REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2545 OF 2017
[Arising out of SLP [C] No.23563/2007]
Orissa Industrial Infrastructure
Development Corporation … Appellant
Vs.
M/s. MESCO Kalinga Steel Ltd. & Ors. … Respondents
With CA No. 2546 /2017 (@ SLP (C) No. 23759/2007 and CA No.2547/2017 (@ SLP
(C) No.2683/2008).
J U D G M E N T
ARUN MISHRA, J.
1. Leave granted.
2. The appeals have been preferred by Orissa Industrial Infrastructure
Development Corporation (in short ‘IDCO’) and also by Jindal Stainless Ltd.
aggrieved by the impugned judgment and order dated 30.10.2007 passed by the
High Court of Orissa, thereby directing IDCO to lease out 825.68 acres of
land and to enter into a lease agreement with M/s. Mesco Kalinga Steel Ltd.
3. The factual matrix discloses that Mesco Kalinga Steel Ltd. (in short
‘Mesco’) had applied to IDCO for allotment of 2500 acres of land on
30.6.1994 and IDCO in turn, requested the Government of Orissa to issue
necessary orders to process the allotment. On 28.10.1994 the State
Government conveyed in principle approval for allotment of 2500 acres of
land on the terms and conditions laid down in the policy decision of the
State Government as revised on 25.1.1995 for establishment of steel plant.
4. Initially the State Government had agreed for equity participation of
Rs.25 crores towards the cost of land. This offer was withdrawn by the
State Government on 2.2.1995 and was communicated to Mesco. IDCO wrote a
letter on 21.3.1995 to Mesco to deposit the land cost in twenty half-yearly
equal instalments and further requested to deposit Rs.1.25 crores towards
the first instalment and Rs. 13.08 lakhs towards ground rent and cess.
Mesco deposited Rs.1.25 crores with IDCO on 3.4.1995. On 13.6.1996 IDCO
requested Mesco to take over possession of 1756.29 acres of land in the
first phase and to submit the draft lease deed for execution. Mesco took
over possession of the land on 18.6.1996. However, lease deed was not
executed. Thereafter, on 13.10.1997, the State Government intimated the
proceedings of the meeting held on 26.9.1997 to IDCO and required it to
execute the lease deed in favour of Mesco and also to realize the
instalments due.
5. On 27.10.1997, IDCO requested Mesco to submit draft deed of lease
agreement for execution within 15 days, failing which steps will be taken
for cancellation of allotment and resumption of land. IDCO again requested
on 26.11.1997 to submit the draft deed of agreement for execution. However
Mesco kept quiet and failed to get the lease deed executed. Thereafter, for
more than 5 ½ years nothing happened. No steps were taken by Mesco to get
the lease deed executed. Thereafter, IDCO gave final notice to Mesco on
4.7.2003 to deposit the balance defaulted amount of Rs.22.44 crores along
with statutory dues and to execute the lease deed by 19.7.2003 failing
which it was intimated that the said land shall be resumed at their cost
and the amount paid shall be adjusted towards compensation for use and
occupation of the land; apart from that, Mesco shall also be liable for
damages. Ultimately on 25.7.2003 on failure to get the lease deed executed,
land was resumed and possession letter of 1756.29 acres of land was
cancelled by IDCO. The amount of Rs.1.25 crores deposited by Mesco was
forfeited and adjusted towards compensation for use and occupation of the
land and damages.
6. After resumption of the land, IDCO allotted 209.59 acres of land out
of the land in question to Visa Industries Ltd. on 7.11.2003 and also
allotted 71.20 acres out of the disputed land to Jindal Stainless Ltd.
Possession of the land was handed over to Visa Industries Ltd. on 30.8.2004
and to Jindal Stainless Ltd. on 28.2.2005. IDCO further allotted 533.52
acres of disputed land to Jindal Stainless Ltd. and another 120 acres of
land out of the disputed land to Visa Industries Ltd. and handed over
possession to Jindal and Visa on 11.11.2005 and 17.11.2005 respectively.
The lease deed etc. have been executed between the aforesaid parties.
7. A representation was submitted by Mesco on 20.8.2003 questioning
resumption in which Mesco submitted its own terms and conditions for
payment. The said representation was rejected on 26.9.2003 by IDCO. The
first round of litigation in the form of W.P. (C) No.12857/2003 was filed
by Mesco questioning the cancellation and resumption of land. The High
Court disposed of the said writ petition on 15.1.2004. Pursuant thereto,
representation dated 20.1.2004 submitted to IDCO had been rejected on
25.2.2004. Thereafter, in the second round of litigation, W.P. (C)
No.2453/2005, during its pendency, Mesco came up with another
representation dated 22.8.2005 to IDCO which was rejected on 7.10.2005 on
the ground that it was highly unsatisfactory, unconvincing and completely
unacceptable. Mesco amended the writ petition to question the rejection
order dated 7.10.2005. On 11.4.2007 and 12.4.2007, the High Court again
asked IDCO whether it was willing to lease out the remaining land to Mesco.
As IDCO was unable to do so, the High Court allowed the writ application to
lease out 825.68 acres of land. Aggrieved thereby, the appellants are
before us.
8. The High Court has held that since IDCO has not complied with clause
18 contained in the policy decision dated 25.1.1995 in as much as 3 months’
notice has not been given, it was not open to resume the possession
otherwise than in due course of law. Since Mesco had confined its prayer to
the available land to the aforesaid extent, the High Court had issued
directions to lease out 825.68 acres of land.
9. It was submitted by learned senior counsel on behalf of the
appellants that the High Court has erred in law in setting aside the order
of resumption of land as there was failure on the part of Mesco to get the
lease deed executed despite repeated reminders made by IDCO in the years
1996 and 1997 and thereafter for several years there was lull, and
ultimately after issuance of notice, resumption of land was made which has
been subsequently allotted to other industries and the remaining land was
required for their future expansion. The land for mining purposes is also
not available at present. The instalments were also not deposited. In the
absence of execution of lease deed, the relationship of lessor and lessee
never came into being, as such the 3 months’ notice for resumption of land
was not required. Three months’ notice is required to terminate a lease
deed. The order of resumption was passed and pursuant thereto, possession
has rightly been taken as Mesco was not vested with any right to retain
possession having failed to pay the instalments and execute the lease deed.
The order passed by IDCO for forfeiture of the amount deposited to the tune
of Rs.1.25 crores was fully justified in the facts and circumstances of the
case. No development had been made by Mesco on the land in question. Thus,
the impugned order may be set aside.
10. Learned senior counsel appearing on behalf of the respondent urged
that the order of the High Court is appropriate and no case for
interference in the appeal is made out. Setting up of the steel plant would
be in the interest of the State and the public at large. Due to certain
legal proceedings etc, Mesco could not get the lease deed executed. It was
necessary to serve 3 months’ notice to resume the land which has not been
done. On a specific query being posed about the development over the land,
it was stated that the boundary wall had been constructed. However, no
plant etc. could be established before resumption of the land.
