REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 3107-3108 OF 2012
(Arising out of SLP(C) Nos. 36724-36725 of 2009)
Saroj Screens Pvt. Ltd. ... Appellant
versus
Ghanshyam and others ... Respondents
J U D G M E N T
G.S. Singhvi, J.
1. Leave granted.
2. These appeals are directed against judgment dated 16.10.2009 of the
Bombay High Court, Nagpur Bench whereby the writ petitions filed by
respondent nos. 1 and 2 were partly allowed, Resolution dated 28.8.1991
passed by Municipal Corporation of the City of Nagpur (for short, 'the
Corporation') for renewal of lease in favour of the appellant in respect of
Plot No.5, Circle No.19/27, Division I, Old Sarai Road, Geeta Ground
Layout, Nagpur as also sanction accorded by the State Government under
Section 70(5) of the City of Nagpur Corporation Act, 1948 (for short, 'the
Act') were quashed and a direction was issued to Civil Judge (Senior
Division), Nagpur to decide Special Civil Suit No. 1135 of 1993 latest by
31.12.2010.
FACTS:
3. On an application made by Gopaldas Mohta (father of respondent No. 1
- Ghanshyam Mohta and father-in-law of respondent No. 2 - Smt. Kamla Devi),
Municipal Committee of Nagpur (for short, 'the Committee') passed
resolution dated 17.3.1944 for grant of lease to him in respect of the plot
described herein above for a period of 30 years. In furtherance of that
resolution, lease deed dated 28.10.1944 was executed in favour of Gopaldas
Mohta. The tenure of lease commenced from 17.3.1944. For the sake of
convenient reference, Clauses 6 and 8 of the lease deed are extracted
below:
"6. The lessee shall upon every assignment of the said land or any
part thereof within a calendar month thereafter deliver to the lessor
or to such person as he may appoint in this behalf a notice of such
assignment putting forth the names and description of the parties
thereto and the particulars and effect thereof.
8. The Municipal Committee i.e. the lessor will have the option to
retake structure at end of the term of 30 years hereby granted by
paying the then market value of the structure or to renew the lease on
the revised ground rent, fair and equitable, for a further term of 30
years or more.
Provided also that every such renewed lease of the land shall contain
such of the covenants provisions and conditions in these presents
contained as shall be applicable and shall always contain a covenant
for further renewal of the lease."
3.1 After about 3 years, Gopaldas Mohta leased out the plot to the
appellant for a period of 27 years (from 28.3.1947 to 16.3.1974). The
relevant portions of deed dated 10.9.1947 executed between Gopaldas Mohta
and the appellant read as under:
"THIS DEED OF LEASE made on the 10th day of September, 1947, between
DIWAN BAHADUR Seth Gopaldas Mohta, resident of Akola (hereinafter
called the Lessor) of the ONE PART, and Messrs Saroj Screens Ltd.,
Amraoti, a joint stock company with limited liability, represented by
Mr. Anandrao son of Yadararo, Managing Director, resident of Amraoti,
Taluq and District Amraoti, (hereinafter called the Lessees) of the
SECOND PART.
WITNESSETH AS FOLLOWS:
1. The Lessor holds and is in possession of a plot of land,
situated in the locality popularly known as "The Geeta Ground", in
Sitabuldi of Nagpur city in the Central Provinces and more
particularly described in the scheduled statement herewith below,
which he holds under a lease dated 17th March, 1944, granted by the
Municipal Committee Nagpur, and on this plot, the Lessor has
constructed a plinth for construction of a Cinema Theatre, as per
plans, sanctioned and approved by the said Municipal Committee. Over
this plot, certain building materials, such as sand, stones, metal and
other iron and wooden material etc., belonging to the Lessor, have
been collected and are lying. The Lessor hereby lessee the said plot
including the plinth and above mentioned materials which have already
been delivered into the possession of the Lessees by the Lessor), to
the Lessees, for a period commencing from 28.3.1947 till 16th March,
1974, which is the entire unexpired period of the Lease which the
Lessor holds under the Municipal Committee, Nagpur.
The main lease in favour of the lessor, contains a clause for renewal
under which the lessor shall be entitled to have the lease renewed in
his favour, for a further period on the expiry of the present lease.
This right of the lessor, is however, retained by the lessor, for his
own benefit and the lessees shall have no claim to the interest
thereby created.
PROVIDED HOWEVER, if the lessees acquire the interests of the lessor,
as provided in Clause (5) below, the lessees shall be entitled to all
the rights and interest of the lessor under the said clause for
renewal, together with all other interests which the lessor may have
under the lease before mentioned, dated 17th March, 1944 including the
right of renewal, therein mentioned.
5. The lessees shall have the option to pay to the lessor a sum of
Rs. 90,000/- (Rupees Ninety Thousand only) at any time during the
first five years of the lease and to purchase all the rights of the
Lessor under said Head Lease from the Municipal Committee, Nagpur,
together with his rights over the plinth and the material and on this
amount being paid as per this conditions, the lessor shall be bound to
execute the necessary assignment or other assurance in favour of the
lessees at the cost and expenses of the lessees. The lessees shall
have also the option to acquire the said interest from the lessor at
any time, on payment of the same price, namely Rs. 90,000/- only
during the last year before the expiry of the lease by afflux of time.
10. On expiry of the lease in due course, the lessees shall hand
over the possession of the premises leased together with the
structures thereon to the lessor who shall thereupon be entitled to
take over the structure after valuing them in the manner hereinbefore
provided. In case, he pays the value of that part of the structure
which the lessees have constructed to the lessees, then the entire
structure will thereafter belong to the lessor. In case, the lessor
does not elect to take over the materials and in case, the lessees
fail to exercise the option of acquiring the leased premises from the
lessor as provided, then in that event, the lessees may remove that
part of the structure which he may have constructed at his cost within
reasonable time of two months and on his failure to do so, the
structure shall thereafter belong to the Lessor and the lessees will
have no right to the same or price thereof."
