with

the appellant had given it the right to sell

proposed commercial premises, and to

collect premium on such allotment from

prospective buyers. The MPRTC had only

been given NOC for completing the bus stand

and the commercial-cum-residential complex

on B.O.T. basis. MPRTC had no legal right,

being a sub-lessee higher than the lessee.

The next submission of Mr. Cama is that

MPRTC has completely wound up its

operations; they have sold all their buses.

Therefore, it can not be compelled to get the

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Page 34

bus stand constructed from the appellant.

Countering the submission of Mr.

Nariman and Mr. Patwalia, he submits that

the order of the High Court

dated 5th August, 2005 directing MPRTC to

hand over the possession to the appellant

can not be relied upon by the appellant, the

said order has not become final inasmuch

as:-

(i) IDA was not a party in the said proceedings;

(ii) The HC had not decided the matter in relating to lease of the IDA

(iii) State Govt had filed recall application – which was pending disposal before HC

(iv) Even MPRTC filed a recall application wherein they pleaded that the entire order was based on the statement made by their counsel that they are not in a position to pay Sri Ram builders, however they made a statement, in recall application that they are now willing to repay Sri Ram and hence

3

Page 35

prayed for recall of order dated. 5.8.05 – which was also pending;

(v) Where SLP is dismissed without giving reasons, there is no merger of the judgment of the HC with the order of SC. Hence judgment of HC can be reviewed, even after dismissal of SLP. Reliance was placed upon Gangadhara Palo vs. The Revenue Divisional Officer & Anr. [2011 (4) SCC 602]

39. It is submitted that construction of bus terminal on

B.O.T. basis was a commercial transaction between

MPRTC and the appellant. Even if the cancellation is

not legal, this Court will not interfere in this decision

as it was purely contractual in nature. He relies on

the judgments of this Court in the case of Rajasthan

Housing Board & Anr. vs. G.S. Investments &

Anr. 8 and Ramchandra Murarilal Bhattad & Ors.

vs. State of Maharashtra & Ors. 9

8 (2007) 1 SCC 477 9 (2007) 2 SCC 588

3

Page 36

40. It is submitted that the arguments of the appellant

that the lease, which was granted in the first

instance for 30 years was intended to continue

(automatically) for a further period of 30 years in

terms of clause 1 of the aforesaid lease deed is

untenable. Even otherwise the submission can not

be considered as there were no pleadings to this

effect either in the original petition or in the grounds

of SLP. In any event, according to the respondents,

the initial period of the lease was for 30 years.

Furthermore, Paragraph/Clause 5(E) of the

agreement to lease makes it clear that after

termination of the lease period, it can be extended

after renewal; that too only with the consent of

MPRTC and IDA and further obtaining sanction of the

State Government. According to Mr. Cama, two short

questions would arise namely:-

(i) From what date, the period of 30 years is to

be counted?

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(ii) Whether there is an automatic extension of

lease?

41. It is according to Mr. Cama, admittedly possession

of the property was given to MPRTC on 21st January,

1982. This premium, as well as the first lease rent

had been deposited on 3rd October, 1980. It is also

an admitted position that the lease rent for the entire

period of 1982 onwards has in fact been paid by

deposit of premium plus 15 years lease rent. It is

reiterated by Mr. Cama that admitted date of actual

possession by the lesser is 22nd January, 1982.

Therefore, the first period of lease expired by efflux

of time on 21st January, 2012. With regard to the

renewal of the lease, it is submitted that even such

renewal is on specific sanction of the IDA and the

State Government. He submits that the concept of

extension of the lease is distinguishable from the

concept of renewal. In support of this submission,

Mr. Cama relies on Hardesh Ores (P) Ltd. Vs.

