REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDCITION
CIVIL APPEAL NO. 5370 OF 2016
(Arising out of S.L.P. (Civil) No. 35374 of 2010)
Delhi Development Authority …Appellant
Versus
Kenneth Builders & Developers Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO.5371 OF 2016
(Arising out of S.L.P. (Civil) No. 13146 of 2011)
J U D G M E N T
Madan B. Lokur, J.
1. Delay condoned. Leave granted in both petitions.
2. The appellant (Delhi Development Authority or the DDA) in the first
appeal is aggrieved by the judgment and order dated 30th July, 2010 passed
by a Division Bench of the High Court of Delhi in W.P.(C) No. 10647 of
2009.[1] The grievance of the DDA is that even though the High Court held
that the project land that we are concerned with was “Residential” as
contended by the DDA, yet the High Court held that in the event
construction activity thereon is not permitted by the Delhi Pollution
Control Committee (or the DPCC) the developer (Kenneth Builders) would be
entitled to a refund of the entire amount deposited with the DDA pursuant
to the acceptance of the developer’s bid in an auction, along with interest
thereon.
3. In the connected appeal, the appellants (Government of the National
Capital Territory of Delhi or the GNCTD and its Department of Forests) are
aggrieved by the same judgment and order to the extent that it has been
held that the DDA is the final authority to determine land use, even though
its determination pertains to the Ridge in the National Capital Territory
of Delhi.
4. Before referring to the facts of the case, which we have taken from
the appeal filed and argued by the DDA, we would like to mention that there
has been protracted correspondence between the DDA, Kenneth Builders and
the Secretary (Environment) cum Chairman of the Delhi Pollution Control
Committee of the GNCTD. However, we are of opinion that it is not necessary
to detail the contents of every letter between them and we propose not to
burden this judgment with avoidable details, as long as the narrative does
not suffer.
5. The principal question that arises for our decision is whether the
development agreement between the DDA and the developer Kenneth Builders
was frustrated within the meaning of Section 56 of the Indian Contract Act,
1872 due to some intervening circumstances not contemplated by either
party. Our answer to the question is in the affirmative.
The facts of the case
6. The DDA proposed a public-private partnership project for the
development of an area of 14.3 hectares of prime land at Tehkhand in South
Delhi for the construction of 750 premium residential flats in a self
contained community to be sold by private real estate development on free
sale basis. In addition to the premium residential flats, the developer
would have to construct 3500 resettlement houses for the economically
weaker sections of society with each house having a super area of 26 sq.
metres. These resettlement houses and the developed common facilities
relating thereto would be handed over to the DDA for allotment.
7. According to the DDA (and there is no dispute about this) the
project land was notified on 1st August, 1990 for “Recreation” (District
Park) in the Master Plan for Delhi - 2001 (MPD-2001). According to the DDA
(and again there is no dispute in this regard) two notifications were
issued by the Ministry of Urban Development of the Government of India on
8th January, 2002 and 23rd February, 2006 converting the project land from
“Recreation” (District Park) to “Residential”.
8. On 20th March, 2006 the DDA issued an advertisement for involving
the private sector in Delhi’s development and for the development of the
project land for the construction of 750 residential flats and 3500
resettlement houses. Pursuant to the advertisement, an auction was held by
the DDA in terms of the Delhi Development Authority (Disposal of Developed
Nazul Land) Rules, 1981 on an “as is where is basis” and as per the terms
and conditions prescribed for the auction.
9. The terms and conditions for the auction specifically mentioned that
the bid would be for the amount of premium offered for the project land to
execute the project and that the project was being offered on an “as is
where is basis”. It was stated that the presumption is that the intending
purchaser has inspected the site and has familiarized himself with the
prevalent conditions in all respects including status of infrastructure
facilities available etc. before giving its bid. It was stated that on
acceptance of the bid, the highest bidder would be required to deposit 25%
of the bid amount as earnest money and the balance 75% of the bid amount
was required to be deposited with 90 days of the issuance of the allotment-
cum-demand letter. It was also stated that possession of the project land
would be handed over on payment of the entire bid amount and on execution
of the development agreement, except an area of approximately 4 hectares on
which there is a JJ cluster. The terms and conditions also required the
developer to comply with all the statutory requirements and rules and
regulations of all public bodies including payment of fees and taxes etc.
10. Kenneth Builders was the highest bidder in the auction held on 26th
April, 2006 and its bid was accepted. On 15th June, 2006 a demand-cum-
allotment letter was issued to it requiring payment of balance 75% of the
bid amount. It is not in dispute that Kenneth Builders deposited the entire
bid amount of Rs. 450.01 crores with the DDA on 11th September, 2006.
11. Pursuant to the deposit of the entire bid amount by Kenneth
Builders, a no objection certificate was issued by the DDA on 6th November,
2006 for submission of building plans for the project to the Planning
Department of the DDA. Thereafter, on 4th December, 2006 possession of
11.70 hectares of the project land was handed over to Kenneth Builders but
an area of approximately 2.60 hectares covered by the JJ cluster was left
out and possession thereof was not given.
12. On 5th September, 2007 a Development Agreement was signed between
the DDA and Kenneth Builders whereby it was agreed, inter alia, that
Kenneth Builders would construct 3500 houses for the resettlement of slum
dwellers and 750 free sale flats which Kenneth Builders would be entitled
to dispose of. Kenneth Builders would also develop roads and peripheral
services for the entire project.
13. In terms of the development agreement it was the responsibility of
Kenneth Builders to obtain various approvals and clearances from the
appropriate authorities including environmental agencies of the State and
the Central Government. Clause 6 of the Development Agreement is important
in this regard and this reads as follows:
“6. Responsibility of Developer to get various approvals and clearances
6.1 The Developer shall be responsible for approval of drawings and for
obtaining other “No Objection Certificate; from the appropriate authorities
and Deptts not limited to MCD, Delhi Jal Board, Electric supplying agency
concerned, Delhi Fire Services, DUAC, the environmental agencies of the
State and Central Government. Authority or its authorized officers who are
duly authorized to give approval on behalf of the Authority. (sic)
6.2 The delay in submission of applications, drawings, construction plans
and compliance of the observation: shall be the responsibility of the
Developer, and any delay in grant of approvals by the aforesaid Government
bodies shall not relieve the Developer of any of its responsibilities under
the Contract.”
14. Kenneth Builders was also deemed to have inspected the site and its
surroundings and checked the information available in connection therewith
including the sub-surface conditions, the hydrological and climatic
conditions etc. It was also deemed to have satisfied itself of the
correctness and sufficiency of all the material and all its obligations
under the contract, including dealing with concerned authorities such as
environmental agencies of the State and Central Government. Clause 11.1 of
the Development Agreement in this regard is important and this reads as
follows:
“11.1 Sufficiency of Information
The Developer shall be deemed to have satisfied itself of the correctness
and sufficiency of all the material and all its obligations under the
Contract, including dealing with the concerned authorities not limited to
MCD, Delhi Jal Board, Electric supplying agency concerned, Delhi Fire
Services, DUAC, the environmental agencies of the State and Central
Government, Authority or its authorized officers who are duly authorized to
give approval on behalf of the Authority at its own cost and expense, as
well as all the contingencies and all matters and things necessary for the
proper execution and completion of the project and the remedying of any
defects therein, before submitting the tender. The Developer has agreed
and understood that no request for change in the terms and conditions of
the Contract shall be entertained at any stage on any ground whatsoever.”
15. The problems for Kenneth Builders began when, pursuant to the
Development Agreement, it attempted to establish infrastructure facilities
on the project land such as its site office, DDA office, sample flat for
the economically weaker sections etc. sometime in February/March 2008. It
was then that the Department of Forests of the GNCTD raised objections to
carrying out such activities on the ground that the project land falls in
the Ridge and hence all activities were required to be suspended.
16. The objection of the Department of Forests compelled Kenneth
Builders to stop all building activity on the project land and that
resulted in an exchange of letters for the next several months between the
DDA, the GNCTD and Kenneth Builders. To cut a long story short, the DDA
insisted that the project land was “Residential” and that the project could
be undertaken thereon. The GNCTD was equally clear that the project land
falls within the Ridge and no construction activity could be carried out
without the consent of the Ridge Management Board and the permission of
this Court. On its part, the Ministry of Environment and Forest, Government
of India (or the MoEF) kept aloof from the controversy and gave
environmental clearance for the project on 15th July, 2008 subject to the
condition that a “consent to establish” shall be obtained by Kenneth
Builders from the DPCC under the Water (Prevention and Control of
Pollution) Act, 1974 (for short the Water Act) and the Air (Prevention and
Control of Pollution) Act, 1981 (for short the Air Act) and a copy
submitted to the said Ministry before the start of any construction work at
the site. The relevant extract of the environmental clearance given by the
MoEF reads as follows:
“Subject: Construction of residential housing project at Tehkhand New Delhi
by M/s Kenneth Builders & Developers Pvt. Ltd. Environmental Clearance –
Reg.
Dear Sirs,
This has reference to your application No. nil, dated 15.01.2008 and
subsequent letters dated 23.04.2008 and 23.05.2008 seeking prior
Environmental Clearance for the above project under the EIA Notification,
2006. The proposal has been appraised as per prescribed procedure in the
light of provisions under the EIA Notification, 2006 on the basis of the
mandatory documents enclosed with the application viz., the Questionnaire,
EIA, EMP and the additional clarifications furnished in response to the
observations of the Expert Appraisal Committee constituted by the competent
authority in its meetings held on 13th 14th March 2008, 1st & 3rd May 2008
and 26th May, 2008 and awarded “Silver” grading to the project.
2. xxx xxx xxx
3. The Expert Committee after due considerations of the relevant documents
submitted by the project proponent and additional clarifications furnished
in response to its observation have accorded environmental clearance as per
the provisions of Environmental Impact Assessment Notification – 2006 and
its subsequent amendments, subject to strict compliance of the terms and
conditions as follows:
PART A – SPECIFIC CONDITIONS
Construction Phase.
“Consent for Establishment” shall be obtained from Delhi Pollution Control
Committee under Air and Water Act and a copy shall be submitted to the
Ministry before start of any construction work at the site.
to (xxvi) xxx xxx xxx
II. Operation Phase
xxx xxx xxx
PART B - GENERAL CONDITIONS:
xxx xxx xxx
4. and 5. xxx xxx xxx
6. The Ministry reserves the right to add additional safeguard measures
subsequently, if found necessary and to take action included revoking of
the environment clearance under the provisions of the Environmental
(Protection) Act, 1986, to ensure effective implementation of the suggested
safeguard measures in a time bound and satisfactory manner.
7. All other statutory clearances such as the approvals for Storage of
diesel from Chief Controller of Explosives, Fire Department, Civil Aviation
Department. Forest Conservation Act, 1980 and Wildlife (Protection) Act,
1972 etc. shall be obtained, as applicable by project proponents from the
respective competent authorities.