3.2 In 1959, there was a partition in the family of Gopaldas Mohta and
the plot in question came to the share of his wife Smt. Gangabai. She
assigned the same to Parmanand Kisandas Mundhada of Calcutta by executing
deed dated 12.8.1960. Thereafter, the name of Parmanand Mundhada was
entered in the records of the Committee along with that of Smt. Gangabai.
After 12 years, the appellant sent letter dated 15.1.1973 to Parmanand
Mundhada indicating therein that it was ready to pay Rs.90,000/- and
purchase the interest created in favour of Gopaldas Mohta vide lease deed
dated 28.10.1944. The appellant also requested Parmanand Mundhada to
approach the Corporation, which had succeeded the Committee, for renewal of
the lease after 16.3.1974.
3.3 Parmanand Mundhada submitted application dated 7.3.1974 to the
Corporation for renewal of lease for a period of 30 years. However,
without waiting for the Corporation's response, the appellant filed Special
Civil Suit No.96 of 1974 against Parmanand Mundhada, Gopaldas Mohta,
Gangabai and the Corporation for the specific performance of agreement
dated 10.9.1947 executed by Gopaldas Mohta. During the pendency of the
suit, Parmanand Mundhada died and his legal representatives were brought on
record.
3.4 The suit filed by the appellant was decreed by Civil Judge, Senior
Division, Nagpur (hereinafter referred to as, 'the trial Court') vide
judgment dated 28.4.1980 but the same was reversed by the High Court in
First Appeal Nos. 95 of 1980 and 96 of 1980 filed by the heirs of Parmanand
Mundhada and respondent No.2 and the Corporation respectively. The relevant
portions of the High Court's judgment dated 25.7.1991 are extracted below:
"20. To this letter (Exh. 98) a reminder was sent on 15th February
1974 after a gap of one year. That letter is Exh. 99. That letter is
addressed to defendant no. 1 Parmanand by the Counsel of the
plaintiff. It makes an interest reading. It is hence extracted as a
whole. It reads as under:-
Dear Sir,
Under instructions of my clients M/s Saroj Screens Pvt. Ltd., I
have to invite your attention to their registered letter dated
15.1.1973 received by your on 19.1.1973. My client has not
received any reply so far.
2. Please let me know whether you have applied to the Municipal
Corporation, Nagpur for renewal of the lessor whether you want to
apply for renewal of the lease. If you have applied, what is the
result of your application.
3. My client has been ever ready and willing to perform his part of the
contract under the Indenture dated 10.9.1947 with Diwan Bahadur Seth
Gopaldas Mohta, by which you are bound.
4. Please note that if you do not sent any satisfactory reply within ten
days of the receipt of this letter, my client will take it that you do
not want to get the lease dated 28.10.1944 renewed and to perform your
part of the contract and thereby you have committed breach
thereof. In that event my client will be free to take such steps as
he may be advised and in the event of litigation you will be held
liable for costs and consequences. Please take notice.
Yours faithfully,
Sd/-
Advocate
Counsel for M/s. Saroj Screens Pvt. Ltd.
The letter is self explanatory. It clearly calls upon the defendant
no. 1 to get the legal renewed and on failure to perform that part of
contract it would result in breach of the contract of his part.
Therefore, the readiness or willingness on the part of the plaintiff
was made subject to renewal of the lease which condition was never
agreed upon. This is more glaring when we peruse the reliefs claimed
in the plaint. In prayer clause (a) the plaintiff claimed a decree
that the defendant no. 1 do obtain from the defendant no. 2 a renewed
lease of the original (Exh. 120) on rent which is fair and equitable,
and in clause (aa) the relief claimed was that on deposit of Rs.
79,000/- in Court the defendant no. 1 do execute in favour of the
plaintiff a deed of transfer of all rights in the renewed lease
granted to him by the defendant no. 2. The pleadings and the evidence
are restricted to the allegations made in the two letters Exh. 98 and
99 only.
21. Therefore, no doubt is left in our mind that the plaintiff came
forward seeking implementation of a different contract than the one
agreed between the parties. Apparently the plaintiff had no desire to
pay the amount of Rs.90,000/- till such time the lease is renewed.
There was neither readiness or willingness on the part of the
plaintiff to implement the contract. We hence answer the point at
issue in the negative. The learned Court below had completely
misdirected itself in coming to a contrary conclusion not warranted by
the facts on record."
(emphasis added)
3.5 During the pendency of the suit filed by the appellant, the
Corporation passed Resolution No.162 dated 29.10.1975 for renewal of lease
in favour of Parmanand Mundhada for a period of 30 years subject to the
condition of payment of ground rent at the rate of Rs.13,120/- per annum
and penalty of Rs.3,000/- for breach of the conditions embodied in lease
deed dated 28.10.1944. The relevant portions of Resolution dated
29.10.1975 are reproduced below:
"Resolution No. 162: The term of the 30 years lease of plot no. 5
situated on Geeta Ground, Sitabuldi, where upon Anand Talkies is
situate has expired on 16.3.1974. The present owner of that plot viz
Shri Parmananddas Kisandas Mundhada, resident of 55/58 Isra Street,
Calcutta, having made an application on 7.3.1974 for renewal or lease
for further 30 years, the house took into consideration the said
request.
xxx xxx xxx
With regard to the subject under consideration, the Hon'ble Members
have made a request that the House should give information to them
regarding the notes made by way of amendment by the Municipal
Commissioner.
The Hon'ble Mayor has suggested that the Municipal
Commissioner should clarify about the amended notes.
