THE HON’BLE SRI JUSTICE M.S.RAMACHANDRA RAO W.P.Nos.7892, 7998 and 8566 of 2009; and W.P.Nos.22246, 22559, 31162, 31163 and 32924 of 2010 %01-07-2013 # M/s.Shankar Daswani and others ...Petitioner VERSUS $ Government of AP, Rep. by its Principal Secretary, YAT & C (S) Department, Secretariat, Hyderabad and others. ...Respondents < GIST: > HEAD NOTE: !Counsel for the petitioners : Sri R.V.Reddy, Sri C.V.Bhaskar Reddy, Sri Md.Ahmed Quadri and Sri P.R.Prasad. ^ Counsel for the 1st respondent : Sri V.C.H.Naidu ^ Counsel for the 2nd respondent : Sri M.V.S.Prasad ? Cases referred [1] (2010) 1 SCC 716 2 AIR 1977 SC 1496 3 AIR 1989 SC 1076 4 (2000) 6 SCC 293 5 (2003) 7 SCC 410 6 (1996) 6 SCC 22 THE HON’BLE SRI JUSTICE M.S. RAMACHANDRA RAO W.P.Nos.7892, 7998 and 8566 of 2009; and W.P.Nos.22246, 22559, 31162, 31163 and 32924 of 2010 COMMON ORDER : As a common question arises for consideration in these cases, they are being disposed of by a common order. The facts in WP.No.7892 of 2009, being illustrative of the facts in all these cases, the same are referred to. 2. The petitioner in W.P.7892 of 2009 is the occupant of a shop No.17 in Lal Bahadur Stadium Complex, Hyderabad, which is presently owned and managed by the 2nd respondent, a statutory body constituted under the Andhra Pradesh Sports Authorities Act, 1988 (for short, ‘the Act’). The said shop had been allotted by the Andhra Pradesh Sports Council to the petitioner’s father in 1968 under a registered lease deed dt.16.12.1968 on a monthly rent of Rs.250/- p.m. on certain terms and conditions. Later, the said Council was abolished and in its place, the 2nd respondent was established/constituted under the above Act. Under G.O.Ms.No.219 Education (SAM) Department dt.28.06.1989, the properties of the Council stood transferred to the 2nd respondent. 3. After the constitution/establishment of 2nd respondent, a meeting was convened with tenants such as the petitioner on 08.05.1993. In that meeting, the tenants on their own proposed to pay a flat rate of rent of Rs.300/- p.m. as against the existing rent of Rs.150/- and also agreed to enhance 20% every three years on the existing rent. The 2nd respondent felt that the rent offered by the tenants was extremely low and ultimately fixed the rent at Rs.350/- p.m. w.e.f. 01.01.1993 with an enhancement of rent @20% every three years w.e.f. 01.01.1996 and 01.01.1999. The 2nd respondent asked the tenants to execute lease agreements every time it is renewed so that benami tenants can be identified. The last of such lease agreements executed by some of the tenants including the petitioner are dt.18.03.2004. Clause – 9 of the said lease deed stated : “Clause – 9 : The lease is renewable every 3 years subject to the following conditions: (i) Promptness of payment of rent, (ii) Keeping cleanliness, maintenance of surroundings, (iii) If Lessor decides to renew the lease it shall be a condition that the annual rent of the shop under occupation of the Lessee shall be increased by 20% and Lessee shall pay for the enhanced rent from there onwards.” The said lease was from 05.04.2004 to 04.04.2007. 4. According to 2nd respondent, the petitioner did not come forward to execute a fresh lease after 4.4.2007. It was also felt by 2nd respondent that the rent paid by the petitioner was meagre in comparison with rents paid for other similarly situated premises in the locality even though the leased premises was situated in a prime locality in the centre of the city with close proximity to all State offices, business centres, markets, and is accessible with public transport system, etc. According to 2nd respondent, the petitioner was not paying rents regularly and was also not keeping the premises clean and violated the terms of the lease, particularly Clause – 9 and therefore, he is not entitled for renewal of the lease. 5. As the 2nd respondent felt that the rents being paid by the tenants was very low, it appointed a consultant M/s.Cushman-Wakefield India (P.) Ltd. to ascertain/evaluate the rents of the premises in the Lal Bahadur Stadium with other places around it. The said consultant submitted a detailed report dt.22.09.2008 to 2nd respondent and the same was placed before the Board of Directors of 2nd respondent and the rates ascertained/suggested/quoted by the said consultant were approved by 2nd respondent in its 57th Board meeting dt.12.12.2008. 6. Accordingly, the impugned proceeding/notice dt.4.3.2009 was issued to the petitioner enhancing the rent per month to Rs.31/- per sq.ft. so that the total monthly rent for the area of 1105 sq.ft. in the occupation of the petitioner would be Rs.34,255/- w.e.f. 01.04.2009. 7. Aggrieved thereby, the present writ petition is filed by the petitioners. 