11. Before dilating upon the rival submissions, it is appropriate to take
note of certain facts. The Government of Orissa, Department of Steel &
Mines had conveyed its in principle approval for allotment of 2500 acres of
land for establishment of 2 million tons steel plant with ultimate capacity
of 3 million tons per annum. The offer for equity participation of Rs. 25
crores was withdrawn by the State Government vide letter dated 5.1.1995
before direction for allotment was issued and IDCO was advised to hand over
2500 acres of land on long term lease basis on the terms and conditions
stipulated in the revised terms and conditions issued by the Government on
25.1.1995. They were required to deposit Rs.1.25 crores towards the first
instalment and Rs.13,08,842/- towards ground rent and cess as reflected in
the letter dated 21.3.1995. The amount of Rs.1.25 crores was deposited on
3.5.1995. Vide communication dated 13.6.1996 of IDCO, possession of 1756.29
acres of land was required to be taken and Mesco was further required to
submit a draft deed of agreement in duplicate. It appears that on 18.6.1996
advance possession of 1756 acres of land had been handed over to Mesco but
the draft deed of agreement for execution of lease deed was not submitted
by it, hence a letter was written on 27.10.1997 by IDCO to resume the land
and to cancel allotment. In communication dated 26.11.1997, IDCO wrote that
it had sent draft lease deed to Mesco on 20.1.1996 and required the latter
to submit the draft of lease agreement for execution immediately. Thus it
is apparent that though the possession had been taken by Mesco but, at the
same time, there was inexplicable neglect on its part to execute the lease
deed. Due to the contumacious default on the part of Mesco for several
years, lease deed could not be executed. Ultimately IDCO had served notice
dated 4.7.2003 to Mesco regarding resumption of land referring to its
earlier communications dated 27.10.1997 and 26.11.1997 to execute the lease
deed or to face resumption of land. The amount of instalments had also not
been deposited except the initial amount of Rs.1.25 crores. Thus Mesco was
required by notice to deposit the balance defaulted amount of
Rs.22,84,48,890/- and to execute the lease deed by 19.7.2003 failing which
land shall be resumed and the amount paid by Mesco shall be adjusted
towards compensation for use and occupation of the land and there shall be
future liability of damages and costs thereupon. As nothing was done by
Mesco, vide communication dated 25.7.2003, IDCO resumed the land and
cancelled delivery of deed of possession dated 18.6.1996. The amount
deposited was forfeited.
12. The memorandum of understanding (MOU) was reached between the
Government of Orissa and Mesco Group of Industries on 4.5.1994. According
to the same, Government of Orissa had undertaken to recommend leasehold
rights for mining at suitable mining locations. The MOU was required to be
converted into agreement in due course of time. As per the general terms
and conditions framed by the Government of Orissa on 25.1.1995 for
allotment of land for steel plants, the cost of land was Rs.1 lakh per
acre. The amount was to be paid in instalments as provided with a right to
hold the demised property for 90 years. Condition No.18 of the general
terms and conditions to be inserted in lease deed provided that the lessee
had to remedy the breach within three months after notice. Clause 18 of the
general terms and conditions is extracted hereunder :
“18. If the dues of the Lessor hereby reserved or any part thereof shall
at any time being arrears and unpaid for three months next after the date
on which the same shall have become due, whether the same shall have been
lawfully demanded or not, or if there is a breach or non-observance by the
Lessee of any of the conditions and covenant herein contained and the
lessee fails to remedy the breach within three months of the notice in
writing given by the lessor or becomes insolvent or enters into an
agreement with his creditors for composition of the said business. This
agreement will be deemed to have been terminated and the Lessee may
notwithstanding the waiver of any previous causes of action or rights or
remedy of re enter and without prejudice to any such rights, or remedy of
the lessor for recovery of dues under the lease, enter upon the demised
property and repossess the same as if this demised property had not been
leased out. In such a case the lessee shall pay to the Lessor such amount
by way of damages or such other charges as may be determined by the Lessor.
The amount of damages or other dues recoverable from the Lessee will be
adjusted against the amount already paid by the Lessee. If after such
adjustment there remains surplus, the same shall be returned to the lessee
without any interest. If after such adjustment there shall remains some
dues recoverable from the lessee and if lessee fails to pay the same, the
lessor shall be free to take any legal action as it deems for realization.”
(emphasis supplied)
Aforesaid condition No.18 never came into force and remained
inoperative in the facts of the instant case as lease deed itself had not
been executed. Even otherwise, more than three months’ time was given to
Mesco to remedy the breach inasmuch as notice for resumption was initially
given in 1997 and for more than 5½ years till resumption in July, 2003,
breach was not remedied. In spite of receiving the advance possession,
there was failure on the part of Mesco to execute the lease deed though
draft lease deed was sent to it in January, 1996 for execution. The
relationship of lessor and lessee never came into being, in the absence of
execution of lease deed. The execution of lease deed was necessary as the
State Government had only accorded in principle approval and advised IDCO
to allot the land that could only be done by execution of lease deed. As a
matter of fact, IDCO ought not to have handed over advance possession of
the land to Mesco without execution of lease deed. However, for the reasons
best known to IDCO, advance possession was given. The allotment letter
itself contemplated the execution of the lease deed as a condition
precedent. As provided in section 33 of the Orissa Industrial
Infrastructure Development Corporation Act, 1980 (for short ‘the Act’), the
Corporation can dispose of the land subject to directions given by the
State Government in such a manner and subject to such terms and conditions
as may be necessary. The condition precedent was that of execution of lease
deed, and as it was so directed by State Government also, in our considered
opinion, no concluded contract came into being and the transaction became
void due to failure on the part of Mesco to execute a formal lease deed.
13. Section 33 of the Act is extracted hereunder:
“Section 33. Disposal of land by the Corporation. - (1) Subject to any
directions given by the State Government the Corporation may dispose of –
Any land acquired by the State Government and transferred to it, without
undertaking or carrying out any development thereon; or
Any such land after undertake or carrying out such development as it thinks
fit,
to such person in such manner and subject to such terms and conditions, as
it considers expedient for securing the purposes of this Act.
(2) The powers of the Corporation with respect to the disposal of land
under sub-S. (1) shall be so exercised as to secure, so far as practicable,
that –
where the Corporation proposes to dispose of by sale any such land which is
surplus to its requirement, the Corporation shall offer the land in the
first instance to the persons from whom it was acquired, if they desire to
purchase it, subject to such requirements as to its development and use as
the Corporation may think fit to impose.
persons who are residing or carrying on business or other activities on any
such land shall, if they desire to obtain accommodation on land belonging
to the Corporation and are willing to comply with any requirements of the
Corporation as to its development and use have an opportunity to obtain
thereon accommodation suitable to their reasonable requirements on terms
settled with due regard to the price at which any such land has been
acquired from them.
(3) Nothing in this Act shall be construed as enabling the Corporation to
dispose of land by way of gift, but subject as aforesaid; reference in this
Act to the disposal of land shall be construed as reference to the disposal
thereof in any manner whether by way of sale, mortgage, exchange, or lease
or by the creation, of any easement, right or privilege or otherwise.”
It is apparent from section 33(1) and 33(3) that it was necessary to
execute the lease deed as the Corporation could dispose of the land only in
the manner as provided in law and otherwise also it was so stipulated in
the Government order itself. Thus, due to neglect of Mesco the transaction
became void and it was not necessary to serve three months’ notice to
remedy the breach. However, in the facts of the case for several years the
breach was not remedied after communication dated 27.10.1997 till July,
2003.
14. In the instant case it is apparent that possession had been enjoyed
by Mesco without execution of the lease deed. The conduct of IDCO was also
not diligent. Notice was served in the year 1997 for resumption but
thereafter up to July, 2003 nothing was done by either IDCO or Mesco. Not
even a single communication has been placed on record by Mesco containing
its proposal to remedy breach and on a specific query being made to the
learned counsel appearing for Mesco, they were unable to explain as to what
transpired between 1997 and 2003 except a vague submission was made that it
was mired in certain litigations which fact has not been even pleaded.