Accordingly the Hon'ble Municipal Commissioner made
clarification about his notes made on 17.10.1975 in details.
xxx xxx xxx
After that discussion, as mentioned in the notes of the Hon'ble
Municipal Commissioner dated 17.10.1975, the House has taken unanimous
decision to renew the lease on other conditions for further 30 years
by charging per year Rs. 13,120/- as ground rent, and the previous
lease having committee breach of two minor conditions, by penalizing
him Rs. 1500/- for each breach, total Rs. 3000/-, as shown in the
concerned file.
The term of 30 years lease of Municipal Plot No. 5 situate in Geeta
Ground, Sitabuldi, on which Anand Talkies is situate, having expire on
16.3.1974 and the present owner of the plot Parmananddas having his
residence at 55/58 Isra Street, Calcutta having made an application
for further renewal of the plot for further 30 years, as also
considering the notes prepared by the Hon'ble Municipal Commissioner
dated 17.10.1975 for the case has been renewed for further 30
'sanctioned', 'sanctioned', on the following conditions.
1) Considering the fact that the present market price in comparison to
old price, which is 10 times more, it being proper to enhance the
ground rent in ratio by 10 times, it was suggested that the ground
rent of that plot should be fixed at Rs. 13120/- per annum.
2) The previous lessee of the lease deed have committed breach of two
conditions, Rs.1500/- for each breach, total Rs. 3000/-should be
recovered by way of fine from him.
3) Other conditions will be as before."
3.6 Parmanand Mundhada is said to have filed an appeal under Section
397(3) read with Section 411 of the Act questioning the decision of the
Corporation to increase the ground rent and to impose penalty. However,
the pleadings filed before this Court do not show whether Parmanand
Mundhada and/or his heirs pursued the appeal and the same was decided by
the Competent Authority.
3.7 After the judgment of the High Court, respondent nos.1 and 2
submitted application dated 1.8.1991 to the Commissioner of the Corporation
for entering their names in the municipal records by asserting that the
heirs of Parmanand Mundhada had assigned the leasehold rights of the plot
in their favour by registered deeds dated 2.9.1985 and this fact had been
brought to the notice of the Corporation vide letter dated 23.9.1985.
However, instead of taking action on the request of respondent nos. 1 and
2, the Corporation passed Resolution No. 137 dated 28.8.1991 for renewal of
lease in favour of the appellant for a period of 30 years commencing from
16.3.1991 subject to the condition of payment of ground rent at the rate of
Rs.20,000/- per annum. That resolution reads as under:
"Resolution No. 137: Since Messrs Saroj Screen Private Limited has
been paying from time to time ground rent of the land and the land and
building thereon are in possession of the Saroj Screen Private
Limited, there should be no objection for mutation of the land in
their name. Messrs Saroj Screen Private Limited, has by written letter
guaranteed to pay Rs. 15,000/- per year by way of ground rent of the
land. Therefore, as by way of resolution dated 29.10.1975, bearing no.
162, the Nagpur Municipal Corporation has fixed the ground rent at Rs.
13,120/- per year and Rs. 15,000/- by way of ground rent is being
paid, which is more than ground rent of Rs. 13,120/- which is fixed,
there will be no kind of financial loss of the Corporation. M/s Saroj
Screen Private Limited had paid the amount of ground rent of Rs.
2,12,529.60 for the period 16.3.1984 to 25.3.1991. Therefore, the
House has taken into consideration the resolution renewal of lease for
30 years from 16.3.1991 at the ground rent of Rs. 15,000/- per annum
and as per resolution no. 162 dated 29.10.1975 fix the ground rent at
Rs. 15,000/- after making recovery of arrears according to that
resolution and recommended for acceptance. It also proposed that in
stead of ground rent of Rs. 13,120/- in future ground rent of Rs.
20,000/- should be recovered, which suggestion was made by Hon'ble
Member Shri Atalbahadur Singh. This suggestion was unanimously
sanctioned by the voice of acceptance."
3.8 In furtherance of the aforesaid resolution, lease deed dated 4.9.1991
was executed between the Commissioner of the Corporation and the appellant.
3.9 Respondent Nos. 1 and 2 challenged the decision of the Corporation to
grant lease to the appellant in Writ Petition No. 1613 of 1992 and prayed
that Resolution dated 28.8.1991 may be quashed and a direction be issued
for registration of lease deed in their favour because the heirs of
Parmanand Mundhada had assigned leasehold rights in their favour. They
pleaded that in view of Resolution dated 29.10.1975 vide which the
Corporation renewed lease in favour of Parmanand Mundhada for a period of
30 years, the subsequent resolution was liable to be declared as nullity,
more so, because while deciding First Appeal Nos. 95 and 96 of 1980, the
High Court had found that the appellant was not ready and willing to
perform its part of agreement dated 10.09.1947.
3.10 In the written statement filed by the appellant, it was pleaded that
respondent nos. 1 and 2 do not have the locus standi to challenge
Resolution dated 28.8.1991 because the plot had been assigned by Smt.
Gangabai to Parmanand Mundhada. It was further pleaded that the assignment
deeds dated 2.9.1985 executed by the heirs of Parmanand Mundhada had no
sanctity in the eyes of law because tenure of the initial lease granted to
Ghanshyam Mohta had ended in 1974. Another plea taken by the appellant was
that Resolution dated 29.10.1975 passed by the Corporation for extending
the term of lease in favour of Parmanand Mundhada had became infructuous
because he did not pay the enhanced ground rent and penalty.
3.11 In the written statement filed on behalf of the Corporation, an
objection was taken to the maintainability of the writ petition on the
ground that the issues raised therein are purely contractual and the same
cannot be decided by the High Court under Article 226 of the Constitution.