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Page 38

Hede and Company 10 (Pages 627 & 628). He

submitted that the agreement of lease used both

words extension and renewal but extension is always

made subject to renewal. Mr. Cama further pointed

out that Order dated 5th August, 2005 has

not become final and binding on all parties on the

dismissal of the SLP filed by the MPRTC. The

aforesaid SLP was dismissed in limine. Therefore,

the judgment of the High Court can not be said to

have merged with the order of this Court. In support

of the submission, Mr. Cama relies on

Kunhayammed & Ors. vs. State of Kerala &

Anr. 11 and Gangadhara Palo vs. Revenue

Divisional Officer & Anr. 12

42. With regard to the submission relating to the order

passed by the Chief Secretary, Mr. Cama submits

that the appellant has to either accept or challenge 10 (2007) 5 SCC 614 11 (2000) 6 SCC 359

12 (2011) 4 SCC 602(Para 7)

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Page 39

the order in toto. If the complete order is accepted,

the termination of the lease is set aside, the property

would return to IDA with compensation to the

appellant. In the event, the order is completely set

aside, the termination of the lease remains in force

and the property returns to the IDA. In either case,

the land returns to the IDA. Mr. Cama submits that

the order passed by the Chief Secretary is a

comprehensive order and can not be permitted to be

challenged in a truncated manner.

43. We have considered the submissions made by the

learned counsel for the parties.

44. Before we proceed to examine the submission

made by Mr. Nariman, it would be appropriate to cull

out the bare essential facts for the determination of

the controversy herein. A lease deed dated 2nd

November, 1981 was entered into between MPRTC

and IDA. The possession of the land was handed over

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Page 40

to MPRTC on 22nd January, 1982. Initially, the lease

was taken by the MPRTC for the purpose of a bus

stand. It appears that no final decision was taken till

8th November, 2001 when the Council of Ministers of

the State Government authorized the construction of

a commercial complex on the land under BOT

Scheme. A tender notice was issued on 13th April,

2002. On 7th July, 2003, the bid of the appellant was

found to be the highest. The amount as mentioned in

Para 6 earlier, was duly paid by the appellant. A

separate agreement was entered into between

MPRTC and the appellant on 4th February, 2004 which

read alongwith the tender document provided as

under:

“The successful promoters/builders will have the right to market the saleable space made available to him on different floors in the commercial complex, collect premium on such allotment from prospective buyers.”

45. On 25th May, 2004, MPRTC deposited the lease

rental with IDA. A formal lease was executed on

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26th May, 2004. As noticed earlier, the lease was for

30 years. The leased land (plot) was to be used only

for the bus terminal. It was specifically provided that

the plot cannot be divided. The possession of the plot

had been received on 22nd January, 1982. The lease

also provided that the Rules published in the gazette

on 16th December, 1977 shall be binding on the

lessee. Rule 40 of the aforesaid Niyam/Rules read as

under :

“The lessee may take possession of the plot on the date fixed or notified to him for taking over possession of the plot and the lease of the plot shall commence from the date irrespective of the fact “whatsoever, possession of the plot has been taken or not and the lessee shall pay all rates and taxes where leviable the owner or the lessee from the date.”

46. On 24th June, 2004, IDA gave its no objection for bus

terminal-cum-commercial complex to be constructed

under the BOT Scheme. On 18th December, 2005, the

State Government decided to wind up the MPRTC.

The proposal of the State Government was not

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Page 42

approved by the Ministry of Shipping and Road

Transport, Government of India. On 17th November,

2008, a letter was issued informing the State

Government that the Ministry of Labour had declined

to grant permission for closure under Section 25-O of

the Industrial Disputes Act, 1947. On 5th August,

2005, the directions were issued by the High Court in

the writ petition filed by the appellant. SLP filed

against these directions was dismissed by this Court

on 7th October, 2005. In the contempt petition filed

by the appellant for non compliance of the directions

of the High Court dated 5th August, 2005, MPRTC

was restrained from handing over the possession of

the property or to create third party interest/rights.