8. These stipulations would be enforced among others under the provisions
of Water (Prevention and Control of Pollution) Act, 1974, the Air
(Prevention and control of Pollution) Act 1981, the Environment
(Protection) Act, 1986 the Public Liability (Insurance) Act, 1991 and EIA
Notification, 2006.
9. Environmental clearance is subject to final order of the Hon’ble
Supreme Court of India in the matter of Goa Foundation v. Union of India in
Writ Petition (Civil) No.460 of 2004 as may be applicable to this project.
10. xxx xxx”
17. In view of the above, Kenneth Builders applied to the DPCC for
“consent to establish” on 4th November, 2008. In response, the DPCC
required Kenneth Builders to submit a “ridge demarcation report” at the
earliest. Despite its asking by Kenneth Builders, the DDA did not give any
such report to Kenneth Builders on the ground that the issue had already
been clarified to the GNCTD in a letter dated 17th October, 2008. The
letter dated 17th October, 2008 is a little ambiguous inasmuch as it
mentions that the boundaries of the Ridge have been delineated, but they
have not been identified at the site. The letter dated 17th October, 2008
reads as follows:
“Subject: Regarding Residential housing Project at Tehkhand, New Delhi by
M/s Kenneth Builders & Developers Pvt. Ltd.
Sir,
This has reference to letter No. DPCC/MCIII/3154: dated 6th August, 2008,
enclosing the copy of the letter of Secretary (Environment) cum Chairman,
Delhi Pollution Control Committee, Government of National Capital Territory
of Delhi dated 13th June, 2008. In the Master Plan for Delhi-2001, Ridge
has been defined in an area of 7777 hectares which is to be preserved in
its pristine glory. In the Preamble of the said Master Plan for Delhi-
2001, one conceptual sketch indicating the ridge has been shown as one of
the eight concepts only, whereas the land use Plan is the legal
documents/plan showing the details which are to be referred for the purpose
of establishing the area/land use, in this case for the ridge/regional
park.
Delhi Government through its notification dated 24.05.1994 has delineated
the boundaries of the ridge but the same has not been identified on the
site. This notification is under Section 4 for the areas to be earmarked
as reserved forests under the Delhi Forest Act.
The land pocket where DDA has proposed residential development, was clearly
shown under District Part in-MPD-2001, and the land use of the same has
already been changed from Recreational Use (District Park) to residential
vide Gazette of India notification Nos.A-13011/30/1995-DDIB dated
08.01.2002 and 23.02.2006 (copies enclosed). The said notifications were
issued following the due process of law and taking relevant factors into
consideration. No objection in respect of the land use of the Project land
were raised by any departments including the Forest Department at that
stage.
The Ministry of Environment & Forest, after considering and taking on
record the representation from both Delhi Pollution Control Committee and
DDA (Letter No.F.3(60)MP/D.116 dated 30.6.08) with respect to land use of
the Project land, has accorded the Environment Clearance to our project on
15th July, 2008, copy of the same is attached herewith.
All the facts, documents and detailed plans have been shared and discussed
in detail between the two departments, in meeting. In the light of facts
been legally converted from recreational use (District Park) to
residential.
In view of the facts, it is requested that the “Consent to Establish” from
Delhi Pollution Control Committee under Air & Water Act be granted to the
applicant at the earliest.”
18. Faced with this impasse and unable to obtain the ridge demarcation
report and therefore the “consent to establish” from the DPCC, Kenneth
Builders approached the Delhi High Court by way of a writ petition on 1st
August, 2009 resulting in the impugned judgment and order. In the writ
petition, Kenneth Builders prayed, inter alia, for setting aside of the
tender/auction notice dated 20th March, 2006 as also the allotment letter
dated 15th June, 2006 and a declaration that the project was incapable of
performance. It was further prayed that the auction had become void and
that Kenneth Builders was entitled to a refund of the amount paid to the
DDA along with interest at 18% per annum till realization.
Decision of the High Court
19. The High Court has elaborately discussed the various letters
exchanged between the concerned parties and has thereafter very succinctly
put the controversy in focus in paragraphs 26 and 27 of the impugned
judgment and order. These paragraphs read as follows:
“26. The foregoing demonstrates the controversy between the parties. The
petitioner’s stand is that it had made the bid for the project and had aid
the entire amount of Rs.450.01 crores on the clear understanding that the
project site was residential. This understanding, according to the
petitioner, was based on the representation made by the DDA as the detailed
facts referred to above would reveal. In fact, the DDA has maintained and
continues to maintain its stand that the project site is not within the
ridge area and the land use of the same has been clearly shown as
residential. According to the DDA, the land in question was earlier
earmarked for recreational (District Park) purposes. However, that was
subsequently altered by the two notifications dated 08.01.2002 and
26.02.2006 by carrying out modifications in the Master Plan (MPD-2001).
The stand of the DDA is also this that the land use of any particular area
is to be determined under the Master Plan and the authority which does such
determination is the DDA and not any other authority, such as the DPCC. The
clear stand of the DDA is that the DPCC has no right or business to raise
any objection with regard to the land use and that is solely within the
domain and powers of the DDA. The stand of the DDA is, however, not
accepted either by the DPCC or the Department of Forests, Government of NCT
of Delhi. In fact, both the DPCC and the Department of Forests
(respondents 2 and 4 herein) along with the Government of NCT of Delhi
(respondent No.3) have taken a unified stand that the land in question
falls within the ridge and more so because the Department of Forests has
found the said land to be part of Khasra Nos. 444 and 445 of village
Tehkhand which, in the revenue record, has been shown as “gair mumkin
pahar”. Thus, according to the said respondents, no construction activity
can be carried out in the land in question inasmuch as, according to them
it falls within the ridge area. Consequently, the DPCC has refrained from
issuing the “consent to establish” under Water and Air Acts, which was a
requirement and a condition of the clearance given by the Ministry of
Environment and Forests, Government of India.
27. It is in this backdrop that the petitioner felt that there is
virtually no chance of the project going ahead in view of the stalemate
between the DDA and the various governmental departments. It is on the
basis of this situation that the petitioner has sought the setting aside of
the tender/auction as also the allotment letter dated 15.06.2006 in its
favour and has sought the return of the money paid by it along with
interest thereon.”
20. By the impugned judgment and order, the High Court held that Kenneth
Builders was not entitled to have the tender/auction in which it had
participated and in which it was a highest bidder set aside. Kenneth
Builders was also not entitled to have the letter of allotment issued to it
pursuant to the acceptance of its bid in the auction conducted by the DDA
set aside or to the return of money paid by it to the DDA. However, it was
held that Kenneth Builders would be entitled to have the DPCC examine its
application for the grant of “consent to establish” from the stand point of
the Water Act and the Air Act within two months for carrying out the
project which was the subject matter of the writ petition. It was also
held that in the event the DPCC does not give its “consent to establish”
and the project cannot be carried out then Kenneth Builders would be
entitled to a return of the entire amount (with interest at the rate of 6%
till realization) paid by it to the DDA since the project would stand
frustrated and would be incapable of performance.
21. For arriving at the above conclusions, the High Court held that once
the Master Plan for Delhi prepared by the DDA earmarks land for a
particular use, then no other authority can challenge the same. As far as
the project land was concerned, the DDA had earmarked it for residential
use and this could not be challenged. The High Court also held that after
the MoEF had given the environmental clearance, the role of the DPCC was
limited to the grant of “consent to establish” under the Air Act and the
Water Act. It was not open to the GNCTD, the Department of Forests or the
DPCC to question the land use of the project land as determined by the DDA
on the ground that it was within the Ridge.
22. At this stage, it is necessary to mention that during the pendency
of the writ petition in the High Court, it came out that during a meeting
convened by the Lieutenant Governor on 23rd June, 2009 on some other issue,
the case of Kenneth Builders came up, perhaps for an informal discussion.
Nevertheless, it was decided in that meeting that the question of the
status of the project land should be referred to the MoEF (even though it
had already granted environmental clearance) and that the decision of the
MoEF would be accepted as final. These facts were put to the learned
Additional Solicitor General appearing in the matter and he sought time to
take instructions. Eventually, the following response dated 3rd December,
2009 was sent by the MoEF to the learned Additional Solicitor General:
“Sub: Opinion of the Ministry of Environment and Forest in regard to WP (C)
No. 0647/2009
Ref.: Secretary, Environment, NCT’s D.O. No. F.11 (105/PA/CF/Part/09/4582
dated 27.11.2009).
Sir,
This is with regard to Writ Petition (C) 10647/2009 of Kenneth Builders and
Developers Ltd. v. UOI & Ors. in the High Court of Delhi. An opinion was
sought from Ministry of Environment and Forests to the effect that the land
in the subject matter of the Writ Petition mentioned under subject is a
part of Ridge or not. The opinion of Ministry of Environment and Forests in
this regard is as follows:
“Keeping in view the purely legalistic position taken by DDA and exercise
undertaken for identification of ridge, based upon one or more criterion
decided by NCT of Delhi, as relevant for classification of any land as
“ridge” in Delhi, the said piece of land measuring 14.3 ha falling in
Khasra No.444 and 445 reflected as “Gai Mumkin Pahar” in revenue land,
needs to be considered as ridge in accordance to the spirit of various
orders of Hon’ble Supreme Court in WP (C) 4677/1985, morphological features
and revenue records. The Hon’ble Apex Court is still looking into various
aspects of protection & conservation of Delhi ridge, in WP (Civil) No.
4677/1985 from time to time. However, the Hon’ble High Court of Delhi, if
deemed appropriate, the opinion of Central Empowered Committee, set up by
Hon’ble Supreme Court may be taken”.
It is requested to intimate the Hon’ble Court about the opinion of the
Ministry of Environment and Forests when the case will come up on 4th
December, 2009.”
It will be seen from the above that the MoEF had taken a virtual volte face
and had opined that the project land needs to be considered as Ridge, but
if deemed appropriate the opinion of the Central Empowered Committee might
be taken. This was apparently not brought to the notice of the High Court.
23. Be that as it may, the DDA has challenged the order of the Delhi
High Court which has effectively directed the DDA to refund the tender
amount to Kenneth Builders since “consent to establish” and continue with
the project had not been granted by the DPCC. The GNCTD as well as the
Department of Forests also filed a Petition for Special Leave to Appeal
being SLP (C) No. 13146 of 2011 challenging the decision of the Delhi High
Court to the effect that the DDA is the competent authority to decide the
land use.
Subsequent events
24. After the decision of the Delhi High Court, Kenneth Builders
requested the DPCC on 3rd August, 2010 in terms of the order of the Delhi
High Court, for “consent to establish”. By its letter of 28th October, 2010
the DPCC made it quite clear that since Kenneth Builders did not have any
clearance to carry out any construction on the project land from the Ridge
Management Board or from this Court or from the Department of Forests,
“consent to establish” under the Air Act and Water Act could not be given.