On merits, it was pleaded that assignment deeds dated 2.9.1985 are not
binding on the Corporation because it had not been apprised about the
transfer of leasehold rights by the heirs of Parmanand Mundhada in favour
of respondent nos. 1 and 2.
3.12 At this stage, it will be appropriate to mention that during the
pendency of Writ Petition No.1613 of 1992, respondent nos.1 and 2 filed
Special Civil Suit No.1135 of 1993 for eviction of the appellant,
possession of the suit property and recovery of damages by alleging that
Resolution dated 28.8.1991 was illegal and without jurisdiction and lease
deed dated 4.9.1991 executed in favour of the appellant did not create any
rights in its favour.
3.13 After filing the written statement in Writ Petition No.1613 of 1992,
the Corporation passed Resolution dated 22.7.1996 and cancelled the lease
granted to the appellant on the ground that previous sanction of the State
Government had not been obtained as per the requirement of Section 70(5) of
the Act. The appellant questioned this action of the Corporation in Writ
Petition No.1786 of 1996. By an interim order dated 14.8.1996, the High
Court directed that status quo be maintained regarding possession of the
plot. After 1 year and about 8 months, the Corporation sent letter dated
27.4.1998 to the appellant and gave an assurance for restoration of the
lease subject to the condition that it shall have to withdraw the writ
petition. Thereupon, the appellant filed an application dated 6.5.1998
with a prayer that it may be allowed to withdraw the writ petition. The
same remained pending till 18.10.2001, on which date the High Court
dismissed Writ Petition No.1786 of 1996 as withdrawn.
3.14 In the meanwhile, the State Government accorded sanction for grant of
lease to the appellant for a period of 30 years, i.e., from 16.3.1991 to
15.3.2021. This was communicated to the Corporation vide letter dated
12.6.2000.
3.15 On coming to know of the aforesaid decision of the State Government,
respondent nos.1 and 2 filed Writ Petition No.3661 of 2001 and prayed that
communication dated 12.6.2000 be quashed by contending that during the
pendency of Writ Petition Nos.1613 of 1992 and 1786 of 1996, there was no
justification for according sanction under Section 70(5) of the Act.
Another plea taken by respondent nos.1 and 2 was that the decision of the
State Government and the Corporation was violative of Article 14 of the
Constitution inasmuch as public property was transferred to the appellant
without conducting auction or inviting tenders so as to enable the members
of public to participate in the process of grant of lease.
3.16 In its reply, the appellant controverted the allegation of favoritism
and pleaded that respondent nos. 1 and 2 cannot question the sanction
accorded by the State Government under Section 70(5) of the Act because
their predecessor had not complied with the conditions incorporated in
Resolution dated 29.10.1975. It was further pleaded that the sanction
accorded by the State Government is not retrospective and the Corporation
is required to execute a new lease which would be effective from 1991.
Another plea taken by the appellant was that respondent nos. 1 and 2 had
not come to the Court with clean hands inasmuch as they have suppressed the
fact that the suit filed by them was pending before the Civil Court.
3.17 The Division Bench of the High Court overruled the preliminary
objections raised by the appellant and the Corporation to the
maintainability of the writ petition by relying upon the judgments of this
Court in D.F.O., South Kheri v. Ram Sanehi Singh (1971) 3 SCC 864 and
S.J.S. Enterprises (P) Ltd. v. State of Bihar (2004) 7 SCC 166. The
Division Bench held that when a public authority is said to have acted in
violation of the statutory provisions, the Court can grant relief to the
aggrieved person and the availability of the alternative remedy does not
operate as a bar. The Division Bench further held that respondent nos. 1
and 2 cannot be held guilty of suppressing the factum of filing suit for
eviction because the first writ petition had been instituted much before
filing the suit. While dealing with the challenge to Resolution dated
28.8.1991 and the decision of the State Government to accord sanction under
Section 70(5), the Division Bench opined that during the subsistence of
Resolution dated 29.10.1975, the Corporation could not have granted lease
in favour of the appellant and the State Government had no right to
validate such grant. However, the prayer of respondent nos. 1 and 2 for
issue of a direction to the Corporation to implement Resolution dated
29.10.1975 was rejected on the premise that the issue was pending
consideration before the trial Court.
4. Shri Gagan Sanghi, learned counsel for the appellant argued that the
reasons assigned by the High Court for nullifying the decision taken by the
State Government and the Corporation to grant lease in favour of the
appellant are legally unsustainable and the impugned judgment is liable to
be set aside because Resolution dated 29.10.1975 passed by the Corporation
for renewal of lease in favour of Parmanand Mundhada had not been acted
upon. Learned counsel submitted that respondent nos. 1 and 2 had not
produced any evidence before the High Court to substantiate their assertion
that Parmanand Mundhada had filed an appeal under Section 397(3) read with
Section 411 of the Act questioning Resolution dated 29.10.1975 to the
extent of enhancement of ground rent and imposition of penalty and argued
that even if such an appeal had been filed, the same did not entitle the
beneficiary of the resolution to claim renewal of lease without fulfilling
the conditions incorporated therein. Learned counsel argued that the
Corporation did not commit any illegality by passing Resolution dated
28.8.1991 and executing lease deed dated 4.9.1991 in favour of the
appellant because Parmanand Mundhada and his heirs did not come forward for
the execution of lease deed in terms of Resolution dated 29.10.1975. He
further argued that sanction accorded by the State Government under Section
70(5) of the Act was legally correct and the High Court committed an error
by nullifying the same on the specious ground that during the subsistence
of Resolution dated 29.10.1975, the Corporation could not have granted
lease to the appellant.
