. Since the tender process in which the impleaded respondent had participated, was subject to the outcome of the pending legal proceedings, no right would accrue to it in the stated premises except to get refund of the amount paid as earnest money for participating in the Court directed tender process. The amount so paid by the impleaded respondent shall be refunded to it, with interest at the rate of 9% per annum (equivalent to the bank rate for fixed deposits prevailing at the time the deposit was made) from the date of deposit till its realization. The Municipal Corporation shall forthwith refund such amount to the impleaded respondent N & S Resorts but not later than twelve weeks from today, failing which the Municipal Corporation shall be liable to pay interest at the rate of 12% per annum from the date of deposit till the date of its realization.

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3392 OF 2006
STATE OF HIMACHAL PRADESH …. APPELLANT
:Versus:
RAVINDER KUMAR SANKHAYAN (DEAD)
AND ORS. ….RESPONDENTS
WITH
CIVIL APPEAL NOS. 3393 & 3394 OF 2006
J U D G M E N T
A.M. Khanwilkar, J.
1. These appeals emanate from the judgment and interim
orders dated 24th May, 2005 and 5th July, 2005 passed by the
High Court of Himachal Pradesh at Shimla in Civil Writ
Petition No.555 of 2004, during the pendency of the said writ
petition. Civil Appeal No.3392 of 2006 has been filed by the
State of Himachal Pradesh (for short “the State”) against the
2
judgment and order dated 5th July, 2005, whereas the other
two appeals, i.e. Civil Appeal Nos.3393 & 3394 of 2006 have
been filed by the Himachal Pradesh Tourism Development
Corporation (for short “HPTDC”) against the judgment and
orders dated 24th May, 2005 and 5th July, 2005, respectively.
2. The stated writ petition was filed by the original
respondent No.1, who died during the pendency of the
proceedings in this Court. He claimed to be a public spirited
person. He was aggrieved by the acts of commission and
omission of the Municipal Corporation, Shimla, whereby the
property owned and possessed by the Municipal Corporation
was leased out to HPTDC at a rate much lower than the
prevailing market rate, without conducting auction or
resorting to tender process. Additionally, the Municipal
Corporation had failed to recover the municipal taxes from
HPTDC, including the rental/lease money, which was quite
substantial, causing loss to the Municipal Corporation. This
is the crux of the grievance made in the aforementioned writ
petition, for which following reliefs were claimed:
3
“(I) Respondents may kindly be restrained from allotting
the above mentioned stall to H.P.M.C. which is lossmaking
venture in public interest, or in the alternative
quash the said allotment to the respondent No.3 and
disposed of the same in accordance with law and
direct the respondents to demolish the illegal
structures.
(II) Respondent Municipal Corporation be directed to
recover its outstanding legal dues from various
governmental authorities and individuals.
(III) The respondent Municipal Corporation be directed to
reject its leased out properties to a realistic revision of
(monthly lease amounts) monthly rentals.
(IV) The respondents may kindly be directed to produce the
entire records pertaining to this case for the kind
perusal of this Hon’ble Court.
(V) Any other writ, order or direction deemed fit and
proper in the facts and circumstances mentioned
herein above may very kindly be passed in favour of
the petitioner and against the respondents.
(VI) Cost of the writ petition may kindly be granted
throughout in favour of the petitioner.”
3. The Municipal Corporation as well as the State resisted
the said writ petition, by filing affidavits. The State asserted
that the land in question is owned by the Government of
Himachal Pradesh. The entry in the revenue record indicates
that the possession of the property was with the Municipal
Corporation since 1977. Be that as it may, the property known
as “Goofa”, situated at the Ridge in Shimla Town, was let out
to HPTDC. A lease document was executed on 2nd January,
1978 stipulating the terms and conditions of the lease. The
4
differences between the Municipal Corporation and HPTDC
regarding the rent were resolved in terms of the award passed
by the Secretary (LSG) to the Government of Himachal
Pradesh. The Municipal Corporation and HPTDC were bound
by the said award, whereunder enhanced rent in respect of the
subject properties was specified. The Municipal Corporation
in its meeting held on 20th July, 1988, had taken a decision
regarding the increase of rent payable by HPTDC. The thrust
of the stand taken by the State was that HPTDC, being a State
Corporation, was obliged to engage in promoting tourism
within the State and in terms of the tourism policy of the
State, the directions given by the State were required to be
carried out by HPTDC. The possession of the subject premises
by the HPTDC cannot be equated with a private lease or
occupation by a private individual, as the activities of the
HPTDC were to effectuate the larger public interest and
tourism within the State. Significantly, the lease agreement
between HPTDC and the Municipal Corporation was still
subsisting.