It was also mentioned that the Department of Forests would be challenging
the order of the Delhi High Court in this Court. The letter dated 28th
October, 2010 reads as follows:
“Sub: - Refusal of Consent under Water (Prevention & Control of Pollution)
Act, 1974 and (Prevention & Control of Pollution) Act, 1981 as amended to
date.
Whereas, you M/s KENNETH BUILDERS & DEVELOPERS PVT. LTD., MAA ANANDMAYI
MARG, TEHKHAND, DELHI (hereinafter referred as addressee) have applied for
Consent to Estab. (Orange Category) on 30.05.08 vide I.D. No.25891 under
section 21 of Air (Prevention & Control of Pollution) Act, 1981 and u/s
25/26 of the Water (Prevention & Control of Pollution) Act, 1974 for
activity of Residential Construction Project.
And whereas, a letter dt. 27.03.08 addressed to the Commissioner (L.M.),
DDA was received from Deputy Conservator of Forest, South to provide a copy
of Environmental Clearance w.r.t. large scale earth work undertaken by you
(the addressee)
And whereas, a copy of letter dt. 04.04.08 addressed to the Commissioner
(L.M.) DDA was received from the Deputy Conservator of Forest, South to
stop all construction activity on the said land until the permission for
the same is accorded by the Ridge Management Board.
And whereas, as decided by the Consent Management Committee (Orange) in its
meeting held 03.06.08, a letter was issued to the Deputy Conservator of
Forest, South, on 13.06.08 regarding status of Forest Clearance w.r.t. the
said project.
And whereas, a D.O. letter issued by the Chairman, DPCC on 13.06.08 to the
Vice Chairman, DDA regarding immediate cessation of all construction work
on the project site till the clearance from the same obtained from the
Competent Authorities including the Ridge Management Board & the Hon’ble
Supreme Court.
And whereas, a letter dt. 23.06.08 has been received from the Deputy
Conservator of Forest Dept. informing that the clearance from the Ridge
Management Board & the Hon’ble Supreme Court has not been communicated by
DDA so far.
And whereas a letter was issued to the Deputy Conservator of Forest, South
on 19.02.09 to confirm whether any forest clearance and ridge demarcation
report to the said project has been granted or not.
And whereas, a reply was received from the Deputy Conservator of Forest,
South on 17.03.09 informing that no forest clearance has been accorded so
far.
And whereas, a letter was issued to the Deputy Conservator of Forest, South
on 16.04.09 along with the site plans of the project to inform the status
of the area as per the ridge demarcation report.
And whereas, the Hon’ble High Court vide its judgment dt. 30.07.10 directed
the DPCC to examine the application of the petitioner for grant of “Consent
to Establish” from the standpoint of the Water & Air Acts alone within two
months from the date of judgment.
And whereas, after examination, as decided by the Consent Management
Committee (Orange) in its meeting held on 22.09.10, a letter was issued to
the Forest Deptt. on 01.10.10 to send the opinion on the judgment at the
earliest as the issue pertains the Forest Department.
And whereas, the case was again taken up by the Consent Management
Committee (Orange) in it meeting held on 1.10.10 & it was decided:
“Forest department is going for appeal, therefore, consent be refused.”
Now, therefore, as decided by the said Committee aforementioned consent to
establish application under Air & Water Acts to the addressee unit is
hereby refused with immediate effect.
Please note that the activity of Residential Construction Project without
having valid consent under the Air & Water Acts is a punishable offence and
attracts penal action under the provisions of the said Act.”
25. In view of the categorical response, broadly speaking, the
controversy remains whether the project land is a part of the Ridge or not
and whether the contract between the DDA and Kenneth Builders has been
frustrated due to supervening factors or not. To resolve the first
controversy, this Court passed an order on 6th October, 2015 for
ascertaining whether the project land falls within the Ridge or not. This
was in view of the uncertainty in the status of the project land as well as
the view expressed by the MoEF in the letter dated 3rd December, 2009
addressed to the learned Additional Solicitor General appearing in the High
Court that the issue could be best resolved (if deemed appropriate) by a
reference to the Central Empowered Committee set up by this Court.
Accordingly, we referred this issue to the Central Empowered Committee
(CEC) set up in T.N.Godavarman v. Union of India[2].
26. Pursuant to the order of 6th October, 2015 the CEC submitted its
Report dated 18th November, 2015 in which it was concluded that non-
forestry use of land falling in the Ridge was permitted only after a
development project was cleared or recommended by the Ridge Management
Board and permitted by this Court. However, a decision was rendered by the
Delhi High Court in a case filed by Ashok Kumar Tanwar [W.P. (C) No. 3339
of 2011 decided on 30th November, 2011] to the effect that a development
project on land outside the notified Ridge area but having morphological
features conforming to the Ridge would also require clearance from the
Ridge Management Board and this Court. Therefore, as far as the present
case is concerned though the project land falls outside the Ridge but has
morphological features conforming to the Ridge bringing it within the
extended Ridge, the project of the DDA involving non-forestry use of the
land could be permitted only after obtaining clearance from the Ridge
Management Board and after obtaining the permission of this Court. The CEC
in its Report stated in this regard as follows:
“6. The non-forestry use of land falling in Delhi Ridge for implementation
of the various development projects are being permitted only after the
proposal is cleared/recommended by the Ridge Management Board and permitted
by this Hon’ble Court. Such permissions have been granted by this Hon’ble
Court subject to deposit of 5% of the estimated project cost with the Ridge
Management Board Fund for conservation and development of Delhi Ridge and
compensatory afforestation over equivalent non-forest land/Ridge land at
project cost.
7. Earlier, the clearance from the Delhi Ridge Management Board and the
permission of this Hon’ble Court was being insisted upon only in respect of
the notified Ridge areas. One Shri Ashok Kumar Tanwar filed Writ Petition
(Civil) No.3339 of 2011 before the Hon’ble High Court of Delhi against the
construction of buildings and other infrastructure facilities being done by
the Directorate General, Border Road Organisation in 2.25 acres of land
belonging to Ministry of Defence at Naraina, Delhi Cantonment on the ground
that the said land falls in the Central Ridge and wherein pursuant to the
directions of this Hon’ble Court the non-forestry uses are prohibited. The
Government of NCT of Delhi after considering the view of the Delhi Ridge
Management Board filed before the Hon’ble High Court of Delhi an affidavit
dated 30th November, 2011 wherein it was stated that the land in question
is situated outside the notified ridge areas but is having morphological
features conforming to the Ridge. The Hon’ble High Court of Delhi by order
dated 30th November, 2011 disposed of the said Writ Petition with the
directions that the Border Road Organisation is restrained from carrying
out any further construction works on the land till it obtains necessary
clearance from the Delhi Ridge Management Board or (and) this Hon’ble Court
through the CEC. A copy of the said order of the Hon’ble High Court of
Delhi is enclosed at ANNEXURE-R-2 to this Report. Since then, non-forestry
use of any land having morphological features conforming to the Ridge but
falling outside the notified ridge areas (commonly referred to as “extended
ridge areas”) is also being permitted only after obtaining clearance from
the Delhi Ridge Management Board and permission of this Hon’ble Court.
8. The said project of the Border Road Organisation was subsequently
cleared/recommended by the Delhi Ridge Management Board, recommended by the
CEC and thereafter this Hon’ble Court by order dated 2nd November, 2012
granted permission for implementation of the project on 2.25 acre of land
falling on the “extended ridge areas”. This Hon’ble Court by another order
dated 21.10.2013 has granted permission for implementation of a project by
Delhi Metro Rail Corporation (DMRC) involving use of lands falling in
“extended ridge area”. The copies of the abovesaid orders of the Hon’ble
Court dated 2nd November. 2012 and 21st October, 2013 are enclosed at
ANNEXURE-R-3 and ANNEXURE-R-4 respectively to this Report.
9. In the present case the Delhi Forest Department has found that the
project area falls in “extended ridge area” i.e. outside the areas
identified as Ridge area in the MPD 2001/MPD 2021 but having morphological
features conforming to the ridge and that a large extent of areas in and
around the project site are recorded as “Gair Mumkin Pahar” in the revenue
records. The stand taken by the Forest Department has been verified by the
CEC during the site visit. Copies of the photographs of the project site
taken during the site visit of the CEC are collectively enclosed at
ANNEXURE-R-5 to this Report. A copy of the sketch map prepared by the
Forest Department showing the details of Gair Mumkin Pahar areas in and
around project site is enclosed at ANNEXURE–R-6 to this Report. A copy of
the satellite imagery made available by the DDA showing the project area in
question and the adjoining areas is enclosed at ANNEXURE-R-7 to this
Report.
10. From the above it may be seen that in the present case the land falls
in the “extended Ridge area” i.e. outside the Ridge areas identified in MPD
2001/MPD 2021 having morphological features conforming to Ridge.
Implementation of all the similarly placed cases i.e. the projects
involving non-forestry use of the areas falling in “extended ridge areas”
have been permitted only after obtaining clearance from the Ridge
Management Board and permission of this Hon’ble Court. In two similarly
placed projects of the Border Road Organisation and DMRC this Hon’ble Court
by orders dated 2nd November, 2012 and 21st October, 2013 respectively has
granted permission from the non-forestry use of the lands falling in the
“extended Ridge area”.
11. In the above background the CEC is of the considered view that in the
present case the proposed construction of buildings can be undertaken only
after obtaining clearance from the Ridge Management Board and permission of
this Hon’ble Court.”
Discussion
27. The first submission of learned counsel for the DDA was that a writ
petition under Article 226 of the Constitution was not maintainable for the
reliefs claimed by Kenneth Builders. The reliefs arise out of a contractual
dispute and the High Court ought not to have entertained the writ petition.
We are not inclined to consider this submission for the reason that no such
objection was raised by the DDA before the High Court or even in the
petition filed in this Court. The submission has been advanced by learned
counsel for the DDA for the first time during the final hearing of these
appeals. It is too late in the day for learned counsel to raise such an
objection and we are not inclined to entertain it.
28. On merits, it was submitted that in view of the terms and conditions
of the auction and the development agreement between the DDA and Kenneth
Builders, it was the duty and responsibility of the developer to obtain all
necessary clearances including environmental clearance and consent from the
DPCC for completing the project. It was pointed out that the MoEF had given
environmental clearance for the project on 15th July, 2008 subject to the
developer obtaining “consent to establish” from the DPCC under the Air Act
and the Water Act. It was therefore the obligation of Kenneth Builders to
approach the DPCC and obtain the necessary consent which it failed to do.
29. What has been overlooked by learned counsel is that the fresh view
of the MoEF is that the project land needs to be considered as Ridge.
Consequently, no construction activity is permissible on the project land.
That apart, Kenneth Builders did apply to the DPCC for “consent to
establish” for starting construction activity on the project land. For
considering the request, the DPCC required a ridge demarcation report which
was not given by the DDA to Kenneth Builders or to the DPCC. Therefore, the
DPCC was not inclined to give its consent in the absence of the ridge
demarcation report. Even after judgment was delivered by the High Court,
Kenneth Builders applied to the DPCC for “consent to establish” but to no
effect in the absence of a ridge demarcation report and forest clearance.
