WP(C) 8070-71/05 Page No.1 of 29 THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: 03.07.2008 + WP(C) No.8070-71/2005 EAST INDIA HOTELS LIMITED & ANOTHER ...Petitioners - versus - UNION OF INDIA & ANOTHER ...Respondents Advocates who appeared in this case: For the Petitioners : Mr Dushyant Dave, Sr Advocate with Mr Arun Bhardwaj, Sr Advocate and Mr Ravi Sikri For the Respondents : Mr P.P. Malhotra, ASG with Mr Gaurav Duggal CORAM:- HON'BLE MR JUSTICE BADAR DURREZ AHMED 1. Whether the Reporters of local papers may be allowed Yes to see the judgment ? 2. To be referred to the Reporter or not ? Yes 3. Whether the judgment should be reported in Digest ? Yes BADAR DURREZ AHMED, J 1. This writ petition is directed against the cancellation order / letter dated 11.04.2005 issued by the Deputy Land & Development Officer on behalf of the Government of India whereby the allotment of 2.762 acres of land situate between Oberoi Hotel and the Blind Relief Association on Lal Bahadur Shastri Marg for construction of a hotel by virtue of the allotment letter No.L-III/8/13(16)/82-187 dated 27.06.1995 was cancelled and withdrawn. The petitioners also seek a writ of mandamus directing the respondents to execute the licence in favour of the petitioner No.1 in respect of the said plot of land in terms of the allotment letter dated 27.06.1995 and to issue necessary clearances and grant a No Objection Certificate in favour of the petitioner No.1 for construction of a budget hotel on the said land. WP(C) 8070-71/05 Page No.2 of 29 2. On 18.06.1983, the Government of India conveyed the sanction of the President of India for the allotment of the said land to Delhi Tourism & Transportation Development Corporation (DTTDC) for the setting up of a budget hotel for catering to the requirement of tourists belonging to the middle and low income groups, on certain terms and conditions. Conditions 7 and 8 are relevant and they read as under:- “7. The allotment is made initially on licence basis and the DTTDC should enter into a Memorandum of Agreement with the Government for completion of construction within the stipulated period of 24 calendar months from the date of entering upon the land or authorising to enter upon the land and according to the standard prescribed by the Ministry of Tourism. After satisfactory completion of construction, approval of tariff by the Deptt. of Tourism and satisfactory fulfillment of other conditions of the Memorandum of Agreement the lease hold rights will be granted. There should be a provision both in the Memorandum of Agreement and the lease deed to be entered into subsequently for revocation of licence / cancellation of lease in case tariff change is more than what has been approved by the Deptt. of Tourism. 8. The DTTDC shall not sub lease the land in favour of any other party. They can, however, make such arrangements for constructing land running the hotel as will not involve sub-leasing of the plot.” 3. On 24.02.1992, an advertisement was taken out in the Times of India by the Department of Tourism, Government of India. The said advertisement was as under:- “DEPARTMENT OF TOURISM GOVERNMENT OF INDIA INVEST IN NEW HOTEL AT NEW DELHI Offers are invited from hotel chains for setting up and running of a new hotel at a prime site WP(C) 8070-71/05 Page No.3 of 29 measuring approximately 11.320 sq. mts. in New Delhi. The hotel chain making offer should have: - a minimum of 1,000 rooms and 7 years' experience in hoteliering with a paid up share capital of Rs. 5 Crores or equivalent and the total turnover from hotel operations should be a minimum of Rs.10 crores or equivalent. - experience in running of 3 star category hotels or equivalent and the operations of such hotels should be at least at two different locations in India or abroad; - a sound financial background and capacity to provide a bank guarantee of Rs. One crore or equivalent in the event of acceptance of the offer. The offer should be accompanied by details of concept, design size, specifications and other details of the project and the facilities proposed to be developed, means of financing and schedule for completion. For further details and offer papers contact: Shri Tarlochan Singh Managing Director Delhi Tourism & Transportation Development Corporation 18-A, DDA Shopping-cum-Office Complex Defence Colony, New Delhi-110024. Tel (011) 690784, 4624354, Fax (011) 3313637 Last Date for receipt of offer in the prescribed form: 31st March, 1992.” As indicated in the advertisement, the last date for receipt of offers in the prescribed form was 31.03.1992. The petitioner No.1 submitted its offer on 23.03.1992. It is pertinent to note that the advertisement invited offers from hotel chains and that it was a global offer. 