Thus, no explanation, good, bad or otherwise has been placed on record for
inaction on the part of Mesco. The transaction became void, due to Mesco’s
own lapse and negligence, and it has forfeited the right to get the lease
deed executed. After taking possession, it could not have waited for so
many years. What was required to be performed by Mesco was not done. It
also failed to make any development of worth on the land. We find no force
in the submission that they have spent a sum of Rs.22 crores as they were
unable to explain how they spent the said amount, and only a bald statement
was made that they have constructed a boundary wall. It has not been
established that a sum of Rs.22 crores had been spent by Mesco. Apart from
that, having failed to execute the lease deed, they were to invest at their
own peril. In case they have invested some amount, on that basis they
cannot claim any legal or equitable right.
15. IDCO is a statutory authority and it can act only on the basis of
written lease deed. The execution of lease deed is necessary and it is in
public interest to prevent unauthorized leasing out of property on its
behalf. Lease is required to be executed in a prescribed format in the
shape of formal document which is sine qua non. In the absence thereof, it
would not be permissible to hold that relationship of lessor and lessee
came into being. A situation arose under section 175(3) of the Government
of India Act, 1935 a formal document was required to be executed which
provision was pari materia to Article 299 of the Constitution, this Court
held in Bhikraj Jaipuria v. Union of India AIR 1962 SC 113 that for a
contract between Government and private individuals, formal document is
necessary and where it is required that a thing shall be done in the
prescribed manner or form but does not set out the consequences of non-
compliance, the question whether the provision was mandatory or directory
has to be judged in the light of the intention of the legislature as
disclosed by the object. If the provisions of statute are mandatory, the
thing done not in the manner or form prescribed can have no effect or
validity. This Court also observed that it is in the interest of the public
that the question whether a binding contract has been made between the
State and a private individual should not be left to dispute and
litigation.
It is apparent that there is a manner of executing the lease deed
with the Corporation. Prescribed form of draft lease deed had been sent by
IDCO to Mesco but it failed to execute it. Thus, there was no contract
which could have been enforced and it became void due to inaction of Mesco
itself.
16. Forfeiture of amount of Rs.1.25 crores was also appropriate. In State
of West Bengal v. M/s. B.K. Mondal and Sons AIR 1962 SC 779, this Court
held that the provision of section 175(3) is mandatory and non-compliance
makes the contract invalid and section 70 of the Contract Act prevents
unjust enrichment. It applies as much to individuals as to corporations and
Government. Section 70 of the Contract Act deals with the cases where a
person does a thing not intending to act gratuitously and others enjoyed
it. In such a situation compensation can be claimed under section 70 and
this Court has held that section 175(3) of the Government of India Act is
not in conflict with the principles enunciated under section 70 of the
Contract Act. Thus, we find no force in the submission on the part of Mesco
with respect to the forfeiture of amount of Rs.1.25 crores. In addition,
they would be liable to pay as compensation for retaining possession so
long. In New Marine Coal Co. (Bengal) Private Ltd. v. The Union of India
AIR 1964 SC 152 also, this Court has held that when a contract is found to
be void due to the provisions of section 175(3) of the Government of India
Act it becomes unenforceable but in case a party had performed its
obligation, section 70 is attracted in order to recover compensation.
17. In Laliteshwar Prasad Sahi v. Bateshwar Prasad and Ors. AIR 1968 SC
580 where mere agreement was entered into in contravention of Article 299
of the Constitution and was not ratified by the Government, it was held not
to be a contract as it was void and unenforceable. Similar is the view
taken in Karamshi Jethabhai Somayya v. State of Bombay (now Maharashtra)
AIR 1964 SC 1714. It is true that the said provisions are not attracted in
the instant case but statutory corporation has also to act as per the mode
prescribed by law.
18. There is no question of estoppel or ratification in such cases. In
Mulamchand v. State of Madhya Pradesh AIR 1968 SC 1218, this Court observed
thus :
“6. ….. The principle is that the provisions of Section 175(3) of the
Government of India Act, 1935 or the corresponding provisions of Article
299(1) of the Constitution of India are mandatory in character and the
contravention of these provisions nullifies the contracts and makes them
void. There is no question of estoppel or ratification in such a case. The
reason is that the provisions of Section 175(3) of the Government of India
Act and the corresponding provisions of Article 299(1) of the Constitution
have not been enacted for the sake of mere form but they have been enacted
for safeguarding the Government against unauthorised contracts. The
provisions are embodied in Section 175(3) of the Government of India Act
and Article 299(1) of the Constitution on the ground of public policy — on
the ground of protection of general public —and these formalities cannot be
waived or dispensed with. If the plea of the respondent regarding estoppel
or ratification is admitted, that would mean in effect the repeal of an
important constitutional provision intended for the protection of the
general public. That is why the plea of estoppel or ratification cannot be
permitted in such a case. But if money is deposited and goods are supplied
or if services are rendered in terms of the void contract, the provisions
of Section 70 of the Indian Contract Act may be applicable. In other words
if the conditions imposed by Section 70 of the Indian Contract Act are
satisfied then the provisions of that section can be invoked by the
aggrieved party to the void contract. The first condition is that a person
should lawfully do something for another person or deliver something to
him; the second condition is that in doing the said thing or delivering the
said thing he must not intend to act gratuitously; and the third condition
is that the other person for whom something is done or to whom something is
delivered must enjoy the benefit thereof. If these conditions are
satisfied, Section 70 imposes upon the latter person the liability to make
compensation to the former in respect of, or to restore, the thing so done
or delivered. The important point to notice is that in a case falling under
Section 70 the person doing something for another or delivering something
to another cannot sue for the specific performance of the contract, nor ask
for damages for the breach of the contract, for the simple reason that
there is no contract between him and the other person for whom he does
something or to whom he delivers something. So where a claim for
compensation is made by one person against another under Section 70 it is
not on the basis of any subsisting contract between the parties but on a
different kind of obligation. The juristic basis of the obligation in such
a case is not founded upon any contract or tort but upon a third category
of law, namely, quasi-contract or restitution. In Bibrosa v. Fairbairn,
1943 AC 32 Lord Wright has stated the legal position as follows:
“... any civilised system of law is bound to provide remedies for cases of
what has been called unjust enrichment or unjust benefit, that is, to
prevent a man from retaining the money of, or some benefit derived from,
another which it is against conscience that he should keep. Such remedies
in English Law are generically different from remedies in contract or in
tort, and are now recognised to fall within a third category of the common
law which has been called quasi-contract or restitution”.
In the light of aforesaid decision, when we consider the overall
conduct of Mesco in the instant case, we are fully satisfied that the High
Court has adventured into an avoidable illegality while directing execution
of lease deed. It is a settled law that equity follows the rule of common
law in respect of such contracts. Renewal of lease is a privilege and if a
tenant wishes to claim the privilege, he must do so strictly within the
time limited for the purpose. This Court has further considered the
question where there is no time limit, an application may be made within a
reasonable time. If delay is on the part of lessee for renewal arising out
of mere neglect on his part and which could have been avoided by reasonable
diligence, would not entitle him to claim renewal. Applying the same
principle to the instant case, it is apparent that the conduct of Mesco was
unfair and unpardonable. The conduct disentitled it from indulgence by
Court in any manner. We are constrained to observe that a number of times
the High Court had unnecessarily directed the matter to be reconsidered and
on each and every occasion there was rejection of the representation by the
concerned authorities. Thus, no equitable consideration was available with
Mesco to invoke the writ jurisdiction for the reliefs sought. Relief
granted is not permissible as per law.
