1 hvn IN THE HIGH COURT OF JUDICUATURE AT MUMBAI ORDINARY ORIGINAL CIVIL SIDE WRIT PETITION NO. 1345 OF 2007 1. Patni Computers Systems Ltd, a company incorporated under the provisions of the Companies Act, 1956 having its corporate office at Akruti Softech Park, MIDC Cross Road No. 21, MIDC, Andheri (E), Mumbai 400 093. 2. Sitaram R. Tiwari, of Mumbai Indian Inhabitant, having his office at Akruti Softech Park, MIDC Cross Road No. 21, MIDC, Andheri (E), Mumbai 400 093. ... Petitioners Versus 1. Maharashtra Industrial Development Corporation, a Government of Maharashtra Undertaking, having its Head Office at Udyog Sarthi, Mahakali Caves Raod, Andheri (E), Mumbai 400 093. 2. The State of Maharashtra, through the Ministry of Industry and Water Conservation having its offices at Mantralaya, Mumbai 400 032. 3. Reliance Insolutions Private Limited, a company incorporated under the Companies Act, 1956, having its registered office at 1st Floor, Shree Ram Mills Compound, Ganpatrao Kadam Marg, Worli, Mumbai 400 013 ... Respondents Mr. Iqbal Chagla, Sr. Counsel with Mr. Riyaz Chagla, Mr. Rustom Gagrat, Mr. Mohan Salian, Mr. Mayur Shetty and Ms. Vaijanta Shete i/by M/s. Gagrats for Petitioners. 2 Ms. Deepa Chavan with Mr.Kiran Gandhi i/byM/s. Little & Co. for R. No. 1. Mr. D.A. Nalawade, Government pleader wtih Mr. R.A. Lokhande for R. No. 2. Mr. Milind Sathe, Sr. Cousnel i/by M/s. A.S. Dayal & Associates for R. No. 3. CORAM : FERDINO I. REBELLO & J.H. BHATIA, JJ. DATED : FEBRUARY 11, 2010 ORAL JUDGMENT (Per Ferdino I. Rebello,J.): Rule. By consent heard forthwith. The Petitioners had applied to the first respondent an undertaking of the Government of Maharashtra and responsible for Industrial development in the State of Maharasthra for allotment of land pursuant to invitation to them by the first respondent. The first respondent had proposed to set up Information Technology (IT) Park at Airoli on the land admeasuring about 30 Hectares near Thane creek. The first Petitioner then wrote to first respondent confirming its willingness to accept the first respondent’s offer to acquire 25 acres of land at the proposed Airoli IT Park vide letter dated 9.5.2003 subject to however, the first respondent making necessary facilities available at Airoli. The first petitioner had conceived a plan to set up a technology park campus, comprising of world class facilities for software development, training, customer care, employee recreation among others. The proposed campus completion was to house 17000 professionals designed to cater to the company’s business requirements for catering to and providing integrated IT services to its global customer base and for strengthening its delivery capabilities. 3 The whole project had an outlay of about Rs.900 Crores of investment for its completion. The first respondent vide their letter dated 20.5.2003 informed the rate at which 25 acres of land would be allotted to the first petitioner and the facilities and amenities asked for would be made available. Some further correspondence was exchanged. The first respondent once again confirmed that it would reserve 25 acres of land for the proposed IT Park. According to first Petitioner, subsequently they realized that an integrated state of art research and development center for software entailing large investment would require at least 50 acres of land. It was then agreed between the first petitioner and the 1st respondent that,instead of acquiring only 25 acres of land, the 1st petitioner would acquire 50 acres of land in a phased manner and the entire plot of 50 acres was to be one contiguous piece of land to enable proper construction of the Development Center. 3. Thereafter a Memorandum of Understanding dated 3rd October, 2003 was entered into between the first petitioner and the first respondent. The relevant points are as under : “ d) By Clause 1 of the said MOU, the parties agreed inter alia that : i) Payment of consideration payable to MIDC towards the 10 (ten) acres of the said land @ Rs.1800/- (Rupees One Thousand Eight 4 Hundred Only) per sq. mt. (“the First Allotment”). ii) On execution of the said MOU, the Company shall pay an earnest money deposit of Rs. 3,60,00,000/- as per MIDC letter dated 1st August, 2003. iii) The balance amount of Rs.3,60,00,000/- will be paid to MIDC on MIDC providing the necessary infrastructure facilities like water, power and approach road to enable the Company to commence the construction activities on the land as per the drawing submitted. iv) Payment of consideration payable to MIDC towards additional 5 (Five) acres of the said land to be purchased within two years after the date of the First Allotment @ Rs.1800/- (Rupees One thousand eight hundred only) per Sq. mt. (“the