1    

REPORTABLE  

IN THE SUPREME COURT OF INDIA  

CIVIL APPELLATE JURISDICTION  

CIVIL APPEAL NO. 3392  OF  2006    STATE OF HIMACHAL PRADESH  ….  APPELLANT  

:Versus:  

RAVINDER KUMAR SANKHAYAN (DEAD)  AND ORS.        ….RESPONDENTS   

WITH  

CIVIL APPEAL NOS. 3393 & 3394 OF  2006              

J U D G M E N T  

A.M. Khanwilkar, J.  

1. These appeals emanate from the judgment and interim  

orders dated 24th May, 2005 and 5th July, 2005 passed by the  

High Court of Himachal Pradesh at Shimla in Civil Writ  

Petition No.555 of 2004, during the pendency of the said writ  

petition. Civil Appeal No.3392 of 2006 has been filed by the  

State of Himachal Pradesh (for short “the State”) against the

2    

judgment and order dated 5th July, 2005, whereas the other  

two appeals, i.e. Civil Appeal Nos.3393 & 3394 of 2006 have  

been filed by the Himachal Pradesh Tourism Development  

Corporation (for short “HPTDC”) against the judgment and  

orders dated 24th May, 2005 and 5th July, 2005, respectively.   

 2. The stated writ petition was filed by the original  

respondent No.1, who died during the pendency of the  

proceedings in this Court. He claimed to be a public spirited  

person. He was aggrieved by the acts of commission and  

omission of the Municipal Corporation, Shimla, whereby the  

property owned and possessed by the Municipal Corporation  

was leased out to HPTDC at a rate much lower than the  

prevailing market rate, without conducting auction or  

resorting to tender process. Additionally, the Municipal  

Corporation had failed to recover the municipal taxes from  

HPTDC, including the rental/lease money, which was quite  

substantial, causing loss to the Municipal Corporation.  This  

is the crux of the grievance made in the aforementioned writ  

petition, for which following reliefs were claimed:

3    

“(I) Respondents may kindly be restrained from allotting  the above mentioned stall to H.P.M.C. which is loss-

making venture in public interest, or in the alternative  quash the said allotment to the respondent No.3 and  

disposed of the same in accordance with law and  direct the respondents to demolish the illegal  structures.   

(II) Respondent Municipal Corporation be directed to  recover its outstanding legal dues from various  governmental authorities and individuals.   

(III) The respondent Municipal Corporation be directed to  reject its leased out properties to a realistic revision of  

(monthly lease amounts) monthly rentals.   (IV) The respondents may kindly be directed to produce the  

entire records pertaining to this case for the kind  

perusal of this Hon’ble Court.   (V) Any other writ, order or direction deemed fit and  

proper in the facts and circumstances mentioned  herein above may very kindly be passed in favour of  the petitioner and against the respondents.   

(VI) Cost of the writ petition may kindly be granted  throughout in favour of the petitioner.”   

3. The Municipal Corporation as well as the State resisted  

the said writ petition, by filing affidavits. The State asserted  

that the land in question is owned by the Government of  

Himachal Pradesh. The entry in the revenue record indicates  

that the possession of the property was with the Municipal  

Corporation since 1977. Be that as it may, the property known  

as “Goofa”, situated at the Ridge in Shimla Town, was let out  

to HPTDC. A lease document was executed on 2nd January,  

1978 stipulating the terms and conditions of the lease. The

4    

differences between the Municipal Corporation and HPTDC  

regarding the rent were resolved in terms of the award passed  

by the Secretary (LSG) to the Government of Himachal  

Pradesh. The Municipal Corporation and HPTDC were bound  

by the said award, whereunder enhanced rent in respect of the  

subject properties was specified.  The Municipal Corporation  

in its meeting held on 20th July, 1988, had taken a decision  

regarding the increase of rent payable by HPTDC. The thrust  

of the stand taken by the State was that HPTDC, being a State  

Corporation, was obliged to engage in promoting tourism  

within the State and in terms of the tourism policy of the  

State, the directions given by the State were required to be  

carried out by HPTDC. The possession of the subject premises  

by the HPTDC cannot be equated with a private lease or  

occupation by a private individual, as the activities of the  

HPTDC were to effectuate the larger public interest and  

tourism within the State. Significantly, the lease agreement  

between HPTDC and the Municipal Corporation was still  

subsisting.    