19. Mesco had no enforceable right for grant of any relief by mere
handing over of possession. The question came up before this Court in Khela
Banerjee & Anr. v. City Montessori School & Ors. (2012) 7 SCC 261 when bid
was cancelled and was not accepted but the Manager of the respondent
convinced the Governor to pass individual order of possession and
acceptance of the balance amount in ten six-monthly instalments; thereafter
instalments were not paid. This Court held that no enforceable right
accrued in favour of the respondent notwithstanding the execution of the
agreement dated 12.1.1996 and the offer made by the respondent to make the
payment of the balance price was rightly rejected. This Court has held thus
:
“29. The first question which merits consideration is whether the
conclusion recorded by the High Court on the issue of enforceability of the
agreement dated 12-1-1996 is correct and Respondent 1’s prayer for issue of
a direction to LDA to accept the balance price was rightly rejected. It is
an admitted position that in response to tender notice dated 20-12-
1994, Respondent 1 gave bids for four plots including Plot No. 92-A/C and
paid 25% of the price offered by it but did not pay the balance amount
necessitating cancellation of the bid, about which intimation was
given vide letter dated 14-6-1995. Respondent 1 did not challenge the
cancellation of bids by availing appropriate legal remedy but its Manager
succeeded in convincing the Governor of the State to pass an unusual order
for handing over possession of the plots and acceptance of the balance
amount in six-monthly instalments. The reasons which prompted the Governor
to act in violation of the Rules of Business and ordain restoration of the
plots in favour of Respondent 1 albeit without setting aside the decision
of LDA to cancel the bids are not borne out from the records produced
before this Court. Therefore, we hold that the order passed by the Governor
and the consequential actions taken by the State Government and LDA
including the execution of agreement dated 12-1-1996 did not create an
enforceable right in favour of Respondent 1 and the High Court rightly
declined to issue a mandamus to LDA to accept the offer made on its behalf
for payment of the balance price.
30. It is significant to note that the agreement dated 12-1-1996
contained an unequivocal stipulation that if Respondent 1 fails to pay the
instalments of balance price within the prescribed time-limit then the
agreement would become void and LDA will be free to sell the plot to any
other person. Admittedly, Respondent 1 did not pay the instalments of
balance price. Therefore, the agreement stood automatically terminated and
LDA became entitled to dispose of the plot by adopting an appropriate
mechanism consistent with the doctrine of equality enshrined in Article 14
of the Constitution. It is rather intriguing as to why the functionaries of
LDA remained silent for more than 13 years and did not repossess the plot
in question. This was perhaps due to the pressure brought by the Manager of
Respondent 1 from different quarters, administrative as well as political.
xxx xxx xxx
32. We have carefully gone through the provisions of the 2009 Act and find
that they do not even remotely deal with the issue of allotment of land to
the educational institutions. Therefore, the Division Bench of the High
Court was not at all justified in ordering transfer of the plot to
Respondent 1 and that too by ignoring its own finding that the said
respondent was a ranked defaulter and the writ petition was filed after a
time gap of 13 years without any tangible explanation.”
(emphasis
added by us)
20. Mesco was required to do several acts in this case as per the general
terms and conditions subject to which the lease was to be granted. Nothing
has been performed including payment of instalments etc. and in such a
situation no relief is permissible to be given as held by this Court in Raj
Kishore (Dead) by LRs. v. Prem Singh & Ors. (2011) 1 SCC 657 in which this
Court has referred to Halsbury’s Laws of England thus :
“33. This Court also quoted with approval the following passage from
Halsbury’s Laws of England, Vol. 14, IIIrd Edn., p. 622, Para 1151:
“1151. Conditions must as a general rule be strictly observed.—Where under
a contract, conveyance, or will a beneficial right is to arise upon the
performance by the beneficiary of some act in a stated manner, or at a
stated time, the act must be performed accordingly in order to obtain the
enjoyment of the right, and in the absence of fraud, accident or surprise,
equity will not relieve against a breach of the terms.””
It is apparent that when several acts are to be done in a stated
manner and in stipulated time and none of them has been performed, as in
the instant case, such gross breach became irremediable and no equitable
principle could have come to the rescue of Mesco as it has utterly failed
to fulfil its obligations.
21. It was submitted on behalf of Mesco that IDCO is bound by promissory
estoppel. We find the submission to be wholly unworthy of acceptance. It is
not the case of Mesco that there was any assurance given to it on the basis
of which it has acted upon. The State Government had withdrawn its initial
offer of equity participation of Rs.25 crores well before the order of
allotment was issued. It was made clear in the order that the State
Government had directed IDCO to allot 2500 acres of land subject to
execution of lease deed. In such a situation there is no room to entertain
the plea of promissory estoppel and it is not the case that any of the
authorized persons had at any point of time, without execution of lease
deed, asked Mesco to do anything. Any such assurance even if it had been
given, would be of no consequence as held by this Court in Mumbai
International Airport Private Ltd. v. Golden Chariot Airport & Anr. (2010)
10 SCC 422. Therein a question arose that the Airports Authority of India
being a statutory body constituted under section 3 of the Airports
Authority of India Act, 1944 was required to execute the contract in a
particular form as provided under the Act and the Regulations. As such it
was held that even if oral assurance of execution of licence is proved,
such assurance cannot bind the statutory body. In the facts of the instant
case, the principle of promissory estoppel is not attracted at all. IDCO
is a statutory body and can act only in the mode prescribed and Mesco was
informed of the lease deed to be executed in prescribed format. Thus the
High Court could not have issued the impugned direction.
22. In the writ petition, a prayer had been made for grant of relief of a
declaration that Mesco has acquired full title to hold the property in
question for a period of 99 years from the date of possession and IDCO has
lost its title to the said land and has the remedy to recover the balance
amount by filing a suit. The prayer was wholly misconceived. In the instant
case, on the basis of MOU or allotment letter, no right has accrued to
Mesco, and it having failed to perform its mandatory part, the MOU/offer
became void and unenforceable. IDCO was fully justified in resuming the
land.
23. The High Court has totally misdirected itself in directing to lease
out the balance land. The High Court has also ignored that certain
intervening events have taken place and there was total failure on the part
of Mesco to carry out its obligations. The High Court could not have issued
the direction more so in the changed situation and in view of the defaults
committed by Mesco. As a matter of fact, Mesco was never inclined to abide
by the terms of the letter dated 4.7.2003. When resumption was made on
25.7.2003, a representation was submitted on 20.8.2003 by Mesco. In that,
an attempt was made to dictate its own terms in the garb of prayer for
payment. As a matter of fact, it is apparent from the conduct of Mesco that
it had no justification at any point of time not to execute the lease deed.
It was delaying the same for the reasons best known to it which was wholly
impermissible conduct, particularly after taking possession. The breach was
not remedied for several years much less for three months in which it was
to be remedied. Thus, High Court misadventured into holding the action of
IDCO of resumption of land to be illegal. There was no equitable or legal
consideration in favour of the respondent herein and a writ is not issued
to perpetuate an illegality. Not only the conduct of Mesco was unfair,
third party rights had also intervened. Lawful method had been exercised
for resumption of land and cancellation of letter of handing over the
possession.
24. Resultantly, the impugned order passed by the High Court is hereby
set aside. The appeals are allowed. The writ petition stands dismissed.
Cost of Rs.5 lakhs is directed to be paid by Mesco to IDCO within a period
of two months from today.
………………………J.
(Arun Mishra)
New Delhi; ……………………..J.