5. Shri Shekhar Naphade, learned senior counsel appearing for respondent
nos. 1 and 2 referred to Clause 8 of lease deed dated 28.10.1944 executed
between the Committee and Gopaldas Mohta and argued that the Corporation,
which came to be constituted under the Act had no option but to renew the
lease because the option available under that clause for resumption of the
plot by paying market value of the structure had not been exercised and
Parmanand Mundhada in whose favour Smt. Gangabai had executed assignment
deed dated 12.8.1960 continued to enjoy the status of lessee. Learned
senior counsel relied upon Section 116 of the Transfer of Property Act and
the judgment of this Court in Damodhar Tukaram Mangalmurti v. State of
Bombay AIR 1959 SC 639 and argued that failure of the Corporation to resume
the plot after paying market value of the structure leads to an
irresistible inference that the Corporation had decided to renew the lease
and, as a matter of fact, Resolution dated 29.10.1975 was passed to that
effect. Shri Naphade laid considerable emphasis on the fact that in terms
of Clause 8 of lease deed dated 28.10.1944, the Corporation could have made
fair and equitable revision of the ground rent and argued that there was no
justification for 10 times increase in the ground rent necessitating filing
of an appeal by Parmanand Mundhada.
6. Before dealing with the arguments of the learned counsel, we consider
it necessary to make the following observations:
i) Although, the appellant has not disputed that in the partition, which
took place in 1959 in the family of Gopaldas Mohta, the plot in question
came to the share of his wife Smt. Gangabai and that she had executed
assignment deed dated 12.8.1960 in favour of Parmanand Mundhada, it has not
placed on record copies of the partition deed and assignment deed so as to
enable the Court to appreciate the extent and magnitude of the right
acquired by Parmanand Mundhada.
ii) Before the High Court the appellant and the Corporation pleaded that
neither of them had any knowledge about assignment deeds dated 2.9.1985
executed by the heirs of Parmanand Mundhada in favour of respondent nos. 1
and 2 but their denial is belied by the averments contained in paragraph 3
of C.A. No.1246 of 1991 filed by the appellant in First Appeal No. 95 of
1980, which reads as under:
"3. However, during the pendency of the present appeal, it is
learnt, that the appellants have assigned their lease hold rights in
Plot no.5 in favour of one Shri Ghayanshamdas Mohta and Smt. Kamla
Devi Mohta of Akola under a registered Indenture of Transfer dated 2nd
September 1985 and as such the present appellants have no right, title
or interest in the suit property. A communication dated 23.9.1985
received by the respondent no.2 from the said assignees is appended
herewith."
That apart, what is most surprising is that neither party has produced
copies of assignment deeds dated 2.9.1985.
7. With the aforesaid handicap, we shall proceed to consider whether the
High Court committed an error by quashing Resolution dated 28.8.1991 passed
by the Corporation and the sanction accorded by the State Government under
Section 70(5) of the Act.
8. A reading of lease deed dated 28.10.1944 shows that the Committee
had leased out the plot to Gopaldas Mohta for a period of 30 years
commencing from 17.3.1944 with a clear stipulation that at the end of 30
years' period it will have an option to retake the structure by paying the
prevailing market value or renew the lease on revised ground rent for a
further term of 30 years by incorporating the covenants, provisions and
conditions contained in deed dated 28.10.1944 with a stipulation for
further renewal of the lease. By lease deed dated 10.9.1947, Gopaldas
Mohta transferred all the rights and interests vested in him including the
one relating to renewal of the lease to the appellant, who was also given
an option to pay to the lessor, i.e. Gopaldas Mohta a sum of Rs.90,000/-
during the first five years of the lease and purchase all his rights from
the Committee. An option was also given to the appellant to acquire the
interest of the lessor on payment of the same price during the last year
before expiry of the lease by efflux of time. The appellant did exercise
option for renewal of lease by sending letter dated 15.1.1973 to Parmanand
Mundhada subject to the condition of renewal of lease by the Corporation.
After some time, the appellant filed Special Civil Suit No.96/1974 for
specific performance, which was decreed by the trial Court vide judgment
dated 28.4.1980. However, the appellant's joy proved to be short-lived
because in the appeals filed by the heirs of Parmanand Mundhada and
respondent No. 2 and the Corporation, the High Court reversed the judgment
of the trial Court and dismissed the suit by observing that the appellant
could not prove its readiness or willingness to implement the contract.
The appellant did not challenge the judgment of the High Court by filing a
petition under Article 136 of the Constitution. Therefore, the finding
recorded by the High Court on the tenability of the appellant's claim,
which was primarily founded on Clause 5 of lease deed dated 10.9.1947, will
be deemed to have become final and the appellant cannot now rely upon the
terms and conditions of lease deed dated 10.9.1947 for contending that the
Corporation was bound to renew the lease in its favour for a period of 30
years.
9. The resolution passed by the Corporation for renewal of lease in
favour of the appellant and the consequential action taken for the
execution of lease deed dated 4.9.1991 were ex facie illegal and the High
Court did not commit any error by quashing the same because,
(i) Resolution dated 29.10.1975 passed by the Corporation for renewal of
lease in favour of Parmanand Mundhada for a period of 30 years had not been
cancelled or rescinded and during the subsistence of that resolution,
neither the Corporation could have renewed the lease in favour of the
appellant for 30 years commencing from 16.3.1991 nor the State Government
could have granted sanction under Section 70(5) of the Act for such
renewal.
(ii) Before passing the resolution for renewal of the lease in favour of
the appellant for a period of 30 years, the Corporation did not obtain
sanction of the State Government, which was sine qua non for any such
action /decision.
(iii) It, however, appears that by taking advantage of the fact that it
continued to have possession of the plot, the appellant induced the
functionaries of the Corporation to enter into a clandestine compromise for
forwarding a proposal to the State Government to grant post facto sanction
for renewal of the lease for 30 years from 16.3.1991 and the latter
accorded sanction without realizing that alienation of any right or
interest in a public property in favour of any person without following a
procedure consistent with the doctrine of equality is impermissible.