On 2nd November, 2007, the lease was cancelled by

IDA on the ground that MPRTC had violated the

prescribed conditions by handing over the possession

to RTO. As noticed earlier, the cancellation of the

lease was challenged by MPRTC, by way of a writ

petition, which was disposed of by the High Court on

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Page 43

11th December, 2007 by referring the entire issue to

the Chief Secretary. The appellant did not challenge

the order dated 2nd November, 2007 but submitted to

the jurisdiction of the Chief Secretary by filing a

comprehensive representation. Even in the writ

petition in which the impugned order had been

passed, the appellant had only challenged Clauses III,

IV and V of the order of the Chief Secretary.

47. We shall now consider the submission of

Mr. Nariman, seriatim. Can the order dated

5th August, 2005 be implemented and should the

appellant be permitted to go ahead with the

construction of commercial complex-cum-bus stand.

Undoubtedly, the SLP filed by MPRTC against the

order dated 5 th August, 2005 in Writ

Petition No.363 of 2005 has been dismissed by this

Court, but it was a dismissal in limine without

recording any reason. Therefore, the judgment of the

High Court cannot be said to have merged with the

4

Page 44

order of this Court. In Kunhayammed (supra), this

Court considered the effect of the dismissal of the

SLP in limine. This Court reiterated the ratio laid

down by this Court in Indian Oil Corporation Ltd.

vs. State of Bihar & Ors. 13 which considered the

impact of the order dismissing the SLP with the

following expression:

“The special leave petition is dismissed.”

Considering the aforesaid order of this Court in

Indian Oil Corporation Ltd. (supra), it has been

observed as follows:

“The effect of a non-speaking order of dismissal of a special leave petition without anything more indicating the grounds or reasons of its dismissal must, by necessary implication, be taken to be that this Court had decided only that it was not a fit case where spe- cial leave should be granted. This con- clusion may have been reached by this Court due to several reasons. When the order passed by this Court was not a speaking one, it is not correct to assume that this Court had necessarily decided implicitly all the questions in relation to

13 (1986) 4 SCC 146

4

Page 45

the merits of the award, which was un- der challenge before this Court in the special leave petition. A writ proceeding is a wholly different and distinct pro- ceeding. Questions which can be said to have been decided by this Court ex- pressly, implicitly or even constructively while dismissing the special leave peti- tion cannot, of course, be reopened in a subsequent writ proceeding before the High Court. But neither on the principle of res judicata nor on any principle of public policy analogous thereto, would the order of this Court dismissing the special leave petition operate to bar the trial of identical issues in a separate pro- ceeding namely, the writ proceeding be- fore the High Court merely on the basis of an uncertain assumption that the is- sues must have been decided by this Court at least by implication. It is not correct or safe to extend the principle of res judicata or constructive res judicata to such an extent so as to found it on mere guesswork.

48. In reiterating the aforesaid observation, this Court

in Kunhayammed (supra) observed as follows:

“27. A petition for leave to appeal to this Court may be dismissed by a non- speaking order or by a speaking order. Whatever be the phraseology employed in the order of dismissal, if it is a non- speaking order, i.e., it does not assign reasons for dismissing the special leave petition, it would neither attract the doc- trine of merger so as to stand substi-

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Page 46

tuted in place of the order put in issue before it nor would it be a declaration of law by the Supreme Court under Article 141 of the Constitution for there is no law which has been declared.”

49. The aforesaid ratio in Kunhayamed (supra) is

reiterated by this Court in Gangadhara Palo

(supra):

“7. The situation is totally different where a special leave petition is dis- missed without giving any reasons what- soever. It is well settled that special leave under Article 136 of the Constitu- tion of India is a discretionary remedy, and hence a special leave petition can be dismissed for a variety of reasons and not necessarily on merits. We can- not say what was in the mind of the Court while dismissing the special leave petition without giving any reasons. Hence, when a special leave petition is dismissed without giving any reasons, there is no merger of the judgment of the High Court with the order of this Court.”