Second Allotment”). v) Payment of consideration payable to MIDC towards final and residuary 35 acres of the said land to be purchased within two years from the Second Allotment i.e. Within three years from the date of the First Allotment @ Rs.1908 5 (Rupees One thousand Nine Hundred and Eight Only) per sq. mt. e) By clause 2(g) of the said MOU, the 1st Respondent represented and warranted to the 1st Petitioner, inter alia, that the 1st Respondent shall enter into a Lease Agreement with the 1st Petitioner for area covered by the said MOU. f) By Clause 2(h) of the said MOU, the 1st Respondent further represented and warranted that untill the formal Allotment Letter was issued to the 1st Petitioner by the 1st Respondent, the said MOU shall be considered an Allotment Letter. The 1st Respondent also agreed to issue an Allotment Letter to 1st Petitioner.” 4. On 3.10.2003 the first Petitioner handed over to the first respondent a cheque dated 2nd September, 2003 bearing No. 730694 drawn on the Standard Chartered Bank in a sum of Rs.3,60,00,000/- by way of earnest money deposit under the said MOU. The same was acknowledged by the first respondent. On 23.10.2003 the first respondent accorded sanction to the allotment of land admeasuring 39,825 sq. mtrs. Comprising of Plot No. IT-1 in the TTC Industrial Area to the first petitioner for the purpose of setting up the first petitioner’s Industrial Unit for the purpose of IT 6 Industries. The sanction was subject to the payment of premium amounting to Rs. 7.16,85,000/- calculated @ Rs.1800/- per sq. mtrs. and on the terms and conditions set out therein. Clause 4(h) of the sanction order reads as under: “The other adjacent plots i.e. Plot No. IT-2 admesauring 19,350 m2, Plot No. IT-3 admeasuring 96,839 m2 and Plot No. IT-4 admeasuring 47,365 m2 have been kept reserved by MIDC for your Company as mentioned in the Jt. C.E.O. (IT)’s letter dated 11/07/2003. It is therefore, requested to make arrangement to protect these three plots from any encroachment by providing fencing etc. A copy of the layout plan is enclosed herewith.” Petitioner paid requisite balance amount of premium for the plot of 10 acres and forwarded a cheque drawn on Standard Chartered Bank in the sum of Rs. 3,56,85,000/-. The first respondent acknowledged the receipt of the payment. 5. Although the payment of consideration by the first Petitioner to first respondent towards additional 5 acres of land to be purchased was to be made within two years after the date of first allotment @Rs.1800/- per sq. mtrs. pursuant to the discussions with the respondent No.1, the first Petitioner issued letter dated 15.7.2004 to the first respondent stating that 7 they were ready to purchase the said 5 acres and enclosed a cheque dated 15th July, 2004 bearing No. 709257 drawn on Standard Chartered Bank in a sum of Rs.3,48,390,000/- towards the payment of consideration of plot IT 2 admeasuring 19350 sq. mtrs. This was acknowledged by the first respondent by their receipt dated 16.7.2004. Some additional payment for extra land admeasuring 2500 sq. mtrs. was also made. In addition the sum of Rs. 45,00,000/- was also paid to the first respondent. The possession of plot IT-1 was handed over and advance possession receipt issued on 12.8.2004. 6. On 30.8.2004 the first respondent accorded sanction to the allotment of land admeasuring 19350 sq. mtrs. Comprising of plot NO. IT-2 in TTC Industrial Ara to first petitioner. Chause 2(h) of the said order reads as under : “The other plots i.e. Plot No. IT-3 admeasuring 96,839 sq. mtrs and IT-4 admeasuring 47,365 sq. mts. have been kept reserved by MIDC for the company as mentioned in the Joint CEO (IT)’s letter dated 11.7.2003. It was therefore, requested to make arrangement to protect these plots from any encroachment by providing fencing etc. Copy of the plan is attached.” 8 By another advance possession receipt the first respondents recorded handing over possession of plot IT-2 admeasuirng 19350 sq. mtrs. In the TTC Industrial Area. On 21.10.2004 the first respondent recorded handing over possession of plot IT-1/PT admeasuring 2500 sq. mtrs. 7. Pursuant to the advance possession receipts, the first petitioner took possession of plot No. IT-1, IT-2 and IT-1-PT respectively. According to Petitioners, first respondent thus implemented and acted upon the first phase of allotment by allotting total of 15 acres of land. 8. Thereafter agreement of lease were entered into in respect of land IT-1, IT2, IT-1 PT. Clause 3(b) of the agreement of lease dated 10th February, 2005 stated that the Licensee hereby agreed that additional plot of land of about area of approximately 96,389 sq. mtrs., being Plot No. IT-3 and a further area of approximately 47,365 sq. mtrs., being plot No. IT-4 shall be purchased i..e taken on lease within four years from the date of the allotment. This was reiterated also in all the other lease deeds. 