10. The issue deserves to be considered from another angle. Section 70
of the Act which contains provisions governing the disposal of municipal
property or property vesting in or under the management of the Corporation
reads thus:
"70. Provisions governing the disposal of municipal property or
property vesting in or under the management of Corporation.
(1) No nazul lands, streets, public places, drains or irrigation
channels shall be sold, leased or otherwise alienated, save in
accordance with such rules as the State Government may make in this
behalf.
(2) Subject to the provisions of sub-section (1), -
(a) the Commissioner may, [in his discretion], grant a lease of any
immovable property belonging to the Corporation including any right of
fishing or of gathering and taking fruit, flowers and the like, of
which the premium of rent, as the case may be, does not exceed [One
Lakh] rupees for any period not exceeding twelve months at a time :
[Provided that every such lease granted by the Commissioner other than
a lease of a class in respect of which the Standing Committee has by
resolution exempted the Commissioner from compliance with the
requirements of this proviso, shall be reported by him to the Standing
Committee within fifteen days after the same has been granted;]
(b) With the sanction of the Standing Committee the Commissioner may
dispose of by sale or otherwise, any such right as aforesaid, for any
period not exceeding three years at a time of which the premium or
rent or both, as the case may be, for any one year does not exceed
[One lakh] rupees;
(c) With the sanction of the Corporation, the Commissioner may
lease, sell or otherwise convey any immoveable property belonging to
the Corporation.
(3) The Commissioner may -
[(a)......................]
(b) with the sanction of the Standing Committee, dispose
of by sale or otherwise any moveable property belonging to the
Corporation:
(c) with the sanction of the Corporation, sell or
otherwise convey any moveable property belonging to the
Corporation.
(4) The sanction of the Standing Committee or of the Corporation
under sub-section (2) or sub-section (3) may be given either generally
for any class of cases or specifically in any particular case.
(5) The foregoing provisions of this section shall apply to every
disposal of property belonging to the Corporation made under, or for
the purposes of this Act:
Provided that -
(i) no property vesting in the Corporation in a trust shall be
leased, sold or otherwise conveyed in a manner that is likely to
affect the trust subject to which such property is held;
(ii) no land exceeding [five lakh] rupees in value shall be sold,
leased or otherwise conveyed without the previous sanction of the
State Government and every sale, lease or other conveyance of
property vesting in the Corporation shall be deemed to be subject
to the conditions and limitations imposed by this Act or by any other
enactment for the time being in force.
(6) Notwithstanding anything contained in this section the
Commissioner may, with the sanction of the Corporation and with the
approval of the State Government, grant a lease, for a period not
exceeding thirty years, of a land belonging to the Corporation which
is declared as a slum area under the provisions of the Maharashtra
Slum Area (Improvement, Clearance and Redevelopment) Act, 1971 to a co-
operative society of slum dwellers, at such rent, which may be less
than the market value of the premium, rent or other consideration, for
the grant of such lease, and subject to such conditions as the
Corporation may impose.
The approval of the State Government under this sub-section may be
given either generally for any class of such lands or specially in any
particular case of such land:
Provided that, the Commissioner may, in like manner renew, from time
to time, the lease for such period and subject to such
conditions as the Corporation may determine and impose."
Though, the exercise of power by the Corporation under the aforesaid
section is not hedged with any particular condition except that in a case
like the present one, the alienation could not have been made without the
previous sanction of the State Government, but in our constitutional scheme
compliance of the doctrine of equality enshrined in Article 14 of the
Constitution has to be read as a condition precedent for exercise of power
by the State Government and the Corporation, more so, when it relates to
alienation of public property or any right or interest therein. In this
context, it is necessary to emphasis that the Corporation holds the
property as a trustee of the public and any alienation of such property or
any right or interest therein otherwise than by way of auction or by
inviting bids would amount to breach of that trust.
11. The concept of the 'State' as it was known before the commencement of
the Constitution and as it was understood for about two decades after
26.1.1950 has undergone drastic change in recent years. Today, the State
cannot be conceived of simply as a coercive machinery wielding the
thunderbolt of authority. Now the Government is a regulator and dispenser
of special services and provides to the large public benefits including
jobs, contracts, licences, quotas, mineral rights etc. The law has also
recognised changing character of the governmental functions and need to
protect individual interest as well as public interest. The discretion of
the Government has been held to be not unlimited. The Government cannot
give or withhold largesse in its arbitrary discretion or according to its
sweet-will. The Government cannot now say that it will transfer the
property (land etc.) or will give jobs or enter into contracts or issue
permits or licences only in favour of certain individuals. In V. Punanan
Thomas v. State of Kerala AIR 1969 Ker. 81, K.K. Mathew, J. (as he then
was) observed: -
"The Government is not and should not be as free as an individual in
selecting recipients for its largesse. Whatever its activities, the
Government is still the Government and will be subject to the
restraints inherent in its position in a democratic society. A
democratic Government cannot lay down arbitrary and capricious
standards for the choice of persons with whom alone it will deal."
12. The traditional view that the executive is not answerable in the
matter of exercise of prerogative power has long been discarded. Prof.
H.W.R. Wade in his work 'Administrative Law' 6th Edition highlighted
distinction between the powers of public authorities and those of private
persons in the following words:-
"... The common theme of all the authorities so far mentioned is that
the notion of absolute or unfettered discretion is rejected. Statutory
power conferred for public purposes is conferred as it were upon
trust, no absolutely - that is to say, it can validly be used only in
the right and proper way which Parliament when conferring it is
presumed to have intended. Although the Crown's lawyers have argued in
numerous cases that unrestricted permissive language confers
unfettered discretion, the truth is that, in a system based on the
rule of law, unfettered governmental discretion is a contradiction in
terms.