5    

4. Despite the opposition to the writ petition by the State  

authorities, the High Court, while considering the prayer for  

interim relief sought by the writ petitioner for issuing  

directions to the Municipal Corporation to file a list of  

properties owned and possessed by the Municipal Corporation  

and also to place on record its outstanding legal dues of  

payment by the various Government authorities and  

individuals, including the monthly rental values for which the  

properties have been leased out by the Municipal Corporation,  

proceeded to pass an order on 24th May, 2005, without  

considering the cardinal aspects such as that there is a  

subsisting agreement between HPTDC and Municipal  

Corporation in respect of the subject premises. Being swayed  

away by the submission made by the intervener – applicant,  

whose application was allowed on the same date, that he was  

willing to offer a monthly lease amount of Rs.2,50,000/-  

(annual amount of Rs.30 lakhs), the High Court opined that  

the difference between the lease rent payable by HPTDC and  

the offer made by the intervener was quite substantial, for  

which reason the Municipal Corporation should issue public

6    

advertisement for leasing out the subject property.  The High  

Court passed the following order:  

“ O R D E R  

CWP No.555/2004.  

24.05.2005 Present: Mr. B.C. Negi Advocate, for the  

petitioner.   

Mr. M.S. Chandel, Advocate General, with Mr. J.K. Verma,  

Dy. A.G. for respondent No.1.   

Mr. Ajay Mohan Goel, Advocate, for respondent No.2.  

Mr. Shrawan Dogra, Advocate, for respondent No.3.  

Mrs. Ranjana Parmar, Advocate, for respondent No.4.  

Mr. Ankush D. Sood, Advocate for respondent No.5.  

CMP No.1043/2005.  

Learned counsel for all the parties submit that they have no  

objection to this application being allowed to the limited and  

the only extent of the applicant herein being permitted to  

intervene in the proceedings. We order accordingly. The  

other prayers made in the application are declined.  

The application is disposed of.  

CWP No.555/2004.  

In CMP No.1043/2005 we have ordered today that the  

applicant therein be allowed to intervene in these  

proceedings. In that application, the applicant has offered to  

take the property, Ashiana and Goofa Restaurants situated  

at the Ridge, Shimla on a monthly lease amount of  

Rs.2,50,000/-/- (annual lease amount of Rs.30 lacs). This  

offer of the aforesaid applicant is against the present lease  

money of Rs.2,86,992/- per annum which works out to

7    

Rs.23,916/- per month as is being paid by H.P. Tourism  

Development Corporation. As per the Statement of Accounts  

filed by respondent No.2 HPTDC actually it has been in  

arrears with respect to the payment of aforesaid lease  

amount also at the aforesaid rate and the amount of arrears,  

has been worked out at Rs.18,50,361/- as on 31st March,  

2005.   

What, therefore, clearly emerges is that as against the  

aforesaid annual amount of Rs.2,86,992/- being paid by  

HPTDC to Shimla Municipal Corporation, for the same  

property a party before us has offered to pay  

Rs.30,00,000.00 per annum which is more than ten times  

the aforesaid amount. This is just one party offering to pay  

the aforesaid amount. We are sure that there is a strong  

possibility, actually bright prospects, of many more parties  

coming forward to take the property on lease and offer lease  

money even higher, much higher, than what the intervener  

has offered to pay.   

With a view thus to attract the best offers and to  

ensure that the property is given on lease/license basis  

which will be in best public interest and also in the interest  

of Corporation, we direct respondent No.2 to publish and  

also in the interest of Corporation, we direct respondent No.2  

to publish advertisements in three leading newspapers  

within ten days from today inviting offers from interested  

parties for obtaining the aforesaid property on lease/license  

basis. In the advertisements so published, respondent No.2  

shall ensure that the last date of receipt of offers is not later  

than 30th June, 2005.  

With a view to attracting the best offers, it shall be  

desirable that the property is offered on a long term  

lease/license basis. Also while issuing the advertisement,  

respondent No.2 shall ensure that for the benefit of  

prospective bidders, it fully describes and specifically defines  

the exact details of the property sought to be  

leased/licensed.  

8    

H.P. Tourism Development Corporation and the  

intervener herein, both are at liberty to respond to the  

invitation of respondent No.2 in the aforesaid advertisement  

and to submit their respective offers. The submission of  

offers by the HPTDC and by the intervener shall be without  

prejudice to their rights and contentions in this case. It is,  

however, also specifically made clear that if they both, or  

anyone of them, fails to offer in response to the aforesaid  

invitation to offer, they shall be doing so entirely at their own  

risk and responsibility.   