February 14, 2017. (Amitava Roy)
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2545 OF 2017
[Arising out of SLP [C] No.23563/2007]
Orissa Industrial Infrastructure
Development Corporation … Appellant
Vs.
M/s. MESCO Kalinga Steel Ltd. & Ors. … Respondents
With CA No. 2546 /2017 (@ SLP (C) No. 23759/2007 and CA No.2547/2017 (@ SLP
(C) No.2683/2008).
J U D G M E N T
ARUN MISHRA, J.
1. Leave granted.
2. The appeals have been preferred by Orissa Industrial Infrastructure
Development Corporation (in short ‘IDCO’) and also by Jindal Stainless Ltd.
aggrieved by the impugned judgment and order dated 30.10.2007 passed by the
High Court of Orissa, thereby directing IDCO to lease out 825.68 acres of
land and to enter into a lease agreement with M/s. Mesco Kalinga Steel Ltd.
3. The factual matrix discloses that Mesco Kalinga Steel Ltd. (in short
‘Mesco’) had applied to IDCO for allotment of 2500 acres of land on
30.6.1994 and IDCO in turn, requested the Government of Orissa to issue
necessary orders to process the allotment. On 28.10.1994 the State
Government conveyed in principle approval for allotment of 2500 acres of
land on the terms and conditions laid down in the policy decision of the
State Government as revised on 25.1.1995 for establishment of steel plant.
4. Initially the State Government had agreed for equity participation of
Rs.25 crores towards the cost of land. This offer was withdrawn by the
State Government on 2.2.1995 and was communicated to Mesco. IDCO wrote a
letter on 21.3.1995 to Mesco to deposit the land cost in twenty half-yearly
equal instalments and further requested to deposit Rs.1.25 crores towards
the first instalment and Rs. 13.08 lakhs towards ground rent and cess.
Mesco deposited Rs.1.25 crores with IDCO on 3.4.1995. On 13.6.1996 IDCO
requested Mesco to take over possession of 1756.29 acres of land in the
first phase and to submit the draft lease deed for execution. Mesco took
over possession of the land on 18.6.1996. However, lease deed was not
executed. Thereafter, on 13.10.1997, the State Government intimated the
proceedings of the meeting held on 26.9.1997 to IDCO and required it to
execute the lease deed in favour of Mesco and also to realize the
instalments due.
5. On 27.10.1997, IDCO requested Mesco to submit draft deed of lease
agreement for execution within 15 days, failing which steps will be taken
for cancellation of allotment and resumption of land. IDCO again requested
on 26.11.1997 to submit the draft deed of agreement for execution. However
Mesco kept quiet and failed to get the lease deed executed. Thereafter, for
more than 5 ½ years nothing happened. No steps were taken by Mesco to get
the lease deed executed. Thereafter, IDCO gave final notice to Mesco on
4.7.2003 to deposit the balance defaulted amount of Rs.22.44 crores along
with statutory dues and to execute the lease deed by 19.7.2003 failing
which it was intimated that the said land shall be resumed at their cost
and the amount paid shall be adjusted towards compensation for use and
occupation of the land; apart from that, Mesco shall also be liable for
damages. Ultimately on 25.7.2003 on failure to get the lease deed executed,
land was resumed and possession letter of 1756.29 acres of land was
cancelled by IDCO. The amount of Rs.1.25 crores deposited by Mesco was
forfeited and adjusted towards compensation for use and occupation of the
land and damages.
6. After resumption of the land, IDCO allotted 209.59 acres of land out
of the land in question to Visa Industries Ltd. on 7.11.2003 and also
allotted 71.20 acres out of the disputed land to Jindal Stainless Ltd.
Possession of the land was handed over to Visa Industries Ltd. on 30.8.2004
and to Jindal Stainless Ltd. on 28.2.2005. IDCO further allotted 533.52
acres of disputed land to Jindal Stainless Ltd. and another 120 acres of
land out of the disputed land to Visa Industries Ltd. and handed over
possession to Jindal and Visa on 11.11.2005 and 17.11.2005 respectively.
The lease deed etc. have been executed between the aforesaid parties.
7. A representation was submitted by Mesco on 20.8.2003 questioning
resumption in which Mesco submitted its own terms and conditions for
payment. The said representation was rejected on 26.9.2003 by IDCO. The
first round of litigation in the form of W.P. (C) No.12857/2003 was filed
by Mesco questioning the cancellation and resumption of land. The High
Court disposed of the said writ petition on 15.1.2004. Pursuant thereto,
representation dated 20.1.2004 submitted to IDCO had been rejected on
25.2.2004. Thereafter, in the second round of litigation, W.P. (C)
No.2453/2005, during its pendency, Mesco came up with another
representation dated 22.8.2005 to IDCO which was rejected on 7.10.2005 on
the ground that it was highly unsatisfactory, unconvincing and completely
unacceptable. Mesco amended the writ petition to question the rejection
order dated 7.10.2005. On 11.4.2007 and 12.4.2007, the High Court again
asked IDCO whether it was willing to lease out the remaining land to Mesco.
As IDCO was unable to do so, the High Court allowed the writ application to
lease out 825.68 acres of land. Aggrieved thereby, the appellants are
before us.
8. The High Court has held that since IDCO has not complied with clause
18 contained in the policy decision dated 25.1.1995 in as much as 3 months’
notice has not been given, it was not open to resume the possession
otherwise than in due course of law. Since Mesco had confined its prayer to
the available land to the aforesaid extent, the High Court had issued
directions to lease out 825.68 acres of land.
9. It was submitted by learned senior counsel on behalf of the
appellants that the High Court has erred in law in setting aside the order
of resumption of land as there was failure on the part of Mesco to get the
lease deed executed despite repeated reminders made by IDCO in the years
1996 and 1997 and thereafter for several years there was lull, and
ultimately after issuance of notice, resumption of land was made which has
been subsequently allotted to other industries and the remaining land was
required for their future expansion. The land for mining purposes is also
not available at present. The instalments were also not deposited. In the
absence of execution of lease deed, the relationship of lessor and lessee
never came into being, as such the 3 months’ notice for resumption of land
was not required. Three months’ notice is required to terminate a lease
deed. The order of resumption was passed and pursuant thereto, possession
has rightly been taken as Mesco was not vested with any right to retain
possession having failed to pay the instalments and execute the lease deed.
The order passed by IDCO for forfeiture of the amount deposited to the tune
of Rs.1.25 crores was fully justified in the facts and circumstances of the
case. No development had been made by Mesco on the land in question. Thus,
the impugned order may be set aside.
10. Learned senior counsel appearing on behalf of the respondent urged
that the order of the High Court is appropriate and no case for
interference in the appeal is made out. Setting up of the steel plant would
be in the interest of the State and the public at large. Due to certain
legal proceedings etc, Mesco could not get the lease deed executed. It was
necessary to serve 3 months’ notice to resume the land which has not been
done. On a specific query being posed about the development over the land,
it was stated that the boundary wall had been constructed. However, no
plant etc. could be established before resumption of the land.
