1 BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED : 20.04.2011 CORAM THE HONOURABLE MR.JUSTICE B.RAJENDRAN W.P.(MD).No.1540 of 2011 and M.P.(MD).Nos.1 & 2 of 2011 R.Kumaresan ... Petitioner Vs 1.The Managing Director, Tamil Nadu Tourism Development Corporation Ltd, Tamil Nadu Tourism Complex, No.2, Walajah Road, Chennai-600 002. 2.The Regional Manager, Tamil Nadu Tourism Corporation Ltd, Hotel Tamil Nadu, Azhagarkoil Road, Madurai-625 002. 3.The Regional Manager (Madurai), Hotel Tamil Nadu, Tiruchendur-628 215. ...Respondents Writ petition filed under Article 226 of the Constitution of India for the issuance of a Writ of Certiorarified Mandamus to call for the records of the first respondent in Lr.No.2992/FH/08 dated 02.02.2011 and quash the same and consequently direct the respondents to consider the representation of the petitioner dated 11.01.2011 on merits. For Petitioner : Mr.P.Arun Jayatram For Respondents : Mr.V.Raghavachari **** ORDER The petitioner was the successful bidder in respect of conducting the restaurant in the Tamil Nadu Tourism Corporation Ltd, at Tiruchendur. He was given the contract on the basis of that he has to pay franchisee fee of Rs.70,000/- per annum with 15% escalation once in three years. The contract period is for 10 years commencing from 04.09.2008 till 16.06.2008. According to him, even though the agreement was singed on 16.06.2008, he started only from 01.02.2009, after the respondents handed over the promises. One of the conditions was that the premises should be kept tidy, clean and good hygienic food should be supplied to the customers. While the matter stood thus, the respondents started construction of a building for providing bar and also started renovation of rooms of the hotel premises on 09.07.2010. For construction purposes, since materials were stored like bricks, sand, cement and metal stones, there was a lot of trouble in conducting the restaurant due to movement of the construction labourers in and around the restaurant and the smooth functioning of the restaurant was totally affected. Since, it https://hcservices.ecourts.gov.in/hcservices/ 2 was felt that the quality of the food will be affected, he closed down the restaurant with effect from 13.07.2010. Though the respondents directed to open the restaurant from 04.11.2010 as there was complaints that there was lot of dust and fumes due to the construction work, the petitioner did not open the restaurant. As a result of which, once again he closed down the unit from 10.11.2010. In the meanwhile, the petitioner also applied for waiver of rent. That was rejected by a letter dated 14.12.2010. Ultimately, according to the petitioner, by the communication dated 02.02.2011, the construction materials have been fully cleared. But, unfortunately, he has not paid franchisee fee of Rs.70,000/- with interest at the rate of 14% from 14.09.2010. Therefore, the respondents have terminated the contract and issued the orders to take restaurant on 09.02.2011. Challenging this order, the petitioner has come forward with the Writ of Certiorarified Mandamus. In fact, he would also contend that his contract is for a period of ten years and his closure of the restaurant was due to the act of the respondents and hence, he seeks a direction of this Court to quash the impugned order of the respondents. 2. The respondents have filed a vacate stay petition. In the said vacate stay petition, they have categorically stated that though the petitioner had taken the restaurant as early as 04.09.2008, he requested for some time to undertake some renovation / alteration work before the commencement of the operation. Therefore, he was granted three months time to make his own arrangements for renovation work. Thereafter, even three months granted, he started his operation only in February, 2009. The delay is only because of his own request and not on the part of the respondents. In fact, the room renovations and additional bar are always part and parcel of the activities of the respondents. In fact, the inmates arrival to the hotel have been considerably increased compared to the previous year. The petitioner on his own accord closed the restaurant on 13th July, 2010. But, thereupon, he sought the waiver of rent from 21.07.2010. This is a clear violation of Clauses 12 and 13 of the franchisee agreement. Despite several notices, he has not chosen to open the restaurant. 3. As per the agreement, the franchisee fee has to be paid on or before 04.09.2010. By a letter dated 13.09.2010 itself his waiver application was rejected and he was called upon to pay the amount. In spite of that, he failed to pay the franchise fee and therefore, the first respondent is empowered to terminate the agreement and resume possession of the restaurant. The respondent had given several reminders to the petitioner to open the restaurant and also to pay the money. But neither of them was done by the petitioner. Even as early as on 14.12.2010, it was clearly stated that all materials have been removed. Since there is violation of the contract clauses Nos.12 and 13 and he has not conducted the restaurant for a period of three months, definitely, the respondents are entitled to terminate the agreement. In any view of the matter, this is a purely contractual dispute and the petitioner has no locus standi to file this Writ Petition and the termination was also done after giving sufficient opportunity to the petitioner. Therefore, this Writ Petition is not maintainable and liable to be dismissed. 