8. Heard Sri R.V. Reddy, Sri C.V. Bhaskar Reddy and Sri Md.Ahmed Quadri, Sri P.R. Prasad – counsel for the petitioners, Sri V.C.H. Naidu, counsel for 1st respondent and Sri M.V.S.Prasad, counsel for 2nd respondent. 9. The counsel for petitioners contend inter alia that the fixation of rent by the 2nd respondent is arbitrary; the 2nd respondent could not have enhanced the rent beyond 20% of the existing rent fixed under Clause -9 of the Lease deed dt.18.03.2004; the term of the Chairman of 2nd respondent appointed by the Government expired in 2006 and no Chairman was appointed thereafter till date and consequently no valid council meeting to renew the leases/enhance the rents by the tenants could be held. They also relied upon the decision in Stone India Limited and another v. Board of Trustees, Port of Calcutta and others[1]. 10. Per Contra, the counsel for 2nd respondent contended that the lease agreement dt.18.03.2004 expired on 04.04.2007 and therefore, Clause -9 therein cannot be invoked by petitioners; that petitioners cannot plead that they have a perpetual lease subject to enhancement of rent by 20% once in three years; that even under Clause – 9, the 2nd respondent is not under an obligation to renew the lease and the said clause did not confer any right on the petitioners to claim for a perpetual lease and compel the 2nd respondent to continue it; there is a discretion vested with 2nd respondent whether or not to renew the lease and the petitioners cannot compel 2nd respondent to renew it on the same terms and conditions on enhanced rate of 20% of the existing rent; the petitioners are not paying rents regularly and not keeping the premises clean and have violated the terms of the lease particularly Clause – 9 and are not entitled for renewal of the lease; what is the rent the 2nd respondent is entitled to collect from the petitioners is not a matter which can be decided in a writ petition filed under Article 226 of the Constitution of India; the fixation of rent by the 2nd respondent under the impugned proceedings was done only after taking into account the prevailing rents in the locality and cannot be said to be arbitrary; under Section 4 (h) of the Act, the 2nd respondent is empowered to raise finances by leasing out the properties owned by or vested in it in the manner prescribed; the petitioner in WP.No.7892 of 2009 was paying a rent of Rs.6,187/- prior to the filing of the writ petition; by order dt.24.04.2009 in WPMP.No.10353 of 2009 in WP.No.7892 of 2009, this Court directed him to pay double the existing rent w.e.f. May, 2009 while suspending the impugned letter dt.04.03.2009 issued by 2nd respondent and therefore, he is paying Rs.12,374/- p.m. only whereas the market rate of rent is @ Rs.31/- per sq.ft. per month which would be Rs.34,255/- p.m.; in fact, some of the occupants have inducted third parties and are collecting huge amounts from such sub-tenants and paying nominal amounts to 2nd respondent; some shops are closed and kept under lock and key and allottees’ whereabouts are not known and thus the 2nd respondent is deprived of rents. He also contended that the State Government vide G.O.Ms.No.1 [Youth Advancement, Tourism and Culture (Sports) Department] dt.27.01.2007 noted that the term of the office of the Chairman and Members of the 2nd respondent expired on 26.01.2007 and appointed Principal Secretary to Government, Youth Advancement, Tourism and Culture (Sports) Department, as the Chairman of 2nd respondent w.e.f. 27.01.2007 until further orders in terms of the powers conferred on it under S.3(4) of the Act and therefore the contention of the petitioners that there was no Chairman and no Board meeting could have been held is not valid; and therefore, the writ petition be dismissed. 11. I have noted the contentions of the respective parties. 12. Firstly, I am of the view that what should be the rent payable to 2nd respondent for the premises allotted to the petitioners is a matter purely contractual in nature. It is not a matter justiciable under Art.226 of the Constitution of India. 13. In Radhakrishna Agarwal v. State of Bihar[2], the Supreme Court held that Governmental authorities, when acting in the contractual field, could not be controlled by Article 14 of the Constitution; in such cases, the State as well the citizen with whom they contract are both equally subjected to the Law of Contract; once the State enters into contractual sphere, the relations are no longer governed by the constitutional provisions and no question of violation of Article 14 or any other constitutional provision arises when the State or its agents, purporting to act within the contractual field, perform any act; and that in such cases, powers under Article 226 of the Constitution cannot be invoked. 