The whole conception of unfettered discretion is inappropriate to a
public authority, which possesses powers solely in order that it may
use them for the public good.
There is nothing paradoxical in the imposition of such legal limits.
It would indeed be paradoxical if they were not imposed. Nor is this
principle an oddity of British or American law; it is equally
prominent in French law. Nor is it a special restriction which fetters
only local authorities: it applies no less to ministers of the Crown.
Nor is it confined to the sphere of administration: it operates
wherever discretion is given for some public purpose, for example
where a judge has a discretion to order jury trial. It is only where
powers are given for the personal benefit of the person empowered that
the discretion is absolute. Plainly this can have no application in
public law.
For the same reasons there should in principle be no such thing as
unreviewable administrative discretion, which should be just as much a
contradiction in terms as unfettered discretion. The question which
has to be asked is what is the scope of judicial review, and in a few
special cases the scope for the review of discretionary decisions may
be minimal. It remains axiomatic that all discretion is capable of
abuse, and that legal limits to every power are to be found
somewhere."
13. In Padfield v. Minister of Agriculture, Fishery and Food (1968) A.C.
997, the Court was called upon to decide whether the Minister had the
prerogative not to appoint a Committee to investigate the complaint made by
the members of the Milk Marketing Board that majority of the Board had
fixed milk prices in a way which was unduly unfavourable to the
complainants. While rejecting the theory of absolute discretion, Lord Reid
observed:-
"Parliament must have conferred the discretion with the intention that
it should be used to promote the policy and objects of the Act; the
policy and objects of the Act must be determined by construing the Act
as a whole and construction is always a matter of law for the court.
In a matter of this kind it is not possible to draw a hard and fast
line, but if the Minister, by reason of his having misconstrued the
Act or for any other reasons, so uses his discretion as to thwart or
run counter to the policy and objects of the Act, then our law would
be very defective if persons aggrieved were not entitled to the
protection of the court."
14. In Breen v. Amalgamated Engineering Union (1971) 2 QB 175, Lord
Denning MR observed:-
"The discretion of a statutory body is never unfettered. It is a
discretion which is to be exercised according to law. That means at
least this: the statutory body must be guided by relevant
considerations and not by irrelevantly. It its decision is influenced
by extraneous considerations which it ought not to have taken into
account, then the decision cannot stand. No matter that the statutory
body may have acted in good faith; nevertheless the decision will be
set aside. That is established by Padfield v. Minister of Agriculture,
Fisheries and Food which is a landmark in modern administrative law."
15. The question whether the State and / or its agency / instrumentality
can transfer the public property or interest in public property in favour
of a private person by negotiations or in a like manner has been considered
and answered in negative in several cases. In Akhil Bhartiya Upbhokta
Congress v. State of Madhya Pradesh (2011) 5 SCC 29, this Court was called
upon to examine whether the Government of Madhya Pradesh could have
allotted 20 acres land to Shri Kushabhau Thakre Memorial Trust under the M.
P. Nagar Tatha Gram Nivesh Adhiniyam, 1973 read with M. P. Nagar Tatha Gram
Nivesh Vikasit Bhoomiyo, Griho, Bhavano Tatha Anya Sanrachanao K Vyayan
Niyam, 1975. After noticing the provision of the Act and the Rules, as
also those contained in M.P. Revenue Book Circular and the judgments of
this Court in S. G. Jaisinghani v. Union of India AIR 1967 SC 1427, Ramana
Dayaram Shetty v. International Airport Authority of India (1979) 3 SCC
489, Erusian Equipment and Chemicals Ltd. v. State of W.B. (1975) 1 SCC
70, Kasturi Lal Lakshmi Reddy v. State of J&K (1980) 4 SCC 1, Common Cause
v. Union of India (1996) 6 SCC 530, Shrilekha Vidyarthi v. State of U. P.
(1991) 1 SCC 212, LIC v. Consumer Education & Research Centre (1995) 5 SCC
482, New India Public School v. HUDA (1996) 5 SCC 510, the Court culled out
the following propositions:
"What needs to be emphasised is that the State and/or its
agencies/instrumentalities cannot give largesse to any person
according to the sweet will and whims of the political entities and/or
officers of the State. Every action/decision of the State and/or its
agencies/instrumentalities to give largesse or confer benefit must be
founded on a sound, transparent, discernible and well-defined policy,
which shall be made known to the public by publication in the Official
Gazette and other recognised modes of publicity and such policy must
be implemented/executed by adopting a non-discriminatory and non-
arbitrary method irrespective of the class or category of persons
proposed to be benefited by the policy. The distribution of largesse
like allotment of land, grant of quota, permit licence, etc. by the
State and its agencies/instrumentalities should always be done in a
fair and equitable manner and the element of favouritism or nepotism
shall not influence the exercise of discretion, if any, conferred upon
the particular functionary or officer of the State.
We may add that there cannot be any policy, much less, a rational
policy of allotting land on the basis of applications made by
individuals, bodies, organisations or institutions dehors an
invitation or advertisement by the State or its
agency/instrumentality. By entertaining applications made by
individuals, organisations or institutions for allotment of land or
for grant of any other type of largesse the State cannot exclude other
eligible persons from lodging competing claim. Any allotment of land
or grant of other form of largesse by the State or its
agencies/instrumentalities by treating the exercise as a private
venture is liable to be treated as arbitrary, discriminatory and an
act of favouritism and/or nepotism violating the soul of the equality
clause embodied in Article 14 of the Constitution."