4. On 08.05.1992, the Delhi Tourism and Transport Development Corporation Limited (DTTDC) informed the petitioner No.1 that its offer WP(C) 8070-71/05 Page No.4 of 29 dated 23.03.1992 for building and running a three star hotel on licence basis for a period of 33 years on the said plot of land had been accepted subject to certain conditions mentioned in the said letter. Thereafter, on 24.07.1992, a licence agreement was entered into by and between DTTDC and the petitioner No.1, which was to be the “licencee” which expression also included its successors and assigns and an equity joint venture company promoted by the licencee, namely, Oberoi Palaces and Resorts International Limited which was referred to as the “sub-licencee”. The recitals, inter alia, indicated that the “licencee” was desirous of being granted a licence for using the said plot of land for facilitiating and securing the construction, setting up, commissioning and management of a three star hotel to be operated under the brand name of “NOVOTEL” and of the requisite international standards. By virtue of clause 1 of the agreement, DTTDC agreed to grant to the petitioner No.1 a licence in respect of the said plot of land for a period of 33 years for facilitating the construction, commissioning and running of a three star hotel by the said sub-licencee and for no other purpose whatsoever. The annual licence fee was to be a percentage of the gross turnover or an annual minimum guarantee whichever was higher as shown in the table given in Schedule II to the said agreement. The total of the fixed annual rentals was to be Rs 720.50 crores for the entire duration of the licence period. It could be more if the gross turnover was higher. 5. On 28.07.1992, possession of the said plot of land was handed over to the petitioner No.1 by DTTDC. However, on 01.02.1993, the Government of India, through the Land and Development Officer, sent a WP(C) 8070-71/05 Page No.5 of 29 letter to the Managing Director, DTTDC cancelling the allotment of the said plot of land which was earlier made by virtue of the said letter dated 18.06.1983. It was, inter alia, stated in the cancellation letter dated 01.02.1993 that the land was allotted to DTTDC at highly concessional rates without recovery of premium for setting up a budget hotel charging low tariff. It was further alleged that the budget hotel had not been constructed and commissioned and that it had come to the notice that DTTDC had entered into an agreement with East India Hotels Limited (the petitioner No.1) to run the hotel which was against the terms and conditions of the allotment offered on 18.06.1983. 6. The petitioner No.1 represented to the Government of India against the said decision to cancel the allotment. The Government of India, by a letter dated 04.06.1993, through the Deputy Land and Development Officer, communicated to the petitioner No.1 that the allotment of land had been made to DTTDC and that the petitioner No.1 had no locus standi and as such its representation could not be entertained. However, the decision to cancel the allotment was reviewed by the Government of India. This is apparent from the communication sent by the Under Secretary, Ministry of Urban Affairs and Employment, Government of India to the Land and Development Officer, New Delhi on 07.06.1995. The said communication indicates that several options were given to DTTDC to resolve the matter of restoring the allotment of land in its favour. But, since no response was received from DTTDC, it was decided that no further offer would be made to it. It was, however, stated in the said letter that the matter had been WP(C) 8070-71/05 Page No.6 of 29 reviewed by the Government and sanction of the President was obtained for the utilisation of the land by the petitioner No.1 as per the terms and conditions enumerated in the licence agreement dated 24.07.1992 which shall be suitably modified / endorsed and executed for compliance by the petitioner No.1 with the Land & Development Officer on usual terms and conditions including those mentioned in the said letter. The result of this communication was that the allotment in favour of the DTTDC stood cancelled and the Government of India stepped into the shoes of DTTDC insofar as the relationship with the petitioner No.1 was concerned. The effect was that, with modifications as indicated in the said letter, the original licence in favour of the petitioner No.1 was restored with the Government of India taking the place of DTTDC. It was also noted in the said communication that the same issued with the concurrence of the Finance Division vide their D.O. 757-F dated 06.06.1995. 