On the next date the Commissioner, Municipal  

Corporation shall file his affidavit informing this Court the  

details of the offers received and the action proposed  

thereupon.   

List on 4th July, 2005. Copy Dasti.”   

5. This interim order passed by the High Court has been  

assailed by HPTDC by way of Civil Appeal No.3393 of 2006.   

Pursuant to the aforementioned interim order passed by the  

High Court, the Municipal Corporation issued Tender Notice  

on 9th June, 2005, inviting offers from the interested parties.  

The impleaded respondent N & S Resorts gave the highest offer  

of rent of Rs.6,51,000/- per month (annual rent of  

Rs.78,12,000/-). In continuation of the aforementioned order,  

the High Court proceeded to pass another interim order on 5th  

July, 2005 which reads thus:

9    

 “As a sequel to, and in compliance with the directions  

contained in our order dated 24th May, 2005 the  

Commissioner, Municipal Corporation, Shimla has filed his  

affidavit which has been affirmed on 1st July, 2005. In his  

affidavit the Commissioner has informed us that the  

Corporation had issued a tender notice on 2nd June, 2005  

whereby sealed tenders were invited for leasing out the  

property in question for a period of 25 years on monthly  

rental basis.  In response to the said tender notice, the  

following five parties submitted their tenders and offered the  

rates (per months) as shown against the name of each one of  

them:-  

1. N & S Resorts,   Rs.6,51,000.00  The Mall, Shimla  

2. RA 3 & Co.    Rs.4,80,000.00  48/1, The Mall Shimla  

Ashiana Restaurant,  

Chhota Shimla.  

3. The Pillancle Service   Rs.4,75,251.00  Co. Jasmine Villa, Top  

Floor, Near CPRI,  

Shimla-1.  

4. Mahavir & Co.   Rs.4,11,000.00  Lower Bazar, Shimla  

5. Ascot Hotels & Resorts  Rs.2,75,000.00  Ltd.  

As per the aforesaid affidavit, as well as the aforesaid  

statement of offers and also as per the comparative  

statement of tenders filed as Annexure R-2/B to the  

aforesaid affidavit, it clearly transpires that M/s. N&S  

Resorts, The Mall, Shimla has offered the highest rate of  

Rs.6,51,000/- per month. The Committee constituted by the  

Corporation, as is evidently clear from the perusal of  

Annexure R-2/B, has also recommended that the offer of  

M/s N&S, The Mall Shimla may be accepted.  

In our order dated 24th May, 2005 we had clearly  

recounted that with respect to the same property H.P.  

Tourism Development Corporation had been paying the

10    

annual lease money of Rs.2,86,992/- which actually worked  

out to Rs.23,916/- which is presently being paid by H.P.  

Tourism Development Corporation, the aforesaid M/s N&S  

Resorts has now offered the monthly lease money of  

Rs.6,51,000/- , almost twenty eight-twenty nine times of  

what is being paid by HPTDC. We have no doubt in our  

minds that the aforesaid offer by PTDC. We have no doubt in  

our minds that the aforesaid offer by M/s. N&S Resorts is in  

best public interest. We are also convinced that H.P. Tourism  

Development Corporation did not have any legal, contractual  

or statutory right to continue occupying the premises in  

question for any indefinite period.   

Apart from the fact that the HPTDC does not have any  

contractual or statutory right to continue occupying the  

premises in question for any indefinite period, merely  

because the HPTDC is a Government owned Corporation,  

does not mean that, in law, it should have any preferential  

right of holding on to the occupation of the property despite  

it paying a very meager amount as lease money. Related to  

this issue is also the question of pure commercial nature of  

the property. The property in question is a Restaurant,  

situated at perhaps the most prime location of Shimla town.  

The Restaurant is to be run on pure commercial lines and  

has to serve the best public interest. Therefore, viewed from  

every angle, it cannot be said that merely because the  

HPTDC is a government owned Corporation, it should be  

treated differently than others in the matter of allotment of  

property on lease. We feel that in such like matters  

whichever party pays the highest price should be held  

entitled to the grant of lease.  

It may also be worthwhile to recount that at one stage,  

we had an occasion to go through the accounts of HPTDC for  

the last few years and we found that in every year the  

HPTDC has been incurring losses, year after year, as far as  

the running of this particular Restaurant in question is  

concerned. Not only that, actually at one stage the HPTDC  

was in such a precarious position that it had not even paid  

the arrears of rent to the Corporation for almost a decade or  

so. In this background, therefore, burdening the HPTDC with  

the running of this restaurant and at the same time

11    

depriving the Municipal Corporation of its legitimate right of  

leasing out the property for the highest available rent, would  

be against the principles of natural justice.  