16. The factual matrix of this case shows that before granting 30 years'
lease of the plot in favour of the appellant, the Corporation neither
issued any advertisement nor followed any procedure consistent with the
doctrine of equality so as to enable the members of the public to
participate in the process of alienation of public property. Therefore,
the conclusion reached by the High Court, though for different reasons,
that Resolution dated 28.8.1991 and the sanction accorded by the State
Government vide letter dated 12.6.2000 are legally unsustainable does not
call for interference by this Court.
17. We are also convinced that even though the lease granted to Gopaldas
Mohta was renewed in favour of Parmanand Mundhada vide Resolution dated
29.10.1975, respondent Nos.1 and 2 cannot derive any benefit from the said
renewal merely because the Corporation did not cancel or rescind the
resolution. It was neither the pleaded case of respondent Nos.1 and 2 nor
any material was produced by them before the High Court to show that
Parmanand Mundhada had taken any action in furtherance of Resolution dated
29.10.1975 and fresh lease deed was executed in his favour. The only plea
taken by them was that Parmanand Mundhada had filed an appeal under Section
397(3) read with Section 411 against increase in the ground rent and the
imposition of penalty. However, nothing has been said about the fate of
that appeal. If Parmanand Mundhada, his heirs or respondent Nos.1 and 2
felt that the disposal of the appeal has been unduly delayed then they
could have filed a writ for issue of a mandamus directing the appellate
authority to decide the appeal within a specified period but no such step
is shown to have been taken by either of them. Therefore, we are
constrained to take the view that Resolution dated 29.10.1975 had become
redundant and the same can no longer be relied upon by respondent Nos.1 and
2 for claiming any right or interest in the plot.
18. The ratio of the judgment in Damodhar Tukaram Mangalmurti v. State of
Bombay (supra) which has been relied upon by Shri Naphade has no bearing on
this case. The question which came up for consideration in that case was
whether Civil Court has the jurisdiction to decide the issue of fair and
equitable enhancement of the annual rent. The facts of that case were that
the then Provincial Government of the Central Provinces and Berar, Nagpur
devised a scheme to extend residential accommodation by acquiring
agricultural land and making it available for residential purposes. The
lease granted in respect of building sites of 10,000 sq. ft. contained a
renewal clause with a stipulation that the lessor can make fair and
equitable increase in the amount of annual rent. At the time of renewal,
the lessor increased the annual rent from Rs. 3-8-0 to Rs. 21-14-0 in
accordance with Clause III of the indenture of lease. One of the
preliminary issues framed by the Subordinate Judge, Nagpur was whether the
Civil Court has the jurisdiction to decide as to what should be fair and
equitable enhancement in the amount of annual rent. He ruled in favour of
the plaintiff and his view was confirmed by the lower appellate Court. When
the matter was taken up before the High Court, the Division Bench
consisting of the Chief Justice and Mudholkar, J expressed divergent views.
The third Judge to whom the matter was referred agreed with the learned
Chief Justice that the Civil Court did not have jurisdiction in the matter.
By majority of 2:1, this Court reversed the judgment of the High Court.
Speaking for the majority, S. R. Das, J made the following observations:
"We consider that the words" fair and equitable 'must be given their
due meaning and proper effect. The question then asked is - what
meaning is to be given to the words "such ... as the lessor shall
determine". It is indeed true that these words constitute an
adjectival clause to the expression "fair and equitable enhancement",
but we consider that the meaning of the adjectival clause is merely
this: the lessor must first determine what it considers to be fair and
equitable enhancement; but if in fact it is not so, it is open to the
lessee to ask the court to determine what is fair and equitable
enhancement. We do not think that on a proper construction of the
clause, the intention was to oust the jurisdiction of the court and
make the determination of the enhancement by the lessor final and
binding on the lessee."
19. In the present case, we are not concerned with the question whether
the decision of the Corporation to increase the rent was legally correct
and justified because, as mentioned above, the appeal allegedly filed by
Parmanand Mundhada under Section 397 (3) read with Section 411 of the Act
was not pursued to its logical end and in the writ petitions filed by them,
respondent Nos.1 and 2 did not question ten times increase in the rent
payable by the lessee.
20. The argument of Shri Shekhar Naphade, learned senior counsel for
respondent Nos.1 and 2 that the Corporation is bound to renew the lease
granted to his clients in terms of Section 116 of the Transfer of Property
Act, 1882 because the plot in question remained in their possession through
the appellant also merits rejection. The reason for this conclusion is
that no evidence was produced before the High Court to show that the
appellant was continuing in possession with the consent of Parmanand
Mundhada, his heirs or respondent Nos.1 and 2. Rather, it was their
pleaded case that after expiry of the period specified in lease deed dated
10.9.1947, the appellant did not have any right to continue in possession.
21. We are also of the view that Resolution dated 29.10.1975 though
passed in consonance with Clause 10 of lease dated 28.10.1944, has to
satisfy the test of reasonableness, equality and fairness. Though, the
initial lease was granted to Gopaldas Mohta before coming into force of the
Constitution, while considering the issue of renewal of lease the
Corporation was duty bound to take action and decision strictly in
consonance with the constitutional principles and decision to renew the
lease in favour of Parmanand Mundhada could not have been taken except
after following a procedure consistent with the equality clause, which was
not done.
22. In the result, the appeals are dismissed. The appellant shall hand
over possession of the plot to the Corporation within a period of three
months. After taking possession of the plot, the Corporation shall alienate
the same by sale, lease, or otherwise by auction or by inviting tenders and
after following a procedure consistent with Article 14 of the Constitution.
The Corporation shall pay market value of the structure, as obtaining on
the date of the order of the High Court to the appellant.
........................................................J.
[G.S. SINGHVI]
......................................................J.
[SUDHANSU JYOTI MUKHOPADHAYA]
New Delhi,
March 26, 2012.
-----------------------
36