7. Thereafter, on 27.06.1995, the Government of India, through the Land & Development Officer, sent a letter to the petitioner No.1 conveying the sanction of the President for the construction and commissioning of the hotel by the East India Hotels Limited / Centurion Hotels Limited on the said plot of land subject to compliance of the terms and conditions as enumerated in the licence agreement dated 24.07.1992 on the usual terms and conditions and including those referred to in the said letter of 27.06.1995. The background for the issuance of the said letter, as indicated therein, is of material significance and the same reads as under:- “The above cited plot was allotted to the DTTDC which in turn in pursuance of the licence agreement dated WP(C) 8070-71/05 Page No.7 of 29 24.7.92 evolved arrangement for commissioning of the hotel through East India Hotels Ltd. / Centurion Hotels Ltd. on agreed licence fee as mentioned in Annexure-II to the licence agreement. As this arrangement was not in consonance with the terms and conditions on which allotment of land was made to DTTDC, the entire position was reviewed by the Govt. and various options made available to the DTTDC to regularise the aforesaid arrangement. However, on their failure to do so,it has been decided to honour the licence agreement already executed between the DTTDC and the hotelier.” The letter itself indicates that the petitioner had paid an amount of Rs 1,72,60,275/- to DTTDC in pursuance of the licence agreement as also a further amount of Rs 1,63,14,140/- and the only amount due as on that date was a sum of Rs 31/-, which was also paid. 8. However, the Government did nothing thereafter. The petitioners were constrained to file a writ petition No.3016/2000 in this court seeking a mandamus against the respondents to act pursuant to the allotment letter dated 27.06.1995. The said writ petition was admitted and by way of interim relief the respondents were restrained from dispossessing the petitioners from the said plot of land. By an order dated 24.01.2005, this Court directed the respondents to take a decision within six weeks according to the rights and contentions of the parties. The decision was taken and was communicated by the impugned letter dated 11.04.2005. The said letter was issued by the Deputy Land & Development Officer, Ministry of Urban Development, Government of India and the same reads as under:- “Government of India Ministry of Urban Development Land & Development Office Nirman Bhawan: New Delhi WP(C) 8070-71/05 Page No.8 of 29 No.L-III/8/13(16)/82/148 Dated: 11.4.2005 To, The Managing Director, East India Hotels Ltd., 7, Sham Nath Marg, Delhi-110054. Sub: Cancellation of allotment of 2.762 acres of land between the Oberoi & Blind Relief Association on Lal Bahadur Shastri Marg for construction of Hotel. Sir, I am directed to refer to this office letter No.L- III/8/13(16)/82 dated 27.6.95 relating to allotment of land for construction of hotel and to say that a plot of land measuring 2.762 acres was allotted to Delhi Tourism & Transport Development Corporation (DTTDC) in May, 1993 for setting up a Budget Hotel. Instead of constructing the hotel in July, 1994, DTTDC gave possession of the land to East India Hotels and Oberoi Palaces and Resorts International on licence basis for a period of 33 years without obtaining prior permission from the Ministry of Urban Development and in violation of the terms of allotment. DTTDC had no right to grant such licence for this land to any other agency including the East India Hotels Ltd. 2. In view of the violation of the allotment conditions by the DTTDC, the allotment of the land in their favour was cancelled by the Government. However, after cancellation of the allotment the same plot was allotted in favour of the same agency i.e., East India Hotels on 7.6.1995 under similar terms and conditions. The matter was further reviewed and it was noted that the allotment made to East India Hotels in June, 1995 was based on improprieties as it was made without following proper procedure and without resorting to a transparent and open procedure like competitive bidding or auction. It has been viewed that the interest of the Union of India has not been protected in the manner in which it was allotted to East India Hotels. 3. In view of the above, the matter has been considered by the Competent authority and it has been decided to cancel the allotment letter No.L- III/8/13(16)/82 dated 27.6.1995. Accordingly, the allotment order is hereby cancelled and withdrawn. WP(C) 8070-71/05 Page No.9 of 29 4. However, the possession of the land will be taken over from you only after obtaining the permission from the Hon'ble Court in the matter CWP No.3016/2000 with CM No.4613/2000 after the Hon'ble High Court vacates its interim order dated 26.5.2000 passed in CM No.4613/2000. 