30. It does appear from the record that the exact boundaries of the
Ridge had not been identified by anybody and this is apparent from a letter
dated 13th June, 2008 sent by the Secretary (Environment) of the GNCTD to
the DDA wherein it was pointed out that there is some discrepancy between
the areas notified by the Ministry of Urban Development of the Government
of India in the notifications dated 8th January, 2002 and 23rd February,
2006 and the boundaries of the Ridge. It was further pointed out that the
process of identification had been initiated by the Department of Forests
of the GNCTD but it appears that the demarcation was not completed by the
time the writ petition was filed by Kenneth Builders. According to the DDA
the letter was based on an incorrect appreciation of facts, but that does
not concern us. All that is relevant is that the GNCTD believed that the
construction could not go on in the project land since it fell within the
boundaries of the Ridge.
31. In this context, it must not be forgotten that even after having
given environmental clearance to Kenneth Builders, the MoEF had second
thoughts regarding the status of the project land. This led the MoEF to
send the letter dated 3rd December, 2009 referred to above. In other words,
the status of the project land was generally ‘unclear’ at least to the
GNCTD and the MoEF.
32. Be that as it may, it appears to us that Kenneth Builders did take
all necessary steps to commence the construction activity on the project
land but due to the impasse created by the governmental agencies, it could
not proceed in the development activity. We agree with learned counsel for
Kenneth Builders that under these circumstances, the provisions of Section
56 of the Indian Contract Act, 1872 (the Contract Act) would be attracted
to the facts of the case. Section 56 of the Contract Act reads as follows:
“56. Agreement to do impossible act - An agreement to do an act impossible
in itself is void.
Contract to do act afterwards becoming impossible or unlawful - A contract
to do an act which, after the contract is made, becomes impossible, or, by
reason of some event which the promisor could not prevent, unlawful,
becomes void when the act becomes impossible or unlawful.
Compensation for loss through non-performance of act known to be impossible
or unlawful - Where one person has promised to do something which he knew,
or, with reasonable diligence, might have known, and which the promisee did
not know, to be impossible or unlawful, such promisor must make
compensation to such promisee for any loss which such promisee sustains
through the non-performance of the promise.”
33. The interpretation of Section 56 of the Contract Act came up for
consideration in Satyabrata Ghose v. Mugneeram Bangur & Co.[3] It was held
by this Court that the word “impossible” used in Section 56 of the Contract
Act has not been used in the sense of physical or literal impossibility. It
ought to be interpreted as impracticable and useless from the point of view
of the object and purpose that the parties had in view when they entered
into the contract. This impracticability or uselessness could arise due to
some intervening or supervening circumstance which the parties had not
contemplated. However, if the intervening circumstance was contemplated by
the parties, then the contract would stand despite the occurrence of such
circumstance. In such an event, “there can be no case of frustration
because the basis of the contract being to demand performance despite the
happening of a particular event, it cannot disappear when that event
happens.” This is what this Court had to say:
“The first paragraph of the section lays down the law in the same way as in
England. It speaks of something which is impossible inherently or by its
very nature, and no one can obviously be directed to perform such an act.
The second paragraph enunciates the law relating to discharge of contract
by reason of supervening impossibility or illegality of the act agreed to
be done. The wording of this paragraph is quite general, and though the
illustrations attached to it are not at all happy, they cannot derogate
from the general words used in the enactment. This much is clear that the
word “impossible” has not been used here in the sense of physical or
literal impossibility. The performance of an act may not be literally
impossible but it may be impracticable and useless from the point of view
of the object and purpose which the parties had in view; and if an untoward
event or change of circumstances totally upsets the very foundation upon
which the parties rested their bargain, it can very well be said that the
promissor finds it impossible to do the act which he promised to do.
Although various theories have been propounded by the Judges and jurists in
England regarding the juridical basis of the doctrine of frustration, yet
the essential idea upon which the doctrine is based is that of
impossibility of performance of the contract; in fact impossibility and
frustration are often used as interchangeable expressions. The changed
circumstances, it is said, make the performance of the contract impossible
and the parties are absolved from the further performance of it as they did
not promise to perform an impossibility. The parties shall be excused, as
Lord Loreburn says[4]
“If substantially the whole contract becomes impossible of performance or
in other words impracticable by some cause for which neither was
responsible.”
xxx xxx xxx
It must be pointed out here that if the parties do contemplate the
possibility of an intervening circumstance which might affect the
performance of the contract, but expressly stipulate that the contract
would stand despite such circumstance, there can be no case of frustration
because the basis of the contract being to demand performance despite the
happening of a particular event, it cannot disappear when that event
happens. As Lord Atkinson said in Matthey v. Curling[5] “a person who
expressly contracts absolutely to do a thing not naturally impossible is
not excused for non-performance because of being prevented by the act of
God or the King's enemies … or vis major”. This being the legal position, a
contention in the extreme form that the doctrine of frustration as
recognised in English law does not come at all within the purview of
Section 56 of the Indian Contract Act cannot be accepted.”
34. In so far as the present case is concerned, the DDA certainly did
not contemplate a prohibition on construction activity on the project land
which would fall within the Ridge or had morphological similarity to the
Ridge. It is this circumstance that frustrated the performance of the
contract in the sense of making it impracticable of performance.
35. It is true that the Government of India had notified the project
land as “Residential” and that the project land was shown as “Residential”
in the MPD-2001 and MPD-2021. But that fact alone would not change the
position at law. The exact boundaries of the Ridge do not appear to have
been demarcated and in the absence of demarcation, it could not be said
with any degree of certainty by the DDA that merely because of the two
notifications issued by the Ministry of Urban Development the project land
could be used for residential purposes even if it fell within the Ridge.
This would be ignoring the position at law and would be stretching the
argument a little too far. The DDA was unaware that even if the project
land did not fall within the Ridge yet any development activity thereon
would require permission from the Ridge Management Board as well as from
this Court since there was morphological similarity between the Ridge and
the project land. It is this intervening circumstance which eventually
frustrated the implementation of the contract.
36. It is one thing for the DDA to now contend before us that Kenneth
Builders could have applied to the Ridge Management Board for permission to
carry out development activity and also approached this Court for necessary
permission but it is another thing to say that these requirements were not
within the contemplation of the DDA and certainly not within the
contemplation of Kenneth Builders. For a statutory body like the DDA to
contend that in the face of the legal position (with which the DDA
obviously does not agree), Kenneth Builders ought to have persisted and
perhaps initiated or invited litigation cannot be appreciated.
37. When the DDA informed Kenneth Builders that the project land was
available on an “as is where is basis” and that it was the responsibility
of the developer to obtain all clearances, the conditions related only to
physical issues pertaining to the project land and ancillary or peripheral
legal issues pertaining to the actual construction activity, such as
compliance with the building bye-laws, environmental clearances etc. The
terms and conditions of “as is where is” or environmental clearances
emphasized by learned counsel for the DDA certainly did not extend to
commencement of construction activity prohibited by law except after
obtaining permission of the Ridge Management Board and this Court. On the
contrary, it was the obligation of the DDA to ensure that the initial path
for commencement of construction was clear, the rest being the
responsibility of the developer. The failure of the DDA to provide a clear
passage due to an intervening circumstance beyond its contemplation went to
the foundation of implementation of the contract with Kenneth Builders and
that is what frustrated its implementation.
38. Reliance by learned counsel for the DDA on the “as is where is”
concept as well as clauses 6 and 11 of the Development Agreement in this
context is misplaced. As mentioned above, this primarily pertains to
physical issues at site. This is clear from the following passage referred
to by learned counsel from Punjab Urban Planning & Development Authority v.
Raghu Nath Gupta[6]:
“Evidently, the commercial plots were allotted on “as-is-where-is” basis.
The allottees would have ascertained the facilities available at the time
of auction and after having accepted the commercial plots on “as-is-where-
is” basis, they cannot be heard to contend that PUDA had not provided the
basic amenities like parking, lights, roads, water, sewerage, etc. If the
allottees were not interested in taking the commercial plots on “as-is-
where-is” basis, they should not have accepted the allotment and after
having accepted the allotment on “as-is-where-is” basis, they are estopped
from contending that the basic amenities like parking, lights, roads,
water, sewerage, etc. were not provided by PUDA when the plots were
allotted. Over and above, the facts would clearly indicate that there was
not much delay on the part of PUDA to provide those facilities as well. As
noted, the electrical works and health works were completed by 24-12-2002
and 22-11-2002 respectively and all the facilities like parking, lights,
roads, water, sewerage, etc. were also provided.”
39. On a conspectus of the facts and the law placed before us, we are
satisfied that certain circumstances had intervened, making it
impracticable for Kenneth Builders to commence the construction activity on
the project land. Since arriving at some clarity on the issue had taken a
couple of years and that clarity was eventually and unambiguously provided
by the report of the CEC, it could certainly be said that the contract
between the DDA and Kenneth Builders was impossible of performance within
the meaning of that word in Section 56 of the Contract Act. Therefore, we
reject the contention of the DDA that the contract between the DDA and
Kenneth Builders was not frustrated.
40. Learned counsel for Kenneth Builders urged that the amount deposited
with the DDA ought to be returned with interest at 12% per annum and not 6%
per annum as directed by the High Court. We are not inclined to accede to
this request. Kenneth Builders had prayed for interest at 18% per annum in
the High Court but that was declined and only 6% per annum was awarded.
Kenneth Builders is not in appeal before us on this issue. However, we make
it clear that the calculation of interest on the amount deposited would be
with effect from 11th September, 2006 when the entire amount of Rs. 450.01
crores was deposited by Kenneth Builders with the DDA.
41. The GNCTD and the DPCC raised an issue before us that the DDA was
not the final authority in the matter of determining the land use
particularly when it related to the Ridge. In the view that we have taken,
it is not necessary to go into this question.
Conclusion
42. The appeal filed by the DDA is dismissed. The DDA should now refund
the deposit made by Kenneth Builders with interest at 6% per annum
calculated from 11th September, 2006 till realization. The question raised
in the connected appeal filed by the GNCTD and the Department of Forests of
the GNCTD is left open for consideration in an appropriate case.
43. There will be no order as to costs.
………………………………J
( Madan B. Lokur )
……………………………….J
New Delhi; ( N.V. Ramana )
June 29, 2016
-----------------------
[1] Kenneth Builders and Developers Ltd. v. Union of India and others,
MANU/DE/1815/2010
[2] (2013) 8 SCC 198
[3] (1954) SCR 310
[4] Tamplin Steam Ship Co. Ltd. v. Anglo-Mexican Petroleum Products Co.