5
4. Despite the opposition to the writ petition by the State
authorities, the High Court, while considering the prayer for
interim relief sought by the writ petitioner for issuing
directions to the Municipal Corporation to file a list of
properties owned and possessed by the Municipal Corporation
and also to place on record its outstanding legal dues of
payment by the various Government authorities and
individuals, including the monthly rental values for which the
properties have been leased out by the Municipal Corporation,
proceeded to pass an order on 24th May, 2005, without
considering the cardinal aspects such as that there is a
subsisting agreement between HPTDC and Municipal
Corporation in respect of the subject premises. Being swayed
away by the submission made by the intervener – applicant,
whose application was allowed on the same date, that he was
willing to offer a monthly lease amount of Rs.2,50,000/-
(annual amount of Rs.30 lakhs), the High Court opined that
the difference between the lease rent payable by HPTDC and
the offer made by the intervener was quite substantial, for
which reason the Municipal Corporation should issue public
6
advertisement for leasing out the subject property. The High
Court passed the following order:
“ O R D E R
CWP No.555/2004.
24.05.2005 Present: Mr. B.C. Negi Advocate, for the
petitioner.
Mr. M.S. Chandel, Advocate General, with Mr. J.K. Verma,
Dy. A.G. for respondent No.1.
Mr. Ajay Mohan Goel, Advocate, for respondent No.2.
Mr. Shrawan Dogra, Advocate, for respondent No.3.
Mrs. Ranjana Parmar, Advocate, for respondent No.4.
Mr. Ankush D. Sood, Advocate for respondent No.5.
CMP No.1043/2005.
Learned counsel for all the parties submit that they have no
objection to this application being allowed to the limited and
the only extent of the applicant herein being permitted to
intervene in the proceedings. We order accordingly. The
other prayers made in the application are declined.
The application is disposed of.
CWP No.555/2004.
In CMP No.1043/2005 we have ordered today that the
applicant therein be allowed to intervene in these
proceedings. In that application, the applicant has offered to
take the property, Ashiana and Goofa Restaurants situated
at the Ridge, Shimla on a monthly lease amount of
Rs.2,50,000/-/- (annual lease amount of Rs.30 lacs). This
offer of the aforesaid applicant is against the present lease
money of Rs.2,86,992/- per annum which works out to
7
Rs.23,916/- per month as is being paid by H.P. Tourism
Development Corporation. As per the Statement of Accounts
filed by respondent No.2 HPTDC actually it has been in
arrears with respect to the payment of aforesaid lease
amount also at the aforesaid rate and the amount of arrears,
has been worked out at Rs.18,50,361/- as on 31st March,
2005.
What, therefore, clearly emerges is that as against the
aforesaid annual amount of Rs.2,86,992/- being paid by
HPTDC to Shimla Municipal Corporation, for the same
property a party before us has offered to pay
Rs.30,00,000.00 per annum which is more than ten times
the aforesaid amount. This is just one party offering to pay
the aforesaid amount. We are sure that there is a strong
possibility, actually bright prospects, of many more parties
coming forward to take the property on lease and offer lease
money even higher, much higher, than what the intervener
has offered to pay.
With a view thus to attract the best offers and to
ensure that the property is given on lease/license basis
which will be in best public interest and also in the interest
of Corporation, we direct respondent No.2 to publish and
also in the interest of Corporation, we direct respondent No.2
to publish advertisements in three leading newspapers
within ten days from today inviting offers from interested
parties for obtaining the aforesaid property on lease/license
basis. In the advertisements so published, respondent No.2
shall ensure that the last date of receipt of offers is not later
than 30th June, 2005.
With a view to attracting the best offers, it shall be
desirable that the property is offered on a long term
lease/license basis. Also while issuing the advertisement,
respondent No.2 shall ensure that for the benefit of
prospective bidders, it fully describes and specifically defines
the exact details of the property sought to be
leased/licensed.