50. Even though the order of the High Court had not

merged with the order passed by this Court in

dismissing the SLP, can the appellant be deprived of

the benefit of the order passed by the High Court on

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Page 47

5th August, 2005? Mr. Nariman has submitted that

the order passed by the Chief Secretary on 11th

December, 2007 even though on directions issued by

the High Court in Writ Petition No.6770 of 2007

cannot nullify the directions given by the High Court

earlier. The order passed by the Chief Secretary in its

executive capacity cannot have the effect of

nullifying the order passed by the High Court on

5th August, 2005. On first blush, the submission made

by Mr. Nariman seems to be very attractive, but

factually it has to be noticed that much more water

has flown under the bridge since the passing of the

order dated 5th August, 2005. Subsequently, the

lease to MPRTC was cancelled on 2nd November,

2007 by the IDA. The appellant did not challenge the

order dated 2nd November, 2007 passed

by the IDA. The aforesaid order was challenged by

MPRTC in Writ Petition No.6770 of 2007. On 11th

December, 2007, the High Court without issuing

notice to the appellant, who was impleaded as

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Page 48

respondent No.3, disposed of the writ petition. The

High Court noticed that two instrumentalities of the

State have chosen to bring their disputes in open

court. In such circumstances, the High Court was of

the opinion that the entire dispute ought to be

decided by the Chief Secretary of the State of

Madhya Pradesh by holding meetings between the

Principal Secretary of the Transport Department,

Principal Secretaries of Housing and Environment

Department and the Managing Director of the

MPRTC. The appellant accepted the aforesaid order

passed by the High Court and submitted a detailed

representation before the Chief Secretary on 20th

February, 2009. The Chief Secretary in the meeting

held on 4th March, 2009 took a comprehensive

decision on all the issues involved in writ petition

with regard to the cancellation of the lease deed in

favour of MPRTC by IDA. The Chief Secretary revoked

the order dated 2nd November, 2007 and notice

dated 30th June, 2007 cancelling the lease of land

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Page 49

in question granted to the MPRTC by IDA. RTO was

directed to release the leased land from attachment.

It is noteworthy that the appellant has not chosen to

challenge the aforesaid two directions. However, as

noticed earlier, the appellant challenged the

directions issued in Clauses III, IV and V in Writ

Petition No.2937 of 2009 in the High Court of Madhya

Pradesh. It was, inter alia, contended that the

directions in the aforesaid clauses were in violation

of the order dated 5th August, 2005. It is noteworthy

that even in this writ petition, challenging the

direction Nos. III, IV and V issued by the Chief

Secretary, the appellant had not challenged the

competence of the Chief Secretary to decide the

issues. The appellant cannot now be permitted to

state that the aforesaid directions are without

jurisdiction. Under the orders of the Chief Secretary

dated 4th March, 2009, the possession of the land has

already been delivered to IDA. Therefore, it would

not be possible at this stage to direct that the

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Page 50

mandamus granted on 4th August, 2005 in Writ

Petition No.636 of 2005 shall be enforced.

51. In the ultimate analysis, the whole controversy boils

down to a breach of contract by MPRTC entered into

with the appellant. The scope of judicial review is

very limited in contractual matters even where one

of the contracting parties is the State or an

instrumentality of the State. The parameters within

which power of judicial review can be exercised, has

been authoritatively laid down by this Court in a

number of cases.

In Tata Cellular vs. Union of India,14 this court

upon detailed consideration of the parameters within

which judicial review could be exercised, has culled out

the following principles:

“70. It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by government bodies in order to prevent arbitrariness or favouritism. However, it must be clearly stated that there are inherent limitations in exercise of that

14 (1994) 6 SCC 651

5

Page 51

power of judicial review. The Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbi- trary power. Of course, if the said power is exercised for any collateral purpose the exer- cise of that power will be struck down.