Ltd., (1916) 2 AC 397, 403
[5] (1922) 2 AC 180 at 234
[6] (2012) 8 SCC 197
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDCITION
CIVIL APPEAL NO. 5370 OF 2016
(Arising out of S.L.P. (Civil) No. 35374 of 2010)
Delhi Development Authority …Appellant
Versus
Kenneth Builders & Developers Ltd. & Ors. ...Respondents
WITH
CIVIL APPEAL NO.5371 OF 2016
(Arising out of S.L.P. (Civil) No. 13146 of 2011)
J U D G M E N T
Madan B. Lokur, J.
1. Delay condoned. Leave granted in both petitions.
2. The appellant (Delhi Development Authority or the DDA) in the first
appeal is aggrieved by the judgment and order dated 30th July, 2010 passed
by a Division Bench of the High Court of Delhi in W.P.(C) No. 10647 of
2009.[1] The grievance of the DDA is that even though the High Court held
that the project land that we are concerned with was “Residential” as
contended by the DDA, yet the High Court held that in the event
construction activity thereon is not permitted by the Delhi Pollution
Control Committee (or the DPCC) the developer (Kenneth Builders) would be
entitled to a refund of the entire amount deposited with the DDA pursuant
to the acceptance of the developer’s bid in an auction, along with interest
thereon.
3. In the connected appeal, the appellants (Government of the National
Capital Territory of Delhi or the GNCTD and its Department of Forests) are
aggrieved by the same judgment and order to the extent that it has been
held that the DDA is the final authority to determine land use, even though
its determination pertains to the Ridge in the National Capital Territory
of Delhi.
4. Before referring to the facts of the case, which we have taken from
the appeal filed and argued by the DDA, we would like to mention that there
has been protracted correspondence between the DDA, Kenneth Builders and
the Secretary (Environment) cum Chairman of the Delhi Pollution Control
Committee of the GNCTD. However, we are of opinion that it is not necessary
to detail the contents of every letter between them and we propose not to
burden this judgment with avoidable details, as long as the narrative does
not suffer.
5. The principal question that arises for our decision is whether the
development agreement between the DDA and the developer Kenneth Builders
was frustrated within the meaning of Section 56 of the Indian Contract Act,
1872 due to some intervening circumstances not contemplated by either
party. Our answer to the question is in the affirmative.
The facts of the case
6. The DDA proposed a public-private partnership project for the
development of an area of 14.3 hectares of prime land at Tehkhand in South
Delhi for the construction of 750 premium residential flats in a self
contained community to be sold by private real estate development on free
sale basis. In addition to the premium residential flats, the developer
would have to construct 3500 resettlement houses for the economically
weaker sections of society with each house having a super area of 26 sq.
metres. These resettlement houses and the developed common facilities
relating thereto would be handed over to the DDA for allotment.
7. According to the DDA (and there is no dispute about this) the
project land was notified on 1st August, 1990 for “Recreation” (District
Park) in the Master Plan for Delhi - 2001 (MPD-2001). According to the DDA
(and again there is no dispute in this regard) two notifications were
issued by the Ministry of Urban Development of the Government of India on
8th January, 2002 and 23rd February, 2006 converting the project land from
“Recreation” (District Park) to “Residential”.
8. On 20th March, 2006 the DDA issued an advertisement for involving
the private sector in Delhi’s development and for the development of the
project land for the construction of 750 residential flats and 3500
resettlement houses. Pursuant to the advertisement, an auction was held by
the DDA in terms of the Delhi Development Authority (Disposal of Developed
Nazul Land) Rules, 1981 on an “as is where is basis” and as per the terms
and conditions prescribed for the auction.
9. The terms and conditions for the auction specifically mentioned that
the bid would be for the amount of premium offered for the project land to
execute the project and that the project was being offered on an “as is
where is basis”. It was stated that the presumption is that the intending
purchaser has inspected the site and has familiarized himself with the
prevalent conditions in all respects including status of infrastructure
facilities available etc. before giving its bid. It was stated that on
acceptance of the bid, the highest bidder would be required to deposit 25%
of the bid amount as earnest money and the balance 75% of the bid amount
was required to be deposited with 90 days of the issuance of the allotment-
cum-demand letter. It was also stated that possession of the project land
would be handed over on payment of the entire bid amount and on execution
of the development agreement, except an area of approximately 4 hectares on
which there is a JJ cluster. The terms and conditions also required the
developer to comply with all the statutory requirements and rules and
regulations of all public bodies including payment of fees and taxes etc.
10. Kenneth Builders was the highest bidder in the auction held on 26th
April, 2006 and its bid was accepted. On 15th June, 2006 a demand-cum-
allotment letter was issued to it requiring payment of balance 75% of the
bid amount. It is not in dispute that Kenneth Builders deposited the entire
bid amount of Rs. 450.01 crores with the DDA on 11th September, 2006.
11. Pursuant to the deposit of the entire bid amount by Kenneth
Builders, a no objection certificate was issued by the DDA on 6th November,
2006 for submission of building plans for the project to the Planning
Department of the DDA. Thereafter, on 4th December, 2006 possession of
11.70 hectares of the project land was handed over to Kenneth Builders but
an area of approximately 2.60 hectares covered by the JJ cluster was left
out and possession thereof was not given.
12. On 5th September, 2007 a Development Agreement was signed between
the DDA and Kenneth Builders whereby it was agreed, inter alia, that
Kenneth Builders would construct 3500 houses for the resettlement of slum
dwellers and 750 free sale flats which Kenneth Builders would be entitled
to dispose of. Kenneth Builders would also develop roads and peripheral
services for the entire project.
13. In terms of the development agreement it was the responsibility of
Kenneth Builders to obtain various approvals and clearances from the
appropriate authorities including environmental agencies of the State and
the Central Government. Clause 6 of the Development Agreement is important
in this regard and this reads as follows:
“6. Responsibility of Developer to get various approvals and clearances
6.1 The Developer shall be responsible for approval of drawings and for
obtaining other “No Objection Certificate; from the appropriate authorities
and Deptts not limited to MCD, Delhi Jal Board, Electric supplying agency
concerned, Delhi Fire Services, DUAC, the environmental agencies of the
State and Central Government. Authority or its authorized officers who are
duly authorized to give approval on behalf of the Authority. (sic)
6.2 The delay in submission of applications, drawings, construction plans
and compliance of the observation: shall be the responsibility of the
Developer, and any delay in grant of approvals by the aforesaid Government
bodies shall not relieve the Developer of any of its responsibilities under
the Contract.”
14. Kenneth Builders was also deemed to have inspected the site and its
surroundings and checked the information available in connection therewith
including the sub-surface conditions, the hydrological and climatic
conditions etc. It was also deemed to have satisfied itself of the
correctness and sufficiency of all the material and all its obligations
under the contract, including dealing with concerned authorities such as
environmental agencies of the State and Central Government. Clause 11.1 of
the Development Agreement in this regard is important and this reads as
follows:
“11.1 Sufficiency of Information
The Developer shall be deemed to have satisfied itself of the correctness
and sufficiency of all the material and all its obligations under the
Contract, including dealing with the concerned authorities not limited to
MCD, Delhi Jal Board, Electric supplying agency concerned, Delhi Fire
Services, DUAC, the environmental agencies of the State and Central
Government, Authority or its authorized officers who are duly authorized to
give approval on behalf of the Authority at its own cost and expense, as
well as all the contingencies and all matters and things necessary for the
proper execution and completion of the project and the remedying of any
defects therein, before submitting the tender. The Developer has agreed
and understood that no request for change in the terms and conditions of
the Contract shall be entertained at any stage on any ground whatsoever.”
15. The problems for Kenneth Builders began when, pursuant to the
Development Agreement, it attempted to establish infrastructure facilities
on the project land such as its site office, DDA office, sample flat for
the economically weaker sections etc. sometime in February/March 2008. It
was then that the Department of Forests of the GNCTD raised objections to
carrying out such activities on the ground that the project land falls in
the Ridge and hence all activities were required to be suspended.
16. The objection of the Department of Forests compelled Kenneth
Builders to stop all building activity on the project land and that
resulted in an exchange of letters for the next several months between the
DDA, the GNCTD and Kenneth Builders. To cut a long story short, the DDA
insisted that the project land was “Residential” and that the project could
be undertaken thereon. The GNCTD was equally clear that the project land
falls within the Ridge and no construction activity could be carried out
without the consent of the Ridge Management Board and the permission of
this Court. On its part, the Ministry of Environment and Forest, Government
of India (or the MoEF) kept aloof from the controversy and gave
environmental clearance for the project on 15th July, 2008 subject to the
condition that a “consent to establish” shall be obtained by Kenneth
Builders from the DPCC under the Water (Prevention and Control of
Pollution) Act, 1974 (for short the Water Act) and the Air (Prevention and
Control of Pollution) Act, 1981 (for short the Air Act) and a copy
submitted to the said Ministry before the start of any construction work at
the site. The relevant extract of the environmental clearance given by the
MoEF reads as follows:
“Subject: Construction of residential housing project at Tehkhand New Delhi
by M/s Kenneth Builders & Developers Pvt. Ltd. Environmental Clearance –
Reg.
Dear Sirs,
This has reference to your application No. nil, dated 15.01.2008 and
subsequent letters dated 23.04.2008 and 23.05.2008 seeking prior
Environmental Clearance for the above project under the EIA Notification,
2006. The proposal has been appraised as per prescribed procedure in the
light of provisions under the EIA Notification, 2006 on the basis of the
mandatory documents enclosed with the application viz., the Questionnaire,
EIA, EMP and the additional clarifications furnished in response to the
observations of the Expert Appraisal Committee constituted by the competent
authority in its meetings held on 13th 14th March 2008, 1st & 3rd May 2008
and 26th May, 2008 and awarded “Silver” grading to the project.
2. xxx xxx xxx
3. The Expert Committee after due considerations of the relevant documents
submitted by the project proponent and additional clarifications furnished
in response to its observation have accorded environmental clearance as per
the provisions of Environmental Impact Assessment Notification – 2006 and
its subsequent amendments, subject to strict compliance of the terms and
conditions as follows:
PART A – SPECIFIC CONDITIONS
Construction Phase.
“Consent for Establishment” shall be obtained from Delhi Pollution Control
Committee under Air and Water Act and a copy shall be submitted to the
Ministry before start of any construction work at the site.
to (xxvi) xxx xxx xxx
II. Operation Phase
xxx xxx xxx
PART B - GENERAL CONDITIONS:
xxx xxx xxx
4. and 5. xxx xxx xxx
6. The Ministry reserves the right to add additional safeguard measures
subsequently, if found necessary and to take action included revoking of
the environment clearance under the provisions of the Environmental
(Protection) Act, 1986, to ensure effective implementation of the suggested
safeguard measures in a time bound and satisfactory manner.
7. All other statutory clearances such as the approvals for Storage of
diesel from Chief Controller of Explosives, Fire Department, Civil Aviation
Department. Forest Conservation Act, 1980 and Wildlife (Protection) Act,
1972 etc. shall be obtained, as applicable by project proponents from the
respective competent authorities.