8
H.P. Tourism Development Corporation and the
intervener herein, both are at liberty to respond to the
invitation of respondent No.2 in the aforesaid advertisement
and to submit their respective offers. The submission of
offers by the HPTDC and by the intervener shall be without
prejudice to their rights and contentions in this case. It is,
however, also specifically made clear that if they both, or
anyone of them, fails to offer in response to the aforesaid
invitation to offer, they shall be doing so entirely at their own
risk and responsibility.
On the next date the Commissioner, Municipal
Corporation shall file his affidavit informing this Court the
details of the offers received and the action proposed
thereupon.
List on 4th July, 2005. Copy Dasti.”
5. This interim order passed by the High Court has been
assailed by HPTDC by way of Civil Appeal No.3393 of 2006.
Pursuant to the aforementioned interim order passed by the
High Court, the Municipal Corporation issued Tender Notice
on 9th June, 2005, inviting offers from the interested parties.
The impleaded respondent N & S Resorts gave the highest offer
of rent of Rs.6,51,000/- per month (annual rent of
Rs.78,12,000/-). In continuation of the aforementioned order,
the High Court proceeded to pass another interim order on 5th
July, 2005 which reads thus:
9
“As a sequel to, and in compliance with the directions
contained in our order dated 24th May, 2005 the
Commissioner, Municipal Corporation, Shimla has filed his
affidavit which has been affirmed on 1st July, 2005. In his
affidavit the Commissioner has informed us that the
Corporation had issued a tender notice on 2nd June, 2005
whereby sealed tenders were invited for leasing out the
property in question for a period of 25 years on monthly
rental basis. In response to the said tender notice, the
following five parties submitted their tenders and offered the
rates (per months) as shown against the name of each one of
them:-
1. N & S Resorts, Rs.6,51,000.00
The Mall, Shimla
2. RA 3 & Co. Rs.4,80,000.00
48/1, The Mall Shimla
Ashiana Restaurant,
Chhota Shimla.
3. The Pillancle Service Rs.4,75,251.00
Co. Jasmine Villa, Top
Floor, Near CPRI,
Shimla-1.
4. Mahavir & Co. Rs.4,11,000.00
Lower Bazar, Shimla
5. Ascot Hotels & Resorts Rs.2,75,000.00
Ltd.
As per the aforesaid affidavit, as well as the aforesaid
statement of offers and also as per the comparative
statement of tenders filed as Annexure R-2/B to the
aforesaid affidavit, it clearly transpires that M/s. N&S
Resorts, The Mall, Shimla has offered the highest rate of
Rs.6,51,000/- per month. The Committee constituted by the
Corporation, as is evidently clear from the perusal of
Annexure R-2/B, has also recommended that the offer of
M/s N&S, The Mall Shimla may be accepted.
In our order dated 24th May, 2005 we had clearly
recounted that with respect to the same property H.P.
Tourism Development Corporation had been paying the
10
annual lease money of Rs.2,86,992/- which actually worked
out to Rs.23,916/- which is presently being paid by H.P.
Tourism Development Corporation, the aforesaid M/s N&S
Resorts has now offered the monthly lease money of
Rs.6,51,000/- , almost twenty eight-twenty nine times of
what is being paid by HPTDC. We have no doubt in our
minds that the aforesaid offer by PTDC. We have no doubt in
our minds that the aforesaid offer by M/s. N&S Resorts is in
best public interest. We are also convinced that H.P. Tourism
Development Corporation did not have any legal, contractual
or statutory right to continue occupying the premises in
question for any indefinite period.
Apart from the fact that the HPTDC does not have any
contractual or statutory right to continue occupying the
premises in question for any indefinite period, merely
because the HPTDC is a Government owned Corporation,
does not mean that, in law, it should have any preferential
right of holding on to the occupation of the property despite
it paying a very meager amount as lease money. Related to
this issue is also the question of pure commercial nature of
the property. The property in question is a Restaurant,
situated at perhaps the most prime location of Shimla town.
The Restaurant is to be run on pure commercial lines and
has to serve the best public interest. Therefore, viewed from
every angle, it cannot be said that merely because the
HPTDC is a government owned Corporation, it should be
treated differently than others in the matter of allotment of
property on lease. We feel that in such like matters
whichever party pays the highest price should be held
entitled to the grant of lease.