9. Pursuant to the commencement certificate dated 15.2.2005, the first petitioner commenced construction in accordance with the approved plans. At the time of filing of the petition, the first petitioner has completed construction of two blocks of buildings comprising Module-I, Module II, canteen, employee care centre, Guest House, Training Centre, Service Yard, Guest House and car parking areas 9 covering a built up area of 62702.04 sq. mtrs. The buildings are ready for occupation and occupation certificates have been issued. 10. As the Petitioners required a large contiguous plot of land for the purposes of its development, further discussions between the first petitioner and first Respondent took place. The first Petitioner by letter dated 22.9.2005 enclosed a cheque in the sum of Rs.17,43,10,200/- for plot No. IT-3 admeasuring 19300 sq. mtrs. @ Rs.1800/- per sq. mtrs. and another cheque for sum of Rs. 8,52,57,000/- towards the premium for Plot No. IT-4 admeasuring 47,365 sq. mtrs. @ Rs.1800/- per sq. mtr. The first Petitioners requested the official possession be given. The first respondent by receipt dated 22.9.2005 acknowledged receipt of the said amount which was duly acknowledged which was paid in respect of balance land of 35 acres. The first petitioner informed the first respondent by their communication of 13.1.2006 that the first respondent had requested the first petitioner to wait for possession of the Plot Nos. IT-3 and IT 4 and the possession receipt in this regard, till the 1st respondent had held its Board Meeting and as by then the meeting has been held to hand over the possession. 11. Contrary to the expectation, petitioner received a communication dated 16.2.2006 conveying to the petitioner No.1 that the MOU had been cancelled vide a Board Resolution passed on 23rd December, 2005 and hence, the allotment of land admeasuring 35 acres could not be executed. No reasons were given for the cancellation. The first Petitioner thereafter was in communication with the first respondent and also held discussions. The fist respondent by order dated 20.4.2006 10 purported to direct, that the premium amount of Rs.25,95,67,200/- paid by the first Petitioner for allotment of the balance land of 35 acres in Airoli Knowledge Park of TTC Industrial Area, be refunded without any deductions. It was also set out that the first respondent Board after going through the facts and circumstances of the case, had decided to terminate the said MOU but to retain the land admeasuring 61,675 sq. mtrs., with the first Petitioner. Though the Petitioner No. 1 had received the cheques in protest, they have not encashed the same. 12. According to first Petitioner, several meetings took place, where the issue of allotting 35 acres to the first Petitioner were discussed and the first Petitioner was repeatedly assured that the matter was under consideration and they will soon get their response. During the meeting on 8.3.2007 with the Chief Executive Officer of the first respondent, the problems and issues faced by the first petitioner at Airoli were put before the first respondent and it was further impressed upon them that non- allotment of land would have grave and serious implications on the first Petitioner’s business plans and that the first petitioner would be subjected to irreparable loss and in the absence of the balance 35 acres of land, the entire project would be jeopardized. The first respondent did not respond to the letter of 8.3.2007 for long. The Petitioners thereafter gave final notice on 20.6.2007 and as the Respondents did not act on the same, the present petition was filed on 29.6.2007. 13. On 6.7.2007 this court ordered that any acts done by the parties would be subject to the order that may be passed by this court. On 3.8.2007 an interim relief was granted in terms of Prayer Clause (C)(ii) of the petition. 11 14. At the hearing of this petition, on behalf of the petitioner, their learned counsel submits that the action of the Board in passing the resolution dated 23.10.2005 is unreasonable and arbitrary and issued in breach of the principles of natural justice and fair play and also issued without application of mind and as such violative of article 14 of the Constitution of India. It is submitted that there was valid MOU binding on Respondent No. 1 and the decision of the Board to unilaterally cancel the MOU after receiving consideration without granting petitioners, any opportunity of being heard was in violation of principles of natural justice and fair play and consequently in violation of Article 14 of the Constitution of India. 