8. These stipulations would be enforced among others under the provisions
of Water (Prevention and Control of Pollution) Act, 1974, the Air
(Prevention and control of Pollution) Act 1981, the Environment
(Protection) Act, 1986 the Public Liability (Insurance) Act, 1991 and EIA
Notification, 2006.
9. Environmental clearance is subject to final order of the Hon’ble
Supreme Court of India in the matter of Goa Foundation v. Union of India in
Writ Petition (Civil) No.460 of 2004 as may be applicable to this project.
10. xxx xxx”
17. In view of the above, Kenneth Builders applied to the DPCC for
“consent to establish” on 4th November, 2008. In response, the DPCC
required Kenneth Builders to submit a “ridge demarcation report” at the
earliest. Despite its asking by Kenneth Builders, the DDA did not give any
such report to Kenneth Builders on the ground that the issue had already
been clarified to the GNCTD in a letter dated 17th October, 2008. The
letter dated 17th October, 2008 is a little ambiguous inasmuch as it
mentions that the boundaries of the Ridge have been delineated, but they
have not been identified at the site. The letter dated 17th October, 2008
reads as follows:
“Subject: Regarding Residential housing Project at Tehkhand, New Delhi by
M/s Kenneth Builders & Developers Pvt. Ltd.
Sir,
This has reference to letter No. DPCC/MCIII/3154: dated 6th August, 2008,
enclosing the copy of the letter of Secretary (Environment) cum Chairman,
Delhi Pollution Control Committee, Government of National Capital Territory
of Delhi dated 13th June, 2008. In the Master Plan for Delhi-2001, Ridge
has been defined in an area of 7777 hectares which is to be preserved in
its pristine glory. In the Preamble of the said Master Plan for Delhi-
2001, one conceptual sketch indicating the ridge has been shown as one of
the eight concepts only, whereas the land use Plan is the legal
documents/plan showing the details which are to be referred for the purpose
of establishing the area/land use, in this case for the ridge/regional
park.
Delhi Government through its notification dated 24.05.1994 has delineated
the boundaries of the ridge but the same has not been identified on the
site. This notification is under Section 4 for the areas to be earmarked
as reserved forests under the Delhi Forest Act.
The land pocket where DDA has proposed residential development, was clearly
shown under District Part in-MPD-2001, and the land use of the same has
already been changed from Recreational Use (District Park) to residential
vide Gazette of India notification Nos.A-13011/30/1995-DDIB dated
08.01.2002 and 23.02.2006 (copies enclosed). The said notifications were
issued following the due process of law and taking relevant factors into
consideration. No objection in respect of the land use of the Project land
were raised by any departments including the Forest Department at that
stage.
The Ministry of Environment & Forest, after considering and taking on
record the representation from both Delhi Pollution Control Committee and
DDA (Letter No.F.3(60)MP/D.116 dated 30.6.08) with respect to land use of
the Project land, has accorded the Environment Clearance to our project on
15th July, 2008, copy of the same is attached herewith.
All the facts, documents and detailed plans have been shared and discussed
in detail between the two departments, in meeting. In the light of facts
been legally converted from recreational use (District Park) to
residential.
In view of the facts, it is requested that the “Consent to Establish” from
Delhi Pollution Control Committee under Air & Water Act be granted to the
applicant at the earliest.”
18. Faced with this impasse and unable to obtain the ridge demarcation
report and therefore the “consent to establish” from the DPCC, Kenneth
Builders approached the Delhi High Court by way of a writ petition on 1st
August, 2009 resulting in the impugned judgment and order. In the writ
petition, Kenneth Builders prayed, inter alia, for setting aside of the
tender/auction notice dated 20th March, 2006 as also the allotment letter
dated 15th June, 2006 and a declaration that the project was incapable of
performance. It was further prayed that the auction had become void and
that Kenneth Builders was entitled to a refund of the amount paid to the
DDA along with interest at 18% per annum till realization.
Decision of the High Court
19. The High Court has elaborately discussed the various letters
exchanged between the concerned parties and has thereafter very succinctly
put the controversy in focus in paragraphs 26 and 27 of the impugned
judgment and order. These paragraphs read as follows:
“26. The foregoing demonstrates the controversy between the parties. The
petitioner’s stand is that it had made the bid for the project and had aid
the entire amount of Rs.450.01 crores on the clear understanding that the
project site was residential. This understanding, according to the
petitioner, was based on the representation made by the DDA as the detailed
facts referred to above would reveal. In fact, the DDA has maintained and
continues to maintain its stand that the project site is not within the
ridge area and the land use of the same has been clearly shown as
residential. According to the DDA, the land in question was earlier
earmarked for recreational (District Park) purposes. However, that was
subsequently altered by the two notifications dated 08.01.2002 and
26.02.2006 by carrying out modifications in the Master Plan (MPD-2001).
The stand of the DDA is also this that the land use of any particular area
is to be determined under the Master Plan and the authority which does such
determination is the DDA and not any other authority, such as the DPCC. The
clear stand of the DDA is that the DPCC has no right or business to raise
any objection with regard to the land use and that is solely within the
domain and powers of the DDA. The stand of the DDA is, however, not
accepted either by the DPCC or the Department of Forests, Government of NCT
of Delhi. In fact, both the DPCC and the Department of Forests
(respondents 2 and 4 herein) along with the Government of NCT of Delhi
(respondent No.3) have taken a unified stand that the land in question
falls within the ridge and more so because the Department of Forests has
found the said land to be part of Khasra Nos. 444 and 445 of village
Tehkhand which, in the revenue record, has been shown as “gair mumkin
pahar”. Thus, according to the said respondents, no construction activity
can be carried out in the land in question inasmuch as, according to them
it falls within the ridge area. Consequently, the DPCC has refrained from
issuing the “consent to establish” under Water and Air Acts, which was a
requirement and a condition of the clearance given by the Ministry of
Environment and Forests, Government of India.
27. It is in this backdrop that the petitioner felt that there is
virtually no chance of the project going ahead in view of the stalemate
between the DDA and the various governmental departments. It is on the
basis of this situation that the petitioner has sought the setting aside of
the tender/auction as also the allotment letter dated 15.06.2006 in its
favour and has sought the return of the money paid by it along with
interest thereon.”
20. By the impugned judgment and order, the High Court held that Kenneth
Builders was not entitled to have the tender/auction in which it had
participated and in which it was a highest bidder set aside. Kenneth
Builders was also not entitled to have the letter of allotment issued to it
pursuant to the acceptance of its bid in the auction conducted by the DDA
set aside or to the return of money paid by it to the DDA. However, it was
held that Kenneth Builders would be entitled to have the DPCC examine its
application for the grant of “consent to establish” from the stand point of
the Water Act and the Air Act within two months for carrying out the
project which was the subject matter of the writ petition. It was also
held that in the event the DPCC does not give its “consent to establish”
and the project cannot be carried out then Kenneth Builders would be
entitled to a return of the entire amount (with interest at the rate of 6%
till realization) paid by it to the DDA since the project would stand
frustrated and would be incapable of performance.
21. For arriving at the above conclusions, the High Court held that once
the Master Plan for Delhi prepared by the DDA earmarks land for a
particular use, then no other authority can challenge the same. As far as
the project land was concerned, the DDA had earmarked it for residential
use and this could not be challenged. The High Court also held that after
the MoEF had given the environmental clearance, the role of the DPCC was
limited to the grant of “consent to establish” under the Air Act and the
Water Act. It was not open to the GNCTD, the Department of Forests or the
DPCC to question the land use of the project land as determined by the DDA
on the ground that it was within the Ridge.
22. At this stage, it is necessary to mention that during the pendency
of the writ petition in the High Court, it came out that during a meeting
convened by the Lieutenant Governor on 23rd June, 2009 on some other issue,
the case of Kenneth Builders came up, perhaps for an informal discussion.
Nevertheless, it was decided in that meeting that the question of the
status of the project land should be referred to the MoEF (even though it
had already granted environmental clearance) and that the decision of the
MoEF would be accepted as final. These facts were put to the learned
Additional Solicitor General appearing in the matter and he sought time to
take instructions. Eventually, the following response dated 3rd December,
2009 was sent by the MoEF to the learned Additional Solicitor General:
“Sub: Opinion of the Ministry of Environment and Forest in regard to WP (C)
No. 0647/2009
Ref.: Secretary, Environment, NCT’s D.O. No. F.11 (105/PA/CF/Part/09/4582
dated 27.11.2009).
Sir,
This is with regard to Writ Petition (C) 10647/2009 of Kenneth Builders and
Developers Ltd. v. UOI & Ors. in the High Court of Delhi. An opinion was
sought from Ministry of Environment and Forests to the effect that the land
in the subject matter of the Writ Petition mentioned under subject is a
part of Ridge or not. The opinion of Ministry of Environment and Forests in
this regard is as follows:
“Keeping in view the purely legalistic position taken by DDA and exercise
undertaken for identification of ridge, based upon one or more criterion
decided by NCT of Delhi, as relevant for classification of any land as
“ridge” in Delhi, the said piece of land measuring 14.3 ha falling in
Khasra No.444 and 445 reflected as “Gai Mumkin Pahar” in revenue land,
needs to be considered as ridge in accordance to the spirit of various
orders of Hon’ble Supreme Court in WP (C) 4677/1985, morphological features
and revenue records. The Hon’ble Apex Court is still looking into various
aspects of protection & conservation of Delhi ridge, in WP (Civil) No.
4677/1985 from time to time. However, the Hon’ble High Court of Delhi, if
deemed appropriate, the opinion of Central Empowered Committee, set up by
Hon’ble Supreme Court may be taken”.
It is requested to intimate the Hon’ble Court about the opinion of the
Ministry of Environment and Forests when the case will come up on 4th
December, 2009.”
It will be seen from the above that the MoEF had taken a virtual volte face
and had opined that the project land needs to be considered as Ridge, but
if deemed appropriate the opinion of the Central Empowered Committee might
be taken. This was apparently not brought to the notice of the High Court.
23. Be that as it may, the DDA has challenged the order of the Delhi
High Court which has effectively directed the DDA to refund the tender
amount to Kenneth Builders since “consent to establish” and continue with
the project had not been granted by the DPCC. The GNCTD as well as the
Department of Forests also filed a Petition for Special Leave to Appeal
being SLP (C) No. 13146 of 2011 challenging the decision of the Delhi High
Court to the effect that the DDA is the competent authority to decide the
land use.
Subsequent events
24. After the decision of the Delhi High Court, Kenneth Builders
requested the DPCC on 3rd August, 2010 in terms of the order of the Delhi
High Court, for “consent to establish”. By its letter of 28th October, 2010
the DPCC made it quite clear that since Kenneth Builders did not have any
clearance to carry out any construction on the project land from the Ridge
Management Board or from this Court or from the Department of Forests,
“consent to establish” under the Air Act and Water Act could not be given.