11. Before dilating upon the rival submissions, it is appropriate to take
note of certain facts. The Government of Orissa, Department of Steel &
Mines had conveyed its in principle approval for allotment of 2500 acres of
land for establishment of 2 million tons steel plant with ultimate capacity
of 3 million tons per annum. The offer for equity participation of Rs. 25
crores was withdrawn by the State Government vide letter dated 5.1.1995
before direction for allotment was issued and IDCO was advised to hand over
2500 acres of land on long term lease basis on the terms and conditions
stipulated in the revised terms and conditions issued by the Government on
25.1.1995. They were required to deposit Rs.1.25 crores towards the first
instalment and Rs.13,08,842/- towards ground rent and cess as reflected in
the letter dated 21.3.1995. The amount of Rs.1.25 crores was deposited on
3.5.1995. Vide communication dated 13.6.1996 of IDCO, possession of 1756.29
acres of land was required to be taken and Mesco was further required to
submit a draft deed of agreement in duplicate. It appears that on 18.6.1996
advance possession of 1756 acres of land had been handed over to Mesco but
the draft deed of agreement for execution of lease deed was not submitted
by it, hence a letter was written on 27.10.1997 by IDCO to resume the land
and to cancel allotment. In communication dated 26.11.1997, IDCO wrote that
it had sent draft lease deed to Mesco on 20.1.1996 and required the latter
to submit the draft of lease agreement for execution immediately. Thus it
is apparent that though the possession had been taken by Mesco but, at the
same time, there was inexplicable neglect on its part to execute the lease
deed. Due to the contumacious default on the part of Mesco for several
years, lease deed could not be executed. Ultimately IDCO had served notice
dated 4.7.2003 to Mesco regarding resumption of land referring to its
earlier communications dated 27.10.1997 and 26.11.1997 to execute the lease
deed or to face resumption of land. The amount of instalments had also not
been deposited except the initial amount of Rs.1.25 crores. Thus Mesco was
required by notice to deposit the balance defaulted amount of
Rs.22,84,48,890/- and to execute the lease deed by 19.7.2003 failing which
land shall be resumed and the amount paid by Mesco shall be adjusted
towards compensation for use and occupation of the land and there shall be
future liability of damages and costs thereupon. As nothing was done by
Mesco, vide communication dated 25.7.2003, IDCO resumed the land and
cancelled delivery of deed of possession dated 18.6.1996. The amount
deposited was forfeited.
12. The memorandum of understanding (MOU) was reached between the
Government of Orissa and Mesco Group of Industries on 4.5.1994. According
to the same, Government of Orissa had undertaken to recommend leasehold
rights for mining at suitable mining locations. The MOU was required to be
converted into agreement in due course of time. As per the general terms
and conditions framed by the Government of Orissa on 25.1.1995 for
allotment of land for steel plants, the cost of land was Rs.1 lakh per
acre. The amount was to be paid in instalments as provided with a right to
hold the demised property for 90 years. Condition No.18 of the general
terms and conditions to be inserted in lease deed provided that the lessee
had to remedy the breach within three months after notice. Clause 18 of the
general terms and conditions is extracted hereunder :
“18. If the dues of the Lessor hereby reserved or any part thereof shall
at any time being arrears and unpaid for three months next after the date
on which the same shall have become due, whether the same shall have been
lawfully demanded or not, or if there is a breach or non-observance by the
Lessee of any of the conditions and covenant herein contained and the
lessee fails to remedy the breach within three months of the notice in
writing given by the lessor or becomes insolvent or enters into an
agreement with his creditors for composition of the said business. This
agreement will be deemed to have been terminated and the Lessee may
notwithstanding the waiver of any previous causes of action or rights or
remedy of re enter and without prejudice to any such rights, or remedy of
the lessor for recovery of dues under the lease, enter upon the demised
property and repossess the same as if this demised property had not been
leased out. In such a case the lessee shall pay to the Lessor such amount
by way of damages or such other charges as may be determined by the Lessor.
The amount of damages or other dues recoverable from the Lessee will be
adjusted against the amount already paid by the Lessee. If after such
adjustment there remains surplus, the same shall be returned to the lessee
without any interest. If after such adjustment there shall remains some
dues recoverable from the lessee and if lessee fails to pay the same, the
lessor shall be free to take any legal action as it deems for realization.”
(emphasis supplied)
Aforesaid condition No.18 never came into force and remained
inoperative in the facts of the instant case as lease deed itself had not
been executed. Even otherwise, more than three months’ time was given to
Mesco to remedy the breach inasmuch as notice for resumption was initially
given in 1997 and for more than 5½ years till resumption in July, 2003,
breach was not remedied. In spite of receiving the advance possession,
there was failure on the part of Mesco to execute the lease deed though
draft lease deed was sent to it in January, 1996 for execution. The
relationship of lessor and lessee never came into being, in the absence of
execution of lease deed. The execution of lease deed was necessary as the
State Government had only accorded in principle approval and advised IDCO
to allot the land that could only be done by execution of lease deed. As a
matter of fact, IDCO ought not to have handed over advance possession of
the land to Mesco without execution of lease deed. However, for the reasons
best known to IDCO, advance possession was given. The allotment letter
itself contemplated the execution of the lease deed as a condition
precedent. As provided in section 33 of the Orissa Industrial
Infrastructure Development Corporation Act, 1980 (for short ‘the Act’), the
Corporation can dispose of the land subject to directions given by the
State Government in such a manner and subject to such terms and conditions
as may be necessary. The condition precedent was that of execution of lease
deed, and as it was so directed by State Government also, in our considered
opinion, no concluded contract came into being and the transaction became
void due to failure on the part of Mesco to execute a formal lease deed.
13. Section 33 of the Act is extracted hereunder:
“Section 33. Disposal of land by the Corporation. - (1) Subject to any
directions given by the State Government the Corporation may dispose of –
Any land acquired by the State Government and transferred to it, without
undertaking or carrying out any development thereon; or
Any such land after undertake or carrying out such development as it thinks
fit,
to such person in such manner and subject to such terms and conditions, as
it considers expedient for securing the purposes of this Act.
(2) The powers of the Corporation with respect to the disposal of land
under sub-S. (1) shall be so exercised as to secure, so far as practicable,
that –
where the Corporation proposes to dispose of by sale any such land which is
surplus to its requirement, the Corporation shall offer the land in the
first instance to the persons from whom it was acquired, if they desire to
purchase it, subject to such requirements as to its development and use as
the Corporation may think fit to impose.
persons who are residing or carrying on business or other activities on any
such land shall, if they desire to obtain accommodation on land belonging
to the Corporation and are willing to comply with any requirements of the
Corporation as to its development and use have an opportunity to obtain
thereon accommodation suitable to their reasonable requirements on terms
settled with due regard to the price at which any such land has been
acquired from them.
(3) Nothing in this Act shall be construed as enabling the Corporation to
dispose of land by way of gift, but subject as aforesaid; reference in this
Act to the disposal of land shall be construed as reference to the disposal
thereof in any manner whether by way of sale, mortgage, exchange, or lease
or by the creation, of any easement, right or privilege or otherwise.”
It is apparent from section 33(1) and 33(3) that it was necessary to
execute the lease deed as the Corporation could dispose of the land only in
the manner as provided in law and otherwise also it was so stipulated in
the Government order itself. Thus, due to neglect of Mesco the transaction
became void and it was not necessary to serve three months’ notice to
remedy the breach. However, in the facts of the case for several years the
breach was not remedied after communication dated 27.10.1997 till July,
2003.
14. In the instant case it is apparent that possession had been enjoyed
by Mesco without execution of the lease deed. The conduct of IDCO was also
not diligent. Notice was served in the year 1997 for resumption but
thereafter up to July, 2003 nothing was done by either IDCO or Mesco. Not
even a single communication has been placed on record by Mesco containing
its proposal to remedy breach and on a specific query being made to the
learned counsel appearing for Mesco, they were unable to explain as to what
transpired between 1997 and 2003 except a vague submission was made that it
was mired in certain litigations which fact has not been even pleaded.