15. It is next submitted that the first respondent after informing the Petitioner No. 1 that they had reserved the land identifiable in IT -3 and IT-4, received consideration and the Petitioner No.1 having acted on the MOU as also the covenant as contained in the lease deed and having incurred expenses for integrated complex could not have unilaterally terminated the MOU. The same, it is submitted would be contrary to the legitimate expectations of the Petitioner. 16. Reply has been filed on behalf of Respondent No. 1 by Mr. Suresh Bhosale, Area Manager. It is contended that the perusal of the correspondence clearly reveals that the MIDC was considering the initial request of the Petitioner for allotment of 25 acres and in respect of further 25 acres the Petitioners were given a time bound first right of refusal. The MOU contemplated phasewise transactions in 12 respect of the land between the parties. The MOU it is contended merely contemplated a rate of Rs. 1800/- per sq. mtr which was to prevail for two years from the date of its 1st allotment namely 23ard October, 2003. The preliminary understanding contemplated an annual escalation of 6% on the premium of Rs. 1800/- per sq. mtrs. The resolution of Board dated 23.10.2005 it is set out reveals that the MOU executed between the parties was canceled by the MIDC on two grounds. Firstly that the Petitioners had forwarded a proposal to the Government of India for creation of a Special Economic Zone only to the extent of 25 acres of land and secondly that the Corporation would suffer grave financial loss if the rate of land as contemplated by the preliminary understanding arrived at in the MOU was given effect to. 17. It is stated that on 3.4.2006 an application was received from Reliance Industries for allotment of land in the subject area. On 7.4.2006 MIDC issued an invitation to Reliance Infosolutions Private Limited. MIDC and had called upon the company to furnish requisite amount in in relation to the land at the rate of Rs. 3000/- per sq. mtr. towards earnest money. MOU has been entered into with M/s. Reliance Infosolutions Private Limited on or about 17.4.2006. Petitioners it is submitted have preferred the present petition only in June, 2007 which is almost one year two months after intimating to the Petitioner No. 1 the fact of cancellation of the said MOU and in these circumstances any order passed would clearly affect the rights of M/s,. Reliance as well as MSETCL and MSEDCL. The Petition is therefore, it is submitted hit by laches. It is then set that after the notice of 2.5.2006, from the Advocates for the Petitioners for almost an year, the Petitioners had few 13 meetings with the officials of the MIDC and it was explained to the Petitioners that the MOU was a preliminary understanding with the Petitioner and the Petitioners had themselves applied to the Government of India in respect of SEZ requirement of 25 acres only. The MOU it is submitted is in the nature of preliminary agreement. The MOU for preliminary understanding was unenforceable. It is therefore, submitted that the Petition ought to be dismissed. 18. Pursuant to the Chamber Summons taken out by Reliance Infosolutions, they were added as party and they have filed reply. It is their contention firstly that the petition is hit by laches, rights have been created in favour of third respondent and in these circumstances, this court ought not to grant any discretionary reliefs under article 226 of the Constitution of India. It is further submitted that the Petitioner is for enforcement at the highest of a contractual obligation and a writ petition as such would not be maintainable. It is not necessary to traverse other facts as set out therein. 19. In answer to the reply filed by 1st Respondent, petitioners have filed rejoinder. In rejoinder they have annexed communication of December 06, 2005 addressed to the Chairman, Board of Approvals, Ministry of Commerce and Industry that the total area as SEZ on completion of all phases was to be 50 acres. That 15.24 acres was already in their possession and they were awaiting decision on 34.76 acres and that the current proposal for SEZ was 25.12 acres, totalling to 50 acres. 20. At the outset we may mention that in the course of the hearing, it has come 14 on record that though initially land was earmarked for MSETCL and MSEDCL subsequently no land or area earmarked for the Petitioner No. 1 has been allotted either to MSETCL or MSEDCL. Therefore, the presence of these two parties is neither necessary nor proper as they have no interest in the land earlier sought to be allotted to them on any portion of plot IT-4 for the purpose of disposal of the petition. 