It may also be worthwhile to recount that at one stage,
we had an occasion to go through the accounts of HPTDC for
the last few years and we found that in every year the
HPTDC has been incurring losses, year after year, as far as
the running of this particular Restaurant in question is
concerned. Not only that, actually at one stage the HPTDC
was in such a precarious position that it had not even paid
the arrears of rent to the Corporation for almost a decade or
so. In this background, therefore, burdening the HPTDC with
the running of this restaurant and at the same time
11
depriving the Municipal Corporation of its legitimate right of
leasing out the property for the highest available rent, would
be against the principles of natural justice.
In the best interest of the Corporation as well as in
best public interest, therefore, we approve of the
recommendation of the Committee constituted by the
Corporation and direct the Corporation to lease out the
premises in question in favour of the highest bidder. All the
consequences accordingly shall also follow including the
consequence of H.P. Tourism Development Corporation being
asked to vacate the premises without any loss of time.
Actually from today onwards for whatever period the H.P.
Tourism Development Corporation continues to remain in
occupation of the premises, it shall be its obligation to pay to
the Municipal Corporation the monthly lease amount at the
rate as has now been offered by M/s N&S Resorts for the
period that it remains in occupation.
We also wish to observe and direct that the Municipal
Corporation, Shimla shall ensure, before leasing out the
property to M/s. N&S Resorts, that the interests of the
Corporation are fully secured and protected in so far as
ensuring the payment of the lease money to the Corporation
by M/s. N&S Resorts is concerned. It may, therefore, insist
on receiving advance payment from the aforesaid party or
security or taking such other steps. The purpose, of course,
is to ensure that the lease money being offered by the
aforesaid party is paid to the Corporation regularly and
without any delay.
List after three months. On the next date, the
Commissioner shall file his latest affidavit giving us the
status report in compliance to the aforesaid directions.
CMP NO.1341 of 2005
All the parties in this petition may file reply to this
application in four weeks.”
12
6. Even this interim order has been assailed before this
Court by way of Civil Appeal No.3392 of 2006 by the State and
by way of Civil Appeal No.3394 of 2006 by HPTDC. During the
pendency of these appeals, the operation of the impugned
judgment passed by the High Court has been stayed by this
Court.
7. We have heard Mr. J.S. Attri, learned senior counsel
appearing for the State of Himachal Pradesh and Mr. Varinder
Kumar Sharma and Ms. Tarannum Cheema, learned counsels
appearing for the respondents.
8. After perusing the reliefs claimed in the writ petition,
purportedly public interest litigation and the application for
interim relief filed by the writ petitioner, it is perceptible that
the interim order passed on 24th May, 2005, transcends
beyond the relief claimed by the writ petitioner and more so, is
a mandatory order passed at an interlocutory stage without
recording any just and tangible reasons therefor. We say so
because the High Court has not even adverted to the efficacy
of the subsisting contract between the Municipal Corporation
13
and HPTDC. It was nobody’s case that HPTDC was in
unauthorized occupation of the subject properties. At best, the
High Court felt that the agreed lease rent payable by HPTDC in
respect of subject properties was on the lower side, which
inevitably progenerated financial loss to the Municipal
Corporation. Before recording such a finding, it was necessary
for the High Court to first authoritatively hold that HPTDC was
not legally entitled to remain in occupation of the subject
premises.
9. Notably, the contract between the Municipal Corporation
and HPTDC or the rental policy of the State, as applicable to
the Municipal Corporation, has not been challenged much less
quashed by the High Court. Even the decision of the Municipal
Corporation recorded in its meeting held on 28th March, 2005,
has neither been challenged nor been quashed by the High
Court. The said resolution records as under:
“The following decisions were taken:-
1. It has been agreed that HPTDC will pay 10% increase
in the rent after every three years as per policy. The
enhancement will be applicable and shall be calculated w.e.f.
14
1.11.1990 as the rent of Ashiana Restaurant was fixed at
Rs.13,500/- vide Govt. order dated 24.11.1987, accordingly
the first increase of 10% will be due w.e.f. 1.11.1990.
2. HPTDC also agreed to enhance the rent as per policy of
the Municipal Corporation from time to time in future.
The decisions taken in the meeting were also
discussed with the MD, HPTDC, Shimla, who also agreed
and gave his consent to settle/enhance the rent as per policy
of the Municipal Corporation, Shimla.”