Thus, no explanation, good, bad or otherwise has been placed on record for
inaction on the part of Mesco. The transaction became void, due to Mesco’s
own lapse and negligence, and it has forfeited the right to get the lease
deed executed. After taking possession, it could not have waited for so
many years. What was required to be performed by Mesco was not done. It
also failed to make any development of worth on the land. We find no force
in the submission that they have spent a sum of Rs.22 crores as they were
unable to explain how they spent the said amount, and only a bald statement
was made that they have constructed a boundary wall. It has not been
established that a sum of Rs.22 crores had been spent by Mesco. Apart from
that, having failed to execute the lease deed, they were to invest at their
own peril. In case they have invested some amount, on that basis they
cannot claim any legal or equitable right.
15. IDCO is a statutory authority and it can act only on the basis of
written lease deed. The execution of lease deed is necessary and it is in
public interest to prevent unauthorized leasing out of property on its
behalf. Lease is required to be executed in a prescribed format in the
shape of formal document which is sine qua non. In the absence thereof, it
would not be permissible to hold that relationship of lessor and lessee
came into being. A situation arose under section 175(3) of the Government
of India Act, 1935 a formal document was required to be executed which
provision was pari materia to Article 299 of the Constitution, this Court
held in Bhikraj Jaipuria v. Union of India AIR 1962 SC 113 that for a
contract between Government and private individuals, formal document is
necessary and where it is required that a thing shall be done in the
prescribed manner or form but does not set out the consequences of non-
compliance, the question whether the provision was mandatory or directory
has to be judged in the light of the intention of the legislature as
disclosed by the object. If the provisions of statute are mandatory, the
thing done not in the manner or form prescribed can have no effect or
validity. This Court also observed that it is in the interest of the public
that the question whether a binding contract has been made between the
State and a private individual should not be left to dispute and
litigation.
It is apparent that there is a manner of executing the lease deed
with the Corporation. Prescribed form of draft lease deed had been sent by
IDCO to Mesco but it failed to execute it. Thus, there was no contract
which could have been enforced and it became void due to inaction of Mesco
itself.
16. Forfeiture of amount of Rs.1.25 crores was also appropriate. In State
of West Bengal v. M/s. B.K. Mondal and Sons AIR 1962 SC 779, this Court
held that the provision of section 175(3) is mandatory and non-compliance
makes the contract invalid and section 70 of the Contract Act prevents
unjust enrichment. It applies as much to individuals as to corporations and
Government. Section 70 of the Contract Act deals with the cases where a
person does a thing not intending to act gratuitously and others enjoyed
it. In such a situation compensation can be claimed under section 70 and
this Court has held that section 175(3) of the Government of India Act is
not in conflict with the principles enunciated under section 70 of the
Contract Act. Thus, we find no force in the submission on the part of Mesco
with respect to the forfeiture of amount of Rs.1.25 crores. In addition,
they would be liable to pay as compensation for retaining possession so
long. In New Marine Coal Co. (Bengal) Private Ltd. v. The Union of India
AIR 1964 SC 152 also, this Court has held that when a contract is found to
be void due to the provisions of section 175(3) of the Government of India
Act it becomes unenforceable but in case a party had performed its
obligation, section 70 is attracted in order to recover compensation.
17. In Laliteshwar Prasad Sahi v. Bateshwar Prasad and Ors. AIR 1968 SC
580 where mere agreement was entered into in contravention of Article 299
of the Constitution and was not ratified by the Government, it was held not
to be a contract as it was void and unenforceable. Similar is the view
taken in Karamshi Jethabhai Somayya v. State of Bombay (now Maharashtra)
AIR 1964 SC 1714. It is true that the said provisions are not attracted in
the instant case but statutory corporation has also to act as per the mode
prescribed by law.
18. There is no question of estoppel or ratification in such cases. In
Mulamchand v. State of Madhya Pradesh AIR 1968 SC 1218, this Court observed
thus :
“6. ….. The principle is that the provisions of Section 175(3) of the
Government of India Act, 1935 or the corresponding provisions of Article
299(1) of the Constitution of India are mandatory in character and the
contravention of these provisions nullifies the contracts and makes them
void. There is no question of estoppel or ratification in such a case. The
reason is that the provisions of Section 175(3) of the Government of India
Act and the corresponding provisions of Article 299(1) of the Constitution
have not been enacted for the sake of mere form but they have been enacted
for safeguarding the Government against unauthorised contracts. The
provisions are embodied in Section 175(3) of the Government of India Act
and Article 299(1) of the Constitution on the ground of public policy — on
the ground of protection of general public —and these formalities cannot be
waived or dispensed with. If the plea of the respondent regarding estoppel
or ratification is admitted, that would mean in effect the repeal of an
important constitutional provision intended for the protection of the
general public. That is why the plea of estoppel or ratification cannot be
permitted in such a case. But if money is deposited and goods are supplied
or if services are rendered in terms of the void contract, the provisions
of Section 70 of the Indian Contract Act may be applicable. In other words
if the conditions imposed by Section 70 of the Indian Contract Act are
satisfied then the provisions of that section can be invoked by the
aggrieved party to the void contract. The first condition is that a person
should lawfully do something for another person or deliver something to
him; the second condition is that in doing the said thing or delivering the
said thing he must not intend to act gratuitously; and the third condition
is that the other person for whom something is done or to whom something is
delivered must enjoy the benefit thereof. If these conditions are
satisfied, Section 70 imposes upon the latter person the liability to make
compensation to the former in respect of, or to restore, the thing so done
or delivered. The important point to notice is that in a case falling under
Section 70 the person doing something for another or delivering something
to another cannot sue for the specific performance of the contract, nor ask
for damages for the breach of the contract, for the simple reason that
there is no contract between him and the other person for whom he does
something or to whom he delivers something. So where a claim for
compensation is made by one person against another under Section 70 it is
not on the basis of any subsisting contract between the parties but on a
different kind of obligation. The juristic basis of the obligation in such
a case is not founded upon any contract or tort but upon a third category
of law, namely, quasi-contract or restitution. In Bibrosa v. Fairbairn,
1943 AC 32 Lord Wright has stated the legal position as follows:
“... any civilised system of law is bound to provide remedies for cases of
what has been called unjust enrichment or unjust benefit, that is, to
prevent a man from retaining the money of, or some benefit derived from,
another which it is against conscience that he should keep. Such remedies
in English Law are generically different from remedies in contract or in
tort, and are now recognised to fall within a third category of the common
law which has been called quasi-contract or restitution”.
In the light of aforesaid decision, when we consider the overall
conduct of Mesco in the instant case, we are fully satisfied that the High
Court has adventured into an avoidable illegality while directing execution
of lease deed. It is a settled law that equity follows the rule of common
law in respect of such contracts. Renewal of lease is a privilege and if a
tenant wishes to claim the privilege, he must do so strictly within the
time limited for the purpose. This Court has further considered the
question where there is no time limit, an application may be made within a
reasonable time. If delay is on the part of lessee for renewal arising out
of mere neglect on his part and which could have been avoided by reasonable
diligence, would not entitle him to claim renewal. Applying the same
principle to the instant case, it is apparent that the conduct of Mesco was
unfair and unpardonable. The conduct disentitled it from indulgence by
Court in any manner. We are constrained to observe that a number of times
the High Court had unnecessarily directed the matter to be reconsidered and
on each and every occasion there was rejection of the representation by the
concerned authorities. Thus, no equitable consideration was available with
Mesco to invoke the writ jurisdiction for the reliefs sought. Relief
granted is not permissible as per law.