5. The amount deposited by you with the Land & Development Office on account of allotment of land will be refunded to you separately. 6. The subject land will be put to sale by public auction on its cancellation and subject to orders of the Hon'ble High Court of Delhi in WP No.3016/2000. You shall be free to participate in the sale of the aforesaid land through public auction. Yours faithfully, --sd-- (Jamna Dass) Dy. Land & Development Officer” 9. Being aggrieved by the said cancellation letter dated 11.04.2005, the present writ petition has been filed by the petitioners. It is relevant to note that WP(C) 3016/2000 was withdrawn on 10.05.2005 with liberty to continue with the present writ petition. 10. On the basis of these facts, it has been contended by Mr Dushyant Dave, the learned senior counsel, who appeared on behalf of the petitioner, that the impugned cancellation letter dated 11.04.2005 is wholly arbitrary and without any basis. He also submitted that there was a concluded contract between the petitioner No.1 and the Government of India which is evidenced by the allotment letters dated 07.06.1995 and 27.06.1995. He submitted that the Government of India cannot resile from the same. Apart from this, the Government of India cannot also resile on WP(C) 8070-71/05 Page No.10 of 29 account of the principles of promissory estoppel and legitimate expectation. He referred to the following three decisions:- i) Gujarat State Financial Corporation v. Lotus Hotels Pvt. Ltd: 1983 (3) SCC 379 (Paras 12 and 13); ii) Kollipara Sriramulu v. T. Aswathanarayana and Ors.: AIR 1968 SC 1028 = 1968 (3) SCR 387 (page 393); iii) ABL International Ltd. and Anr. v. Export Credit Guarantee Corporation of India Ltd. and Ors.: 2004 (3) SCC 553 (para 27). 11. Mr P.P. Malhotra, the learned Additional Solicitor General who appeared on behalf of the respondents, submitted that the allotment on 18.06.1983 to DTTDC was for setting up a budget hotel and, as indicated in the allotment letter, it was for no other purpose whatsoever. DTTDC was not permitted to lease out the same. He submitted that as per condition No.5 of the allotment letter, DTTDC was itself to run / start a hotel. Condition No.7 stipulated that the construction ought to be completed within 24 months and then, only, the question of lease would arise. He submitted that there was no lease in favour of the DTTDC at any stage. For a period of 10 years after the allotment, DTTDC did nothing. He submitted that condition 8 of the allotment letter also stipulated that DTTDC shall not sub-let the land though it could make arrangements for constructing and running the hotel. He submitted that the allotment in favour of DTTDC was only a licence, as indicated in condition No.14. Mr Malhotra then submitted that the advertisement of 24.02.1992 was not issued by the Government but by DTTDC. He submitted that the very invitation to invest in a new hotel was contrary to condition No.5 contained in the allotment letter of 18.06.1983. WP(C) 8070-71/05 Page No.11 of 29 Because, under that condition, specific permission of the Government of India was required. He also submitted that the advertisement nowhere mentioned that the hotel was to be a budget hotel. According to him, the DTTDC had no right to issue any such advertisement. With regard to the acceptance of the offer by DTTDC on 08.05.1992, he submitted that DTTDC did not even have a lease in its favour and yet it went ahead and purported to grant a licence in favour of the petitioner No.1 for setting up a three star hotel and that too for a period of 33 years. With regard to the licence agreement between the petitioner and DTTDC and Oberoi Palaces & Resorts International Ltd which was executed on 24.07.1992, he submitted that it was DTTDC which was a licencee of the Government of India but it went and described itself as a licensor. The petitioner No.1 was described as a “licencee” and the Oberoi Palaces & Resorts Ltd was described as the “sub-licencee”. He then referred to the recitals which indicated that the licence was for use of the said plot by NOVOTEL. Referring to various clauses of the said agreement, he submitted that the same could not be entered into by DTTDC and was in complete violation of the allotment made by the Government of India in favour of DTTDC. He submitted that possession of the entire plot was handed over to the petitioner No.1 and DTTDC reserved only 250 sq. ft. area in the proposed building for itself. 