10. It is unfathomable as to how the High Court could have
passed the order dated 24th May, 2005, to straightway direct
the Municipal Corporation to issue tender notice. There is no
indication in the order passed by the High Court on 24th May,
2005, of having quashed the subsisting contract between
Municipal Corporation and HPTDC. As aforesaid, without
deciding on the issue of validity of the subsisting contractual
terms and conditions between the Municipal Corporation and
HPTDC, the High Court could not and should not have
ventured to pass the order, such as dated 24th May, 2005.
11. The order dated 5th July, 2005 is only a consequential
order which must, therefore, meet the same fate. We hold that
the interim orders passed by the High Court were in complete
15
disregard of the scope of judicial review. Further, a mandatory
order has been passed at an interlocutory stage by the High
Court without even bothering to examine the efficacy of the
subsisting contractual obligations of the Municipal
Corporation and HPTDC. It is also in complete disregard of
Section 157 of the Himachal Pradesh Municipal Corporation
Act, 1994, which mandates the procedure for grant of lease.
First, the proposal should be recommended by the Municipal
Corporation; and second, the agreement can be executed by
the Municipal Corporation only after grant of prior sanction by
the Government for leasing out the property. It is not
necessary for us to examine the stand of the State that the
Municipal Corporation can moot a proposal for grant of
sanction for leasing out, only in respect of the property owned
by the Corporation.
12. Suffice it to observe that the writ petitioner had not even
prayed for quashing of the subsisting contract between the
Municipal Corporation and HPTDC in respect of the subject
properties. The gravamen of the reliefs claimed in the writ
16
petition is to direct the Municipal Corporation to lease out the
subject premises on the basis of the prevailing market rent.
Such relief could be entertained only after the subject
premises were to be vacated by HPTDC upon expiry or
termination of the subsisting contract between HPTDC and the
Municipal Corporation.

13. In our opinion, the only relief that could have received
the attention of the High Court was to direct the Municipal
Corporation to recover its outstanding legal dues from various
governmental authorities and individuals, namely, prayer
clause (II) of the writ petition. However, the emphasis in the
writ petition in this behalf is only with regard to the dues
recoverable from HPTDC in respect of the subject premises.
Assuming that there are outstanding dues payable by HPTDC
to the Municipal Corporation, that matter could be resolved
with the intervention of the State. In that, if HPTDC is
financially incapable of settling the claim/demand of the
Municipal Corporation, the State may have to provide financial
assistance to HPTDC to the extent necessary, failing which the
17
Municipal Corporation will be left with no other option but to
take recourse to statutory remedies for recovery of its dues
from HPTDC in relation to the subject premises. Since the
State has also come up in appeal against the decision of the
High Court, it must take initiative to find out a suitable
solution in accordance with law, expeditiously and within a
reasonable time, failing which it may be open to the Municipal
Corporation to resort to recovery proceedings against HPTDC
and including eviction of HPTDC from the suit premises
consequent to termination of the contract inter partes.
14. In light of these observations, nothing would survive for
consideration in the writ petition as filed before the High
Court, which is still pending for final decision. As a result,
besides setting aside the impugned judgment and orders dated
24th May, 2005 and 5th July, 2005, respectively, we are
inclined to dispose of the said writ petition with the
aforementioned observations. Thus, the Writ Petition No.555 of
2004, filed in the High Court of Himachal Pradesh at Shimla,
be deemed to have been disposed of accordingly.
18
15. The only other issue that remains to be addressed is
about the amount of earnest money paid by the impleaded
respondent N & S Resorts by way of banker’s cheque dated
27th June, 2005 in the sum of Rs.10 lakhs. Since the tender
process in which the impleaded respondent had participated,
was subject to the outcome of the pending legal proceedings,
no right would accrue to it in the stated premises except to get
refund of the amount paid as earnest money for participating
in the Court directed tender process. The amount so paid by
the impleaded respondent shall be refunded to it, with interest
at the rate of 9% per annum (equivalent to the bank rate for
fixed deposits prevailing at the time the deposit was made)
from the date of deposit till its realization. The Municipal
Corporation shall forthwith refund such amount to the
impleaded respondent N & S Resorts but not later than twelve
weeks from today, failing which the Municipal Corporation
shall be liable to pay interest at the rate of 12% per annum
from the date of deposit till the date of its realization. 
19
16. We, accordingly, allow these appeals in the above terms,
with no order as to costs.
 ..……………………………...CJI.
 (Dipak Misra)
…..…………………………..….J.
 (A.M. Khanwilkar)
New Delhi;
March 28, 2018.