19. Mesco had no enforceable right for grant of any relief by mere
handing over of possession. The question came up before this Court in Khela
Banerjee & Anr. v. City Montessori School & Ors. (2012) 7 SCC 261 when bid
was cancelled and was not accepted but the Manager of the respondent
convinced the Governor to pass individual order of possession and
acceptance of the balance amount in ten six-monthly instalments; thereafter
instalments were not paid. This Court held that no enforceable right
accrued in favour of the respondent notwithstanding the execution of the
agreement dated 12.1.1996 and the offer made by the respondent to make the
payment of the balance price was rightly rejected. This Court has held thus
:
“29. The first question which merits consideration is whether the
conclusion recorded by the High Court on the issue of enforceability of the
agreement dated 12-1-1996 is correct and Respondent 1’s prayer for issue of
a direction to LDA to accept the balance price was rightly rejected. It is
an admitted position that in response to tender notice dated 20-12-
1994, Respondent 1 gave bids for four plots including Plot No. 92-A/C and
paid 25% of the price offered by it but did not pay the balance amount
necessitating cancellation of the bid, about which intimation was
given vide letter dated 14-6-1995. Respondent 1 did not challenge the
cancellation of bids by availing appropriate legal remedy but its Manager
succeeded in convincing the Governor of the State to pass an unusual order
for handing over possession of the plots and acceptance of the balance
amount in six-monthly instalments. The reasons which prompted the Governor
to act in violation of the Rules of Business and ordain restoration of the
plots in favour of Respondent 1 albeit without setting aside the decision
of LDA to cancel the bids are not borne out from the records produced
before this Court. Therefore, we hold that the order passed by the Governor
and the consequential actions taken by the State Government and LDA
including the execution of agreement dated 12-1-1996 did not create an
enforceable right in favour of Respondent 1 and the High Court rightly
declined to issue a mandamus to LDA to accept the offer made on its behalf
for payment of the balance price.
30. It is significant to note that the agreement dated 12-1-1996
contained an unequivocal stipulation that if Respondent 1 fails to pay the
instalments of balance price within the prescribed time-limit then the
agreement would become void and LDA will be free to sell the plot to any
other person. Admittedly, Respondent 1 did not pay the instalments of
balance price. Therefore, the agreement stood automatically terminated and
LDA became entitled to dispose of the plot by adopting an appropriate
mechanism consistent with the doctrine of equality enshrined in Article 14
of the Constitution. It is rather intriguing as to why the functionaries of
LDA remained silent for more than 13 years and did not repossess the plot
in question. This was perhaps due to the pressure brought by the Manager of
Respondent 1 from different quarters, administrative as well as political.
xxx xxx xxx
32. We have carefully gone through the provisions of the 2009 Act and find
that they do not even remotely deal with the issue of allotment of land to
the educational institutions. Therefore, the Division Bench of the High
Court was not at all justified in ordering transfer of the plot to
Respondent 1 and that too by ignoring its own finding that the said
respondent was a ranked defaulter and the writ petition was filed after a
time gap of 13 years without any tangible explanation.”
(emphasis
added by us)
20. Mesco was required to do several acts in this case as per the general
terms and conditions subject to which the lease was to be granted. Nothing
has been performed including payment of instalments etc. and in such a
situation no relief is permissible to be given as held by this Court in Raj
Kishore (Dead) by LRs. v. Prem Singh & Ors. (2011) 1 SCC 657 in which this
Court has referred to Halsbury’s Laws of England thus :
“33. This Court also quoted with approval the following passage from
Halsbury’s Laws of England, Vol. 14, IIIrd Edn., p. 622, Para 1151:
“1151. Conditions must as a general rule be strictly observed.—Where under
a contract, conveyance, or will a beneficial right is to arise upon the
performance by the beneficiary of some act in a stated manner, or at a
stated time, the act must be performed accordingly in order to obtain the
enjoyment of the right, and in the absence of fraud, accident or surprise,
equity will not relieve against a breach of the terms.””
It is apparent that when several acts are to be done in a stated
manner and in stipulated time and none of them has been performed, as in
the instant case, such gross breach became irremediable and no equitable
principle could have come to the rescue of Mesco as it has utterly failed
to fulfil its obligations.
21. It was submitted on behalf of Mesco that IDCO is bound by promissory
estoppel. We find the submission to be wholly unworthy of acceptance. It is
not the case of Mesco that there was any assurance given to it on the basis
of which it has acted upon. The State Government had withdrawn its initial
offer of equity participation of Rs.25 crores well before the order of
allotment was issued. It was made clear in the order that the State
Government had directed IDCO to allot 2500 acres of land subject to
execution of lease deed. In such a situation there is no room to entertain
the plea of promissory estoppel and it is not the case that any of the
authorized persons had at any point of time, without execution of lease
deed, asked Mesco to do anything. Any such assurance even if it had been
given, would be of no consequence as held by this Court in Mumbai
International Airport Private Ltd. v. Golden Chariot Airport & Anr. (2010)
10 SCC 422. Therein a question arose that the Airports Authority of India
being a statutory body constituted under section 3 of the Airports
Authority of India Act, 1944 was required to execute the contract in a
particular form as provided under the Act and the Regulations. As such it
was held that even if oral assurance of execution of licence is proved,
such assurance cannot bind the statutory body. In the facts of the instant
case, the principle of promissory estoppel is not attracted at all. IDCO
is a statutory body and can act only in the mode prescribed and Mesco was
informed of the lease deed to be executed in prescribed format. Thus the
High Court could not have issued the impugned direction.
22. In the writ petition, a prayer had been made for grant of relief of a
declaration that Mesco has acquired full title to hold the property in
question for a period of 99 years from the date of possession and IDCO has
lost its title to the said land and has the remedy to recover the balance
amount by filing a suit. The prayer was wholly misconceived. In the instant
case, on the basis of MOU or allotment letter, no right has accrued to
Mesco, and it having failed to perform its mandatory part, the MOU/offer
became void and unenforceable. IDCO was fully justified in resuming the
land.
23. The High Court has totally misdirected itself in directing to lease
out the balance land. The High Court has also ignored that certain
intervening events have taken place and there was total failure on the part
of Mesco to carry out its obligations. The High Court could not have issued
the direction more so in the changed situation and in view of the defaults
committed by Mesco. As a matter of fact, Mesco was never inclined to abide
by the terms of the letter dated 4.7.2003. When resumption was made on
25.7.2003, a representation was submitted on 20.8.2003 by Mesco. In that,
an attempt was made to dictate its own terms in the garb of prayer for
payment. As a matter of fact, it is apparent from the conduct of Mesco that
it had no justification at any point of time not to execute the lease deed.
It was delaying the same for the reasons best known to it which was wholly
impermissible conduct, particularly after taking possession. The breach was
not remedied for several years much less for three months in which it was
to be remedied. Thus, High Court misadventured into holding the action of
IDCO of resumption of land to be illegal. There was no equitable or legal
consideration in favour of the respondent herein and a writ is not issued
to perpetuate an illegality. Not only the conduct of Mesco was unfair,
third party rights had also intervened. Lawful method had been exercised
for resumption of land and cancellation of letter of handing over the
possession.
24. Resultantly, the impugned order passed by the High Court is hereby
set aside. The appeals are allowed. The writ petition stands dismissed.
Cost of Rs.5 lakhs is directed to be paid by Mesco to IDCO within a period
of two months from today.
………………………J.
(Arun Mishra)
New Delhi; ……………………..J.
February 14, 2017. (Amitava Roy)