14. In Bareilly Development Authority v. Ajay Pal Singh[3], the above principle was reiterated and it was held that after entering into the field of ordinary contract, the State acts purely in its executive capacity and thereafter the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines the rights and obligations of the parties inter se. It held that in this sphere, they can only claim rights conferred upon them by contract in the absence of any statutory obligations on the part of the authority in the said contractual field. 15. I n Kerala State Electricity Board v. Kurien E. Kalathil[4], the Supreme Court held : “11. A statute may expressly or impliedly confer power on a statutory body to enter into contracts in order to enable it to discharge its functions. Dispute arising out of the terms of such contracts or alleged breaches have to be settled by the ordinary principles of law of contract. The fact that one of the parties to the agreement is a statutory or public body will not by itself affect the principles to be applied. The disputes about the meaning of a covenant in a contract or its enforceability have to be determined according to the usual principles of the Contract Act. Every act of a statutory body need not necessarily involve an exercise of statutory power. Statutory bodies, like private parties, have power to contract or deal with property. Such activities may not raise any issue of public law. In the present case, it has not been shown how the contract is statutory. The contract between the parties is in the realm of private law. It is not a statutory contract. The disputes relating to interpretation of the terms and conditions of such a contract could not have been agitated in a petition under Article 226 of the Constitution of India. That is a matter for adjudication by a civil court or in arbitration if provided for in the contract. Whether any amount is due and if so, how much and refusal of the appellant to pay it is justified or not, are not the matters which could have been agitated and decided in a writ petition. The contractor should have relegated to other remedies.” 16. Similar view has been expressed in National Highways Authority of India v. Ganga Enterprises[5] and State of U.P. v. Bridge and Roof Co. (India) Ltd.[6]. 17. Respectfully following the above decisions, I hold that the petitioners cannot seek determination of the quantum of rent which they should pay to 2nd respondent in a writ petition filed under Article 226 of Constitution of India as admittedly there is no lease deed subsisting between the parties and in any event the transaction of lease is purely a matter of contract. The writ petition, in my opinion, does not raise any issue of public law. In Stone India Ltd. ( 1 supra) cited by the counsel for the petitioners, the Supreme Court did not lay down any ratio that enhancement of rent payable by appellant/tenant therein by the Calcutta Port Trust/landlord can be agitated under Article 226 of the Constitution of India. It merely remanded the matter back to the High Court to decide the issue without adjudicating the matter on merits. Therefore the said decision cannot be of any assistance to the petitioners. 18. I am also not impressed by the contention of the petitioners that the term of the Chairman of 2nd respondent expired on 26.01.2007 and therefore, there could not have been a Board meeting on 12.12.2008 in his absence. The 1st respondent had appointed the Principal Secretary to Government, Youth Advancement, Tourism and Culture Department as Chairman of 2nd respondent w.e.f. 27.01.2007 vide G.O.Ms.No.1 referred to above and he presided over the 57th Board meeting of 2nd respondent held on 12.12.2008 wherein it was resolved to enhance the rents on par with the market values proposed by the consultant after following the prescribed procedure. Therefore, the enhancement of rent was done after following the prescribed procedure. In view of Section 4(h) of the Act, 2nd respondent is empowered to raise finances by leasing out the properties owned by or vested in it in the manner prescribed. The power of 2nd respondent to fix and enhance rents for the properties owned or vested in it cannot therefore be disputed by the petitioners. 19. For the aforesaid reasons, the writ petitions are dismissed as not maintainable and the petitioners are granted liberty to approach the competent Civil Court and agitate their grievances in respect of fixation of rent payable to 2nd respondent for the premises in their occupation. No costs. _______________________________________ JUSTICE M.S.RAMACHANDRA RAO Date: 01-07-2013 Note: L.R.Copy to be marked: Yes. B/o. Ndr/- HON’BLE SRI JUSTICE M.S.RAMACHANDRA RAO W.P.Nos.7892, 7998 and 8566 of 2009; and W.P.Nos. 22246, 22559, 31162, 31163 and 32924 of 2010 Ndr/* Date : -07-2013 [1] (2010) 1 SCC 716 [2] AIR 1977 SC 1496 [3] AIR 1989 SC 1076 [4] (2000) 6 SCC 293 [5] (2003) 7 SCC 410 [6] (1996) 6 SCC 22