* * *

77. The duty of the court is to confine itself to the question of legality. Its concern should be: (1) Whether a decision-making authority ex- ceeded its powers? (2) committed an error of law, (3) committed a breach of the rules of natural justice, (4) reached a decision which no reasonable tribunal would have reached, or (5) abused its powers. Therefore, it is not for the court to determine whether a particular policy or particular deci- sion taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to

5

Page 52

control by judicial review can be classified as under: (i) Illegality: This means the decision-maker must understand correctly the law that regu- lates his decision-making power and must give effect to it. (ii) Irrationality, namely, Wednesbury unrea- sonableness. (iii) Procedural impropriety. The above are only the broad grounds but it does not rule out addition of further grounds in course of time.”

52. In our opinion, the case put forward by the

appellant would not be covered by the aforesaid ratio

of law laid down by this Court. The High Court, in our

opinion, has rightly observed that the appellant can

seek the appropriate relief by way of a civil suit. The

High Court in exercise of its jurisdiction under Article

226 of the Constitution of India would not normally

grant the relief of specific performance of a contract.

This view is supported by Ramchandra Murarilal

Bhattad vs. State of Maharashtra.15 This Court

relying upon the earlier decision in Noble

15 (2007) 2 SCC 588

5

Page 53

Resources Limited vs. State of Orissa16 held as

under:

“50. …this Court would not enforce specific performance of contract where damages would be adequate remedy. It was also held that conduct of the parties would also play an important role. 51. The expansive role of courts in exercising its power of judicial review is not in dispute. But as indicated hereinbefore, each case must be decided on its own facts.”

53. At no stage, the appellant had any privity of

contract with IDA. MPRTC entered into a BOT

contract with the appellant contrary to the terms and

conditions of the lease which provided specifically

that the land shall be used for constructing a bus

stand–cum commercial complex. MPRTC had no legal

right to create any further right in favour of the

appellant with regard to the receiving of the

premium on the constructed units sold to third

party(ies). Even otherwise, the appellant seems to be

flogging a dead horse. Admittedly, the possession of

16 (2006) 10 SCC 236

5

Page 54

the proposed site was delivered to MPRTC on 22nd

January, 1982. The maximum lease period was for 30

years. By efflux of time the aforesaid lease period

expired on 21st January, 2012. We do not accept the

submission of Mr. Nariman that as the entire rent had

been paid, MPRTC would be entitled to automatic

renewal of the lease for 90 years. The renewal clause

in the lease subsequently provides that the renewal

shall be with the consent of IDA. This consent by the

IDA is not a mere formality. We are, therefore, not

inclined to accept the submission of Mr. Nariman that

the term of the lease has to be understood to have

commenced from 26.05.2004.

54. This apart, there is much substance in the

submission of Mr. Cama that no application has been

filed even for this formal renewal by MPRTC. In any

event, MPRTC would not be in a position to continue

with the lease as it is heavily indebted presently, to

the tune of Rs. 3500 crores. The property of the

corporation has been attached by the various

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Page 55

creditors. Even the proposed site where the bus

stand – cum – commercial complex was to be

constructed is under attachment. The claim made by

the appellant is in the nature of damages for breach

of contract and/or the relief of specific performance

of contract. So far as the breach of contract is

concerned, the appellant will have no cause of action

against IDA as there is no privity of contract

between the parties. So far as the specific

performance is concerned, it appears that the entire

purpose of the contract has been frustrated by

subsequent events.

55. We are also not much impressed by the submission

of Mr. Nariman that the doctrine of frustration cannot

be applied here since it is a “self induced

frustration”. In the case of Boothalinga Agencies

(supra), this Court upon comparing and contrasting

the English Law and the statement of Indian Law

contained in Section 56 of the Indian Contract Act

5

Page 56

summed up the legal position with regard to

frustration of contract as follows:-

“The doctrine of frustration of contract is re- ally an aspect or part of the law of discharge of contract by reason of supervening impossi- bility or illegality of the act agreed to be done and hence comes within the purview of Sec- tion 56 of the Indian Contract Act. It should be noticed that Section 56 lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties.