It was also mentioned that the Department of Forests would be challenging
the order of the Delhi High Court in this Court. The letter dated 28th
October, 2010 reads as follows:
“Sub: - Refusal of Consent under Water (Prevention & Control of Pollution)
Act, 1974 and (Prevention & Control of Pollution) Act, 1981 as amended to
date.
Whereas, you M/s KENNETH BUILDERS & DEVELOPERS PVT. LTD., MAA ANANDMAYI
MARG, TEHKHAND, DELHI (hereinafter referred as addressee) have applied for
Consent to Estab. (Orange Category) on 30.05.08 vide I.D. No.25891 under
section 21 of Air (Prevention & Control of Pollution) Act, 1981 and u/s
25/26 of the Water (Prevention & Control of Pollution) Act, 1974 for
activity of Residential Construction Project.
And whereas, a letter dt. 27.03.08 addressed to the Commissioner (L.M.),
DDA was received from Deputy Conservator of Forest, South to provide a copy
of Environmental Clearance w.r.t. large scale earth work undertaken by you
(the addressee)
And whereas, a copy of letter dt. 04.04.08 addressed to the Commissioner
(L.M.) DDA was received from the Deputy Conservator of Forest, South to
stop all construction activity on the said land until the permission for
the same is accorded by the Ridge Management Board.
And whereas, as decided by the Consent Management Committee (Orange) in its
meeting held 03.06.08, a letter was issued to the Deputy Conservator of
Forest, South, on 13.06.08 regarding status of Forest Clearance w.r.t. the
said project.
And whereas, a D.O. letter issued by the Chairman, DPCC on 13.06.08 to the
Vice Chairman, DDA regarding immediate cessation of all construction work
on the project site till the clearance from the same obtained from the
Competent Authorities including the Ridge Management Board & the Hon’ble
Supreme Court.
And whereas, a letter dt. 23.06.08 has been received from the Deputy
Conservator of Forest Dept. informing that the clearance from the Ridge
Management Board & the Hon’ble Supreme Court has not been communicated by
DDA so far.
And whereas a letter was issued to the Deputy Conservator of Forest, South
on 19.02.09 to confirm whether any forest clearance and ridge demarcation
report to the said project has been granted or not.
And whereas, a reply was received from the Deputy Conservator of Forest,
South on 17.03.09 informing that no forest clearance has been accorded so
far.
And whereas, a letter was issued to the Deputy Conservator of Forest, South
on 16.04.09 along with the site plans of the project to inform the status
of the area as per the ridge demarcation report.
And whereas, the Hon’ble High Court vide its judgment dt. 30.07.10 directed
the DPCC to examine the application of the petitioner for grant of “Consent
to Establish” from the standpoint of the Water & Air Acts alone within two
months from the date of judgment.
And whereas, after examination, as decided by the Consent Management
Committee (Orange) in its meeting held on 22.09.10, a letter was issued to
the Forest Deptt. on 01.10.10 to send the opinion on the judgment at the
earliest as the issue pertains the Forest Department.
And whereas, the case was again taken up by the Consent Management
Committee (Orange) in it meeting held on 1.10.10 & it was decided:
“Forest department is going for appeal, therefore, consent be refused.”
Now, therefore, as decided by the said Committee aforementioned consent to
establish application under Air & Water Acts to the addressee unit is
hereby refused with immediate effect.
Please note that the activity of Residential Construction Project without
having valid consent under the Air & Water Acts is a punishable offence and
attracts penal action under the provisions of the said Act.”
25. In view of the categorical response, broadly speaking, the
controversy remains whether the project land is a part of the Ridge or not
and whether the contract between the DDA and Kenneth Builders has been
frustrated due to supervening factors or not. To resolve the first
controversy, this Court passed an order on 6th October, 2015 for
ascertaining whether the project land falls within the Ridge or not. This
was in view of the uncertainty in the status of the project land as well as
the view expressed by the MoEF in the letter dated 3rd December, 2009
addressed to the learned Additional Solicitor General appearing in the High
Court that the issue could be best resolved (if deemed appropriate) by a
reference to the Central Empowered Committee set up by this Court.
Accordingly, we referred this issue to the Central Empowered Committee
(CEC) set up in T.N.Godavarman v. Union of India[2].
26. Pursuant to the order of 6th October, 2015 the CEC submitted its
Report dated 18th November, 2015 in which it was concluded that non-
forestry use of land falling in the Ridge was permitted only after a
development project was cleared or recommended by the Ridge Management
Board and permitted by this Court. However, a decision was rendered by the
Delhi High Court in a case filed by Ashok Kumar Tanwar [W.P. (C) No. 3339
of 2011 decided on 30th November, 2011] to the effect that a development
project on land outside the notified Ridge area but having morphological
features conforming to the Ridge would also require clearance from the
Ridge Management Board and this Court. Therefore, as far as the present
case is concerned though the project land falls outside the Ridge but has
morphological features conforming to the Ridge bringing it within the
extended Ridge, the project of the DDA involving non-forestry use of the
land could be permitted only after obtaining clearance from the Ridge
Management Board and after obtaining the permission of this Court. The CEC
in its Report stated in this regard as follows:
“6. The non-forestry use of land falling in Delhi Ridge for implementation
of the various development projects are being permitted only after the
proposal is cleared/recommended by the Ridge Management Board and permitted
by this Hon’ble Court. Such permissions have been granted by this Hon’ble
Court subject to deposit of 5% of the estimated project cost with the Ridge
Management Board Fund for conservation and development of Delhi Ridge and
compensatory afforestation over equivalent non-forest land/Ridge land at
project cost.
7. Earlier, the clearance from the Delhi Ridge Management Board and the
permission of this Hon’ble Court was being insisted upon only in respect of
the notified Ridge areas. One Shri Ashok Kumar Tanwar filed Writ Petition
(Civil) No.3339 of 2011 before the Hon’ble High Court of Delhi against the
construction of buildings and other infrastructure facilities being done by
the Directorate General, Border Road Organisation in 2.25 acres of land
belonging to Ministry of Defence at Naraina, Delhi Cantonment on the ground
that the said land falls in the Central Ridge and wherein pursuant to the
directions of this Hon’ble Court the non-forestry uses are prohibited. The
Government of NCT of Delhi after considering the view of the Delhi Ridge
Management Board filed before the Hon’ble High Court of Delhi an affidavit
dated 30th November, 2011 wherein it was stated that the land in question
is situated outside the notified ridge areas but is having morphological
features conforming to the Ridge. The Hon’ble High Court of Delhi by order
dated 30th November, 2011 disposed of the said Writ Petition with the
directions that the Border Road Organisation is restrained from carrying
out any further construction works on the land till it obtains necessary
clearance from the Delhi Ridge Management Board or (and) this Hon’ble Court
through the CEC. A copy of the said order of the Hon’ble High Court of
Delhi is enclosed at ANNEXURE-R-2 to this Report. Since then, non-forestry
use of any land having morphological features conforming to the Ridge but
falling outside the notified ridge areas (commonly referred to as “extended
ridge areas”) is also being permitted only after obtaining clearance from
the Delhi Ridge Management Board and permission of this Hon’ble Court.
8. The said project of the Border Road Organisation was subsequently
cleared/recommended by the Delhi Ridge Management Board, recommended by the
CEC and thereafter this Hon’ble Court by order dated 2nd November, 2012
granted permission for implementation of the project on 2.25 acre of land
falling on the “extended ridge areas”. This Hon’ble Court by another order
dated 21.10.2013 has granted permission for implementation of a project by
Delhi Metro Rail Corporation (DMRC) involving use of lands falling in
“extended ridge area”. The copies of the abovesaid orders of the Hon’ble
Court dated 2nd November. 2012 and 21st October, 2013 are enclosed at
ANNEXURE-R-3 and ANNEXURE-R-4 respectively to this Report.
9. In the present case the Delhi Forest Department has found that the
project area falls in “extended ridge area” i.e. outside the areas
identified as Ridge area in the MPD 2001/MPD 2021 but having morphological
features conforming to the ridge and that a large extent of areas in and
around the project site are recorded as “Gair Mumkin Pahar” in the revenue
records. The stand taken by the Forest Department has been verified by the
CEC during the site visit. Copies of the photographs of the project site
taken during the site visit of the CEC are collectively enclosed at
ANNEXURE-R-5 to this Report. A copy of the sketch map prepared by the
Forest Department showing the details of Gair Mumkin Pahar areas in and
around project site is enclosed at ANNEXURE–R-6 to this Report. A copy of
the satellite imagery made available by the DDA showing the project area in
question and the adjoining areas is enclosed at ANNEXURE-R-7 to this
Report.
10. From the above it may be seen that in the present case the land falls
in the “extended Ridge area” i.e. outside the Ridge areas identified in MPD
2001/MPD 2021 having morphological features conforming to Ridge.
Implementation of all the similarly placed cases i.e. the projects
involving non-forestry use of the areas falling in “extended ridge areas”
have been permitted only after obtaining clearance from the Ridge
Management Board and permission of this Hon’ble Court. In two similarly
placed projects of the Border Road Organisation and DMRC this Hon’ble Court
by orders dated 2nd November, 2012 and 21st October, 2013 respectively has
granted permission from the non-forestry use of the lands falling in the
“extended Ridge area”.
11. In the above background the CEC is of the considered view that in the
present case the proposed construction of buildings can be undertaken only
after obtaining clearance from the Ridge Management Board and permission of
this Hon’ble Court.”
Discussion
27. The first submission of learned counsel for the DDA was that a writ
petition under Article 226 of the Constitution was not maintainable for the
reliefs claimed by Kenneth Builders. The reliefs arise out of a contractual
dispute and the High Court ought not to have entertained the writ petition.
We are not inclined to consider this submission for the reason that no such
objection was raised by the DDA before the High Court or even in the
petition filed in this Court. The submission has been advanced by learned
counsel for the DDA for the first time during the final hearing of these
appeals. It is too late in the day for learned counsel to raise such an
objection and we are not inclined to entertain it.
28. On merits, it was submitted that in view of the terms and conditions
of the auction and the development agreement between the DDA and Kenneth
Builders, it was the duty and responsibility of the developer to obtain all
necessary clearances including environmental clearance and consent from the
DPCC for completing the project. It was pointed out that the MoEF had given
environmental clearance for the project on 15th July, 2008 subject to the
developer obtaining “consent to establish” from the DPCC under the Air Act
and the Water Act. It was therefore the obligation of Kenneth Builders to
approach the DPCC and obtain the necessary consent which it failed to do.
29. What has been overlooked by learned counsel is that the fresh view
of the MoEF is that the project land needs to be considered as Ridge.
Consequently, no construction activity is permissible on the project land.
That apart, Kenneth Builders did apply to the DPCC for “consent to
establish” for starting construction activity on the project land. For
considering the request, the DPCC required a ridge demarcation report which
was not given by the DDA to Kenneth Builders or to the DPCC. Therefore, the
DPCC was not inclined to give its consent in the absence of the ridge
demarcation report. Even after judgment was delivered by the High Court,
Kenneth Builders applied to the DPCC for “consent to establish” but to no
effect in the absence of a ridge demarcation report and forest clearance.