12. Mr Malhotra also submitted that as per the Transaction of Business Rules, 1961 of the Government of India, grant of land / lease / licence required the concurrence of the Finance Ministry. He submitted that no concurrence of the Finance Ministry was given to such a transaction. He WP(C) 8070-71/05 Page No.12 of 29 submitted that the property in question could not have been handed over to the petitioner No.1 in the manner it was. 13. Mr Malhotra referred to the letter dated 01.02.1993 whereby the allotment in favour of DTTDC was cancelled. Mr Malhotra also referred to the allotment letters of 07.06.1995 and 27.06.1995 issued by the Government of India, Ministry of Urban Affairs, Land & Development Office. He then referred to the letter dated 01.07.1996 which was issued by the Government of India, Ministry of Urban Affairs and Employment to the Land & Development Officer informing the latter that it may go ahead with the execution of the licence agreement with the petitioner No.1 after suitably modifying the earlier licence agreement executed between DTTDC and the petitioner No.1. Mr Malhotra submitted that between 07.06.1995 and 27.06.1995, no approval from the Finance Ministry was obtained. Therefore, the allotment letter of 27.06.1995 was without any authority. He further submitted that the go-ahead given in the letter dated 01.07.1996 had also not been cleared by the Finance Ministry. In this context, he submitted that the Finance Ministry, not having cleared the allotment, “the whims” of the Ministry of Urban Affairs and Employment would have to bow down to public interest. He submitted that individual interest must yield to public interest and that prime land must get good money and must not be permitted to be allotted at low rates. 14. It was also contended by Mr Malhotra that the challenge in the present petition is to the letter dated 11.04.2005 whereby the allotment of WP(C) 8070-71/05 Page No.13 of 29 2.762 acres of land made to the petitioner No.1 on 27.06.1995 was cancelled. He submitted that the letter dated 11.04.2005 itself indicates that the reason for cancellation was that there were improprieties. The allotment was made without following the proper procedure and without resorting to a transparent and open procedure. He further submitted that the letter dated 07.06.1995 indicated that there would be a licence agreement executed in favour of the petitioner No.1 after suitably modifying the earlier licence agreement dated 24.07.1992. Since no such licence agreement was executed, the petitioner No.1 had no right. 15. Mr Malhotra then referred to the contents of the counter-affidavit filed on behalf of the respondents. He submitted that the piece of land was allotted to the petitioner No.1 on 17.02.1981 and as the petitioner No.1 had to fulfill the conditions of the letter of allotment relating to the completion of the hotel in time for the Asian Games, this allotment was cancelled in consultation with the Ministry of Law and the Ministry of Finance. It is further stated in the counter-affidavit that on the issue of utilisation of the land, Ministry of Finance had advised that this plot should be disposed to a private party for a hotel etc., only after an open auction to ensure a free and fair transaction. In the alternative, it was suggested by the Ministry of Finance that this plot could be used by the Government directly. It is in this background that, based on a request form DTTDC, this plot was offered for allotment to them (DTTDC) for construction of a budget hotel, on specified terms and conditions in consultation with the Ministry of Finance. Reading the counter-affidavit further, Mr Malhotra submitted that the land was WP(C) 8070-71/05 Page No.14 of 29 allotted at highly concessional rates which required an annual payment @ 6 ½% of the notional premium calculated on the residential rates of Rs 2,000/- per sq. mtr. and thus no premium was charged and only the licence fee at the aforesaid concessional rates was levied. The allotment was subject to the terms and conditions contained in the letter of allotment dated 18.06.1983. The relevant conditions have already been indicated above. 16. It is further stated in the counter-affidavit that during the period 1984-1992, the DTTDC did not set up the budget hotel as per the terms of the allotment and it also failed to pay the licence fee. On the contrary, in 1992, DTTDC, without obtaining any permission from the Government of India and in total violation of the conditions of the allotment, invited tenders from private parties for setting up a 3-5 Star Hotel on this plot of land. It was stated that this was in violation of the terms and conditions of the allotment which provided for the setting up of a budget hotel by DTTDC only. It was further stated that the Government of India requested DTTDC to immediately stop these activities in violation of the allotment terms as well as to pay the arrears of licence fee. It was submitted by Mr Malhotra, on the basis of statements made in the counter-affidavit, that there was no justification for