In English law therefore the question of frus- tration of contract has been treated by courts as a question of construction depending upon the true intention of the parties. In contrast, the statutory provisions contained in Section 56 of the Indian Contract Act lay down a posi- tive rule of law and English authorities cannot therefore be of direct assistance, though they have persuasive value in showing how English courts have approached and de- cided cases under similar circumstances.”

We fail to see how the aforesaid observations are

of any relevance in the facts and circumstances of this

case.

56. We are also unable to accept the submission of

Mr. Nariman that the Doctrine of Frustration would

not apply in the facts of this case as it is a self

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Page 57

induced frustration. The aforesaid expression seems

to have been borrowed from certain observations

made by the Judicial Committee in the case of

Maritime National Fish, Limited vs. Ocean

Trawlers, Limited 17 . The facts of that case, as

narrated in Boothalinga Agencies (supra), would

indicate that in that case, the respondents chartered

to the appellants a steam trawler fitted with an otter

trawl. Both the parties knew at the time of the

contract that it was illegal to use an otter trawl

without a licence from the Canadian government.

Some months later the appellants applied for

licences for five trawlers which they were operating,

including the respondent’s trawler. They were

informed that only three licences would be granted,

and were requested to state for which of the three

trawlers they would like to have the licences. They

named three trawlers other than the respondent’s

trawler, and then claimed that they would not be

17 (1935) A.C. 524

5

Page 58

bound by the trawler of the respondent as it was

frustrated. It was held by the Judicial Committee that

the failure of the contract was the result of the

appellant’s own election, and, therefore, no

frustration of the contract.

57. This Court distinguished the aforesaid judgment and

observed as follows:-

“We think the principle of this case applies to the Indian law and the provisions of Section 56 of the Indian Contract Act cannot apply to a case of “self-induced frustration”. In other words, the doctrine of frustration of contract cannot apply where the event which is alleged to have frustrated the contract arises from the act or election of a party. “

58. In our opinion, these observations are of no

assistance to the appellant as in this case, the lease

has come to an end by efflux of time. This apart,

MPRTC is heavily indebted and had sought

permission of the State and the Union of India to

wind up. Furthermore, there was also a breach of the

terms and conditions of the lease on the basis of

which it has been terminated in accordance with law.

5

Page 59

59. In any event, these are issues which would involve

adjudication of disputed questions of fact which can

only be suitably adjudicated in the civil suit as

directed by the High Court in the impugned

judgment. The appellant shall be at liberty to seek its

remedies against MPRTC for breach of contract. Our

conclusion that the High Court was right in rejecting

the contentions of the Appellant herein is also

supported by the law laid in Rajasthan Housing

Board vs. G.S. Investments (supra) which was

relied upon by Mr. Cama. We may notice here the

following excerpt:

“..the Court should exercise its discretionary power under Article 226 of the Constitution with great care and caution and should exercise it only in furtherance of public interest. The Court should always keep the larger public interest in mind in order to decide whether it should interfere with the decision of the authority.”

5

Page 60

60. Also, we are not much impressed by the submission

of Mr. Nariman that the order passed by the High

Court on 11th December, 2007 has been challenged

by the companion SLP (C) No 36887 of 2012. The

aforesaid SLP has been filed merely to get over the

earlier lapse of not challenging the order of the High

Court at the appropriate time. Having submitted to

the jurisdiction of the Chief Secretary, it would not be

open to the appellant to challenge the order dated

11th December, 2007.

61. For the aforesaid reasons, we see no merit in the

appeals. The civil appeals are, therefore, dismissed.

……………………………….J. [Surinder Singh Nijjar]

………………………………..J. [A.K.Sikri]

New Delhi; April 25, 2014.

6

SRI RAM BUILDERS Vs STATE OF M.P. .

SRI RAM BUILDERS Vs STATE OF M.P. .