30. It does appear from the record that the exact boundaries of the
Ridge had not been identified by anybody and this is apparent from a letter
dated 13th June, 2008 sent by the Secretary (Environment) of the GNCTD to
the DDA wherein it was pointed out that there is some discrepancy between
the areas notified by the Ministry of Urban Development of the Government
of India in the notifications dated 8th January, 2002 and 23rd February,
2006 and the boundaries of the Ridge. It was further pointed out that the
process of identification had been initiated by the Department of Forests
of the GNCTD but it appears that the demarcation was not completed by the
time the writ petition was filed by Kenneth Builders. According to the DDA
the letter was based on an incorrect appreciation of facts, but that does
not concern us. All that is relevant is that the GNCTD believed that the
construction could not go on in the project land since it fell within the
boundaries of the Ridge.
31. In this context, it must not be forgotten that even after having
given environmental clearance to Kenneth Builders, the MoEF had second
thoughts regarding the status of the project land. This led the MoEF to
send the letter dated 3rd December, 2009 referred to above. In other words,
the status of the project land was generally ‘unclear’ at least to the
GNCTD and the MoEF.
32. Be that as it may, it appears to us that Kenneth Builders did take
all necessary steps to commence the construction activity on the project
land but due to the impasse created by the governmental agencies, it could
not proceed in the development activity. We agree with learned counsel for
Kenneth Builders that under these circumstances, the provisions of Section
56 of the Indian Contract Act, 1872 (the Contract Act) would be attracted
to the facts of the case. Section 56 of the Contract Act reads as follows:
“56. Agreement to do impossible act - An agreement to do an act impossible
in itself is void.
Contract to do act afterwards becoming impossible or unlawful - A contract
to do an act which, after the contract is made, becomes impossible, or, by
reason of some event which the promisor could not prevent, unlawful,
becomes void when the act becomes impossible or unlawful.
Compensation for loss through non-performance of act known to be impossible
or unlawful - Where one person has promised to do something which he knew,
or, with reasonable diligence, might have known, and which the promisee did
not know, to be impossible or unlawful, such promisor must make
compensation to such promisee for any loss which such promisee sustains
through the non-performance of the promise.”
33. The interpretation of Section 56 of the Contract Act came up for
consideration in Satyabrata Ghose v. Mugneeram Bangur & Co.[3] It was held
by this Court that the word “impossible” used in Section 56 of the Contract
Act has not been used in the sense of physical or literal impossibility. It
ought to be interpreted as impracticable and useless from the point of view
of the object and purpose that the parties had in view when they entered
into the contract. This impracticability or uselessness could arise due to
some intervening or supervening circumstance which the parties had not
contemplated. However, if the intervening circumstance was contemplated by
the parties, then the contract would stand despite the occurrence of such
circumstance. In such an event, “there can be no case of frustration
because the basis of the contract being to demand performance despite the
happening of a particular event, it cannot disappear when that event
happens.” This is what this Court had to say:
“The first paragraph of the section lays down the law in the same way as in
England. It speaks of something which is impossible inherently or by its
very nature, and no one can obviously be directed to perform such an act.
The second paragraph enunciates the law relating to discharge of contract
by reason of supervening impossibility or illegality of the act agreed to
be done. The wording of this paragraph is quite general, and though the
illustrations attached to it are not at all happy, they cannot derogate
from the general words used in the enactment. This much is clear that the
word “impossible” has not been used here in the sense of physical or
literal impossibility. The performance of an act may not be literally
impossible but it may be impracticable and useless from the point of view
of the object and purpose which the parties had in view; and if an untoward
event or change of circumstances totally upsets the very foundation upon
which the parties rested their bargain, it can very well be said that the
promissor finds it impossible to do the act which he promised to do.
Although various theories have been propounded by the Judges and jurists in
England regarding the juridical basis of the doctrine of frustration, yet
the essential idea upon which the doctrine is based is that of
impossibility of performance of the contract; in fact impossibility and
frustration are often used as interchangeable expressions. The changed
circumstances, it is said, make the performance of the contract impossible
and the parties are absolved from the further performance of it as they did
not promise to perform an impossibility. The parties shall be excused, as
Lord Loreburn says[4]
“If substantially the whole contract becomes impossible of performance or
in other words impracticable by some cause for which neither was
responsible.”
xxx xxx xxx
It must be pointed out here that if the parties do contemplate the
possibility of an intervening circumstance which might affect the
performance of the contract, but expressly stipulate that the contract
would stand despite such circumstance, there can be no case of frustration
because the basis of the contract being to demand performance despite the
happening of a particular event, it cannot disappear when that event
happens. As Lord Atkinson said in Matthey v. Curling[5] “a person who
expressly contracts absolutely to do a thing not naturally impossible is
not excused for non-performance because of being prevented by the act of
God or the King's enemies … or vis major”. This being the legal position, a
contention in the extreme form that the doctrine of frustration as
recognised in English law does not come at all within the purview of
Section 56 of the Indian Contract Act cannot be accepted.”
34. In so far as the present case is concerned, the DDA certainly did
not contemplate a prohibition on construction activity on the project land
which would fall within the Ridge or had morphological similarity to the
Ridge. It is this circumstance that frustrated the performance of the
contract in the sense of making it impracticable of performance.
35. It is true that the Government of India had notified the project
land as “Residential” and that the project land was shown as “Residential”
in the MPD-2001 and MPD-2021. But that fact alone would not change the
position at law. The exact boundaries of the Ridge do not appear to have
been demarcated and in the absence of demarcation, it could not be said
with any degree of certainty by the DDA that merely because of the two
notifications issued by the Ministry of Urban Development the project land
could be used for residential purposes even if it fell within the Ridge.
This would be ignoring the position at law and would be stretching the
argument a little too far. The DDA was unaware that even if the project
land did not fall within the Ridge yet any development activity thereon
would require permission from the Ridge Management Board as well as from
this Court since there was morphological similarity between the Ridge and
the project land. It is this intervening circumstance which eventually
frustrated the implementation of the contract.
36. It is one thing for the DDA to now contend before us that Kenneth
Builders could have applied to the Ridge Management Board for permission to
carry out development activity and also approached this Court for necessary
permission but it is another thing to say that these requirements were not
within the contemplation of the DDA and certainly not within the
contemplation of Kenneth Builders. For a statutory body like the DDA to
contend that in the face of the legal position (with which the DDA
obviously does not agree), Kenneth Builders ought to have persisted and
perhaps initiated or invited litigation cannot be appreciated.
37. When the DDA informed Kenneth Builders that the project land was
available on an “as is where is basis” and that it was the responsibility
of the developer to obtain all clearances, the conditions related only to
physical issues pertaining to the project land and ancillary or peripheral
legal issues pertaining to the actual construction activity, such as
compliance with the building bye-laws, environmental clearances etc. The
terms and conditions of “as is where is” or environmental clearances
emphasized by learned counsel for the DDA certainly did not extend to
commencement of construction activity prohibited by law except after
obtaining permission of the Ridge Management Board and this Court. On the
contrary, it was the obligation of the DDA to ensure that the initial path
for commencement of construction was clear, the rest being the
responsibility of the developer. The failure of the DDA to provide a clear
passage due to an intervening circumstance beyond its contemplation went to
the foundation of implementation of the contract with Kenneth Builders and
that is what frustrated its implementation.
38. Reliance by learned counsel for the DDA on the “as is where is”
concept as well as clauses 6 and 11 of the Development Agreement in this
context is misplaced. As mentioned above, this primarily pertains to
physical issues at site. This is clear from the following passage referred
to by learned counsel from Punjab Urban Planning & Development Authority v.
Raghu Nath Gupta[6]:
“Evidently, the commercial plots were allotted on “as-is-where-is” basis.
The allottees would have ascertained the facilities available at the time
of auction and after having accepted the commercial plots on “as-is-where-
is” basis, they cannot be heard to contend that PUDA had not provided the
basic amenities like parking, lights, roads, water, sewerage, etc. If the
allottees were not interested in taking the commercial plots on “as-is-
where-is” basis, they should not have accepted the allotment and after
having accepted the allotment on “as-is-where-is” basis, they are estopped
from contending that the basic amenities like parking, lights, roads,
water, sewerage, etc. were not provided by PUDA when the plots were
allotted. Over and above, the facts would clearly indicate that there was
not much delay on the part of PUDA to provide those facilities as well. As
noted, the electrical works and health works were completed by 24-12-2002
and 22-11-2002 respectively and all the facilities like parking, lights,
roads, water, sewerage, etc. were also provided.”
39. On a conspectus of the facts and the law placed before us, we are
satisfied that certain circumstances had intervened, making it
impracticable for Kenneth Builders to commence the construction activity on
the project land. Since arriving at some clarity on the issue had taken a
couple of years and that clarity was eventually and unambiguously provided
by the report of the CEC, it could certainly be said that the contract
between the DDA and Kenneth Builders was impossible of performance within
the meaning of that word in Section 56 of the Contract Act. Therefore, we
reject the contention of the DDA that the contract between the DDA and
Kenneth Builders was not frustrated.
40. Learned counsel for Kenneth Builders urged that the amount deposited
with the DDA ought to be returned with interest at 12% per annum and not 6%
per annum as directed by the High Court. We are not inclined to accede to
this request. Kenneth Builders had prayed for interest at 18% per annum in
the High Court but that was declined and only 6% per annum was awarded.
Kenneth Builders is not in appeal before us on this issue. However, we make
it clear that the calculation of interest on the amount deposited would be
with effect from 11th September, 2006 when the entire amount of Rs. 450.01
crores was deposited by Kenneth Builders with the DDA.
41. The GNCTD and the DPCC raised an issue before us that the DDA was
not the final authority in the matter of determining the land use
particularly when it related to the Ridge. In the view that we have taken,
it is not necessary to go into this question.
Conclusion
42. The appeal filed by the DDA is dismissed. The DDA should now refund
the deposit made by Kenneth Builders with interest at 6% per annum
calculated from 11th September, 2006 till realization. The question raised
in the connected appeal filed by the GNCTD and the Department of Forests of
the GNCTD is left open for consideration in an appropriate case.
43. There will be no order as to costs.
………………………………J
( Madan B. Lokur )
……………………………….J
New Delhi; ( N.V. Ramana )
June 29, 2016
-----------------------
[1] Kenneth Builders and Developers Ltd. v. Union of India and others,
MANU/DE/1815/2010
[2] (2013) 8 SCC 198
[3] (1954) SCR 310
[4] Tamplin Steam Ship Co. Ltd. v. Anglo-Mexican Petroleum Products Co.
Ltd., (1916) 2 AC 397, 403
[5] (1922) 2 AC 180 at 234
[6] (2012) 8 SCC 197