In the best interest of the Corporation as well as in  

best public interest, therefore, we approve of the  

recommendation of the Committee constituted by the  

Corporation and direct the Corporation to lease out the  

premises in question in favour of the highest bidder. All the  

consequences accordingly shall also follow including the  

consequence of H.P. Tourism Development Corporation being  

asked to vacate the premises without any loss of time.  

Actually from today onwards for whatever period the H.P.  

Tourism Development Corporation continues to remain in  

occupation of the premises, it shall be its obligation to pay to  

the Municipal Corporation the monthly lease amount at the  

rate as has now been offered by M/s N&S Resorts for the  

period that it remains in occupation.  

We also wish to observe and direct that the Municipal  

Corporation, Shimla shall ensure, before leasing out the  

property to M/s. N&S Resorts, that the interests of the  

Corporation are fully secured and protected in so far as  

ensuring the payment of the lease money to the Corporation  

by M/s. N&S Resorts is concerned. It may, therefore, insist  

on receiving advance payment from the aforesaid party or  

security or taking such other steps. The purpose, of course,  

is to ensure that the lease money being offered by the  

aforesaid party is paid to the Corporation regularly and  

without any delay.  

List after three months. On the next date, the  

Commissioner shall file his latest affidavit giving us the  

status report in compliance to the aforesaid directions.  

CMP NO.1341 of 2005  

All the parties in this petition may file reply to this  application in four weeks.”    

12    

6. Even this interim order has been assailed before this  

Court by way of Civil Appeal No.3392 of 2006 by the State and  

by way of Civil Appeal No.3394 of 2006 by HPTDC. During the  

pendency of these appeals, the operation of the impugned  

judgment passed by the High Court has been stayed by this  

Court.   

  7. We have heard Mr. J.S. Attri, learned senior counsel  

appearing for the State of Himachal Pradesh and Mr. Varinder  

Kumar Sharma and Ms. Tarannum Cheema, learned counsels  

appearing for the respondents.   

8. After perusing the reliefs claimed in the writ petition,  

purportedly public interest litigation and the application for  

interim relief filed by the writ petitioner, it is perceptible that  

the interim order passed on 24th May, 2005, transcends  

beyond the relief claimed by the writ petitioner and more so, is  

a mandatory order passed at an interlocutory stage without  

recording any just and tangible reasons therefor. We say so  

because the High Court has not even adverted to the efficacy  

of the subsisting contract between the Municipal Corporation

13    

and HPTDC.  It was nobody’s case that HPTDC was in  

unauthorized occupation of the subject properties. At best, the  

High Court felt that the agreed lease rent payable by HPTDC in  

respect of subject properties was on the lower side, which  

inevitably progenerated financial loss to the Municipal  

Corporation.  Before recording such a finding, it was necessary  

for the High Court to first authoritatively hold that HPTDC was  

not legally entitled to remain in occupation of the subject  

premises.   

9. Notably, the contract between the Municipal Corporation  

and HPTDC or the rental policy of the State, as applicable to  

the Municipal Corporation, has not been challenged much less  

quashed by the High Court. Even the decision of the Municipal  

Corporation recorded in its meeting held on 28th March, 2005,  

has neither been challenged nor been quashed by the High  

Court. The said resolution records as under:   

“The following decisions were taken:-  

1. It has been agreed that HPTDC will pay 10% increase  

in the rent after every three years as per policy. The  

enhancement will be applicable and shall be calculated w.e.f.

14    

1.11.1990 as the rent of Ashiana Restaurant was fixed at  

Rs.13,500/- vide Govt. order dated 24.11.1987, accordingly  

the first increase of 10% will be due w.e.f. 1.11.1990.   

2. HPTDC also agreed to enhance the rent as per policy of  

the Municipal Corporation from time to time in future.   

The decisions taken in the meeting were also  

discussed with the MD, HPTDC, Shimla, who also agreed  

and gave his consent to settle/enhance the rent as per policy  

of the Municipal Corporation, Shimla.”  

10. It is unfathomable as to how the High Court could have  

passed the order dated 24th May, 2005, to straightway direct  

the Municipal Corporation to issue tender notice. There is no  

indication in the order passed by the High Court on 24th May,  

2005, of having quashed the subsisting contract between  

Municipal Corporation and HPTDC. As aforesaid, without  

deciding on the issue of validity of the subsisting contractual  

terms and conditions between the Municipal Corporation and  

HPTDC, the High Court could not and should not have  

ventured to pass the order, such as dated 24th May, 2005.   