21. At the hearing of this petition, we had called on Respondent No. 1 to produce their records so as to enable this court to find out whether there has been any allotment to Respondent No. 3 of land in respect of 20 acres which they had paid for and for which Respondent No. 1 had agreed to allot them the land . There is no communication on record to indicate that Respondent No. 1 had at any time intimated to Respondent No. 3 that any portion of the land earmarked as IT-3 or IT4 has been alloted to Respondent No. 3. The Counsel for Respondent No. 1 however, produced before us a file in which shows that as earlier to 5.5.2006, Respondent No. 1 had intended to allot plot IT-3 admeasuring 80,938 sq. mtrs, in favour of M/s. Reliance Infosolutions Pvt. Ltd., at the rate of Rs.3000/- sq. mtrs. The second document on record is the plan which was prepared on 21.7.2007, after the order passed by this court in which the proposed area if IT-4 is set out. However, apart from the file noting there has been no communication by the Respondent No. 1 to Respondent No. 3 that IT-4 has been allotted to them. 22. In terms of the letter of allotment issued by Respondent No. 1 to Respondent No. 3 dated 7.4.2006 it is set out that the plot of land admeasuring 20 acres is being 15 offered to Respondent No. 3 admeasuring 80938 sq. mtrs. Clause 4 reads as under : “If the plot which may be finally allotted to you in this industrial area is facing the National Highway, State Highway or the Service Road parallel to the National Highway or State Highway, then you will have to pay 15% additional premium over and above the usual premium applicable to the respective industrial area at the time of allotment. Moreover you will have to obtain necessary permission from concerned competent authorities before you start construction on such plot allotted to you.” In Para 13 of the same communication, sets out that if the plot in question is not allotted to me/us, I/we am/are willing to accept anyone of the following plots in order of preference on the same terms and conditions referred to 1 to 12 above. It does not refer to any specific plot. 23. Before we complete the narration, we may refer to some of the documents on the file of Respondent No. 1 which has been produced before us subsequently. It is seen from the note of 19.12.2005 that out of 50 acres of IT park, 15 acres had been allotted to M/s. Patni Computer while another 35 acres had been committed by MOU between MIDC and M/s. Patni Computer Systems Limited. Reference is then made to the project proposal from M/s. Reliance Industries 16 and their requirement of 100 acres and it is observed that the project of M/s. Reliance Industries Limited for IT activities needs to be considered for allotment of remaining land. It is also pointed out that earlier Reliance Industries had requested for allotment of land for Data Centre, BOP services, Life Sciences and Industrial Research and Technology centre but now by its letter dated 31.10.2005 it has asked the land only for IT and ITES activity. The note then reads as under : “As per the policy of this Corporation we can accommodate these activities in our Airoli Knowledge Park and the balance land about 37.04 acres could be considered against its demand of 100 acres.” 24. There is a subsequent communication of 5th April, 2006 bringing on record that M/s. Reliance Industries Limited had requested that the offer be issued in favour of M/s. Reliance Infosolutions Pvt. Ltd. and that M/s. Reliance Industries had requested the MIDC to offer the land in their favour by letter dad 3.4.2006. There is letter dated 5.5.2006 which sets out that the plot IT 3 admeasuring 80938 sq. mtrs. Is vacant and available for allotment. Then record shows that on 1.12.2006 further note was put up that the Corporation had allotted about 15 acres of land to M/s. Patni Computers and construction activities on Plot No. IT1 and IT2 are in progress. The corporation had taken a decision to allot in addition 15 acres of land to M/s. Patni Computers and Reliance Industries has been considered for allotment of 20 acres of land. It is then set out that both Patni Computers and Reliance Industries be allotted suitable plots from IT-3 and IT4/AM-2 by reconstituting the same. Then on 17 1.12.2006 there is a further note which says that 15 acres be allotted to Petitioner No. 1 and 20 acres to M/s. Reliance Industries. 25. Considering the above, we may now consider the challenges raised. We may first consider the contention as raised on behalf of Respondent No.1 and Respondent No. 3 that the Petition is hit by laches and on this count itself it ought to be dismissed. The Supreme Court in Karnataka Power Corporation Ltd. And another Vs. K.Thangappan and another (2006)