 11. The order dated 5th July, 2005 is only a consequential  

order which must, therefore, meet the same fate. We hold that  

the interim orders passed by the High Court were in complete

15    

disregard of the scope of judicial review. Further, a mandatory  

order has been passed at an interlocutory stage by the High  

Court without even bothering to examine the efficacy of the  

subsisting contractual obligations of the Municipal  

Corporation and HPTDC. It is also in complete disregard of  

Section 157 of the Himachal Pradesh Municipal Corporation  

Act, 1994, which mandates the procedure for grant of lease.   

First, the proposal should be recommended by the Municipal  

Corporation; and second, the agreement can be executed by  

the Municipal Corporation only after grant of prior sanction by  

the Government for leasing out the property. It is not  

necessary for us to examine the stand of the State that the  

Municipal Corporation can moot a proposal for grant of  

sanction for leasing out, only in respect of the property owned  

by the Corporation.   

12. Suffice it to observe that the writ petitioner had not even  

prayed for quashing of the subsisting contract between the  

Municipal Corporation and HPTDC in respect of the subject  

properties. The gravamen of the reliefs claimed in the writ

16    

petition is to direct the Municipal Corporation to lease out the  

subject premises on the basis of the prevailing market rent.   

Such relief could be entertained only after the subject  

premises were to be vacated by HPTDC upon expiry or  

termination of the subsisting contract between HPTDC and the  

Municipal Corporation.   

   13. In our opinion, the only relief that could have received  

the attention of the High Court was to direct the Municipal  

Corporation to recover its outstanding legal dues from various  

governmental authorities and individuals, namely, prayer  

clause (II) of the writ petition. However, the emphasis in the  

writ petition in this behalf is only with regard to the dues  

recoverable from HPTDC in respect of the subject premises.  

Assuming that there are outstanding dues payable by HPTDC  

to the Municipal Corporation, that matter could be resolved  

with the intervention of the State. In that, if HPTDC is  

financially incapable of settling the claim/demand of the  

Municipal Corporation, the State may have to provide financial  

assistance to HPTDC to the extent necessary, failing which the

17    

Municipal Corporation will be left with no other option but to  

take recourse to statutory remedies for recovery of its dues  

from HPTDC in relation to the subject premises. Since the  

State has also come up in appeal against the decision of the  

High Court, it must take initiative to find out a suitable  

solution in accordance with law, expeditiously and within a  

reasonable time, failing which it may be open to the Municipal  

Corporation to resort to recovery proceedings against HPTDC  

and including eviction of HPTDC from the suit premises  

consequent to termination of the contract inter partes.   

 14. In light of these observations, nothing would survive for  

consideration in the writ petition as filed before the High  

Court, which is still pending for final decision. As a result,  

besides setting aside the impugned judgment and orders dated  

24th May, 2005 and 5th July, 2005, respectively, we are  

inclined to dispose of the said writ petition with the  

aforementioned observations. Thus, the Writ Petition No.555 of  

2004, filed in the High Court of Himachal Pradesh at Shimla,  

be deemed to have been disposed of accordingly.  

18    

15. The only other issue that remains to be addressed is  

about the amount of earnest money paid by the impleaded  

respondent N & S Resorts by way of banker’s cheque dated  

27th June, 2005 in the sum of Rs.10 lakhs.  Since the tender  

process in which the impleaded respondent had participated,  

was subject to the outcome of the pending legal proceedings,  

no right would accrue to it in the stated premises except to get  

refund of the amount paid as earnest money for participating  

in the Court directed tender process. The amount so paid by  

the impleaded respondent shall be refunded to it, with interest  

at the rate of 9% per annum (equivalent to the bank rate for  

fixed deposits prevailing at the time the deposit was made)  

from the date of deposit till its realization.  The Municipal  

Corporation shall forthwith refund such amount to the  

impleaded respondent N & S Resorts but not later than twelve  

weeks from today, failing which the Municipal Corporation  

shall be liable to pay interest at the rate of 12% per annum  

from the date of deposit till the date of its realization.     

19    

16. We, accordingly, allow these appeals in the above terms,  

with no order as to costs.   

 ..……………………………...CJI.  

             (Dipak Misra)   

…..…………………………..….J.           (A.M. Khanwilkar)     

New Delhi;  March 28, 2018.