4. Heard both sides. By consent, the Writ Petition itself is taken up for final final disposal. https://hcservices.ecourts.gov.in/hcservices/ 3 5. The short point arising for consideration in the Writ Petition is that the petitioner who is the successful bidder for running the restaurant has unfortunately failed to adhere to the contract. Admittedly, the petitioner has entered into an agreement with the respondents and no doubt, he has to abide by the conditions stipulated therein. For the better appreciation of the facts, it would be relevant to extract the relevant clause Nos.11,12 and 39 of the agreement:- “11.The franchisee should operate the restaurant on continuous basis throughout the franchisee period. If the franchisee fails to run the restaurant for a period of three months continuously the franchiser shall issue a notice to the franchisee and if the franchisee fails to operate the restaurant even after one month on receipt of the notice the franchiser shall re-enter premises and resume the possession and the operation of the unit without further notice. 12.In case of franchisee fails to remit the franchisee fee of the subsequent years before 90 calendar days from the date of expiry of the earlier franchise period, apart from invoking the bank guarantee, the franchiser reserves the right to re-enter the premises to take possession of the property/hotel .... 39.In case of any dispute, the franchiser will refer the dispute to an Arbitrator in accordance with the provisions of Arbitration and Conciliation Act,1996 and the parties agreed to abide by the decision of the Arbitrator.” As per clause No.11, the franchisee should operate the restaurant throughout the franchisee period on continuous basis. If the franchisee fails to run the restaurant for a period of three months continuously, the franchiser shall issue a notice to the franchisee and if the franchisee fails to operate the restaurant even after one month on receipt of the notice, the franchiser has got right to re-enter premises and resume the possession and the operation of the unit without further notice. As per clause No.12, if the petitioner fails to pay the franchisee fee in the subsequent year before 90 calendar days from the date of receipt of the expiry of the earlier franchise period, the respondent is at liberty to reenter the premises and resume the possession / hotel. Similarly, clause No.13 would entitle the respondent that the petitioner should pay the bank guarantee equivalent to 50% of the franchisee value of the fourth year franchisee fee should be furnished by the franchisee for a period of six years at the end of the time of taking of the property. Clause No.15 also says the in case of default in payment of franchisee amount or furnishing the bank guarantee, the franchisor shall re-enter the premises and resume possession and operation of the unit. 6. In this case, admittedly, the petitioner only started the restaurant more than after three months, after getting the contract, but then, he had got the permission for the absence period of three months. https://hcservices.ecourts.gov.in/hcservices/ 4 Later on, he had closed it voluntarily on 13.07.2010. He has not sought for any permission from the authorities concerned. But, he has sent a letter dated 21.07.2010 for waiver of rent. The reasons stated in the letter was the storage of materials had been kept near the restaurant. But, this letter was promptly replied by the respondents as early as on 13.08.2010 itself in which it has been very clearly stated that his request for waiver of franchise fee has been denied and he was further directed to pay the three year franchisee fee of Rs.70,000/- on or before 04.09.2010. They would also contend that failure to pay the franchisee fee, 14% interest will be levied for the defaulted payment. Since he has not responded, another letter on 20.08.2010 was also issued calling upon to pay him on or before 04.09.2010. Without paying this amount, the petitioner later on replied to these two letters by letter dated 17.11.2010. Here again, he claimed only the waiver of the rent and he has not mentioned anything about the payment of franchisee fee. This was duly replied as early as 23.11.2010 calling upon him to open the restaurant or otherwise, clause 12 of the franchisee agreement would be invoked and consequently, the restaurant will be taken back. Though a reply is given by the petitioner in the year December,2010, nothing has been mentioned as regards the payment for the franchisee for the next year. Again, he has only insisted for waiver. Ultimately, by a letter 11.01.2011, it was informed that after January 14.01.2011, namely, in the Tamil month of “thai', he stated that the hotel would be functioning. Since he has not complied with either opening of the restaurant or payment of money, a final notice was issued on 02.02.2011 calling upon the petitioner once again granting time till 09.02.2011 to pay the amount and open the restaurant, failing which the possession will be taken on 09.02.2011. 7. The petitioner has now challenged the final order dated 02.02.2011. But, conveniently, in the Writ Petition consequently, he wants a direction that a representation dated 11.01.2011 for waiver of rent to be considered. It is a clear case that the petitioner has violated all norms right from the beginning. The contract is very clear that if the restaurant is not running for a period of three months, the contract itself would be cancelled. Similarly, if he does not pay the franchisee fee, after demand, then the respondents are at liberty to take possession. In this case, it is very clear right from 13.08.2010 till 02.02.2011 for a period of seven months, he has been conveniently not running the restaurant. Though he has been claiming that the authorities have storaged the construction materials, even as early as 13.08.2010, the request for waiver of franchisee fee and closure has been rejected by the authorities and subsequently various communications have been exchanged between the petitioner and the respondents. The authorities have been clearly stating that he was called upon to pay the franchisee amount right from 04.09.2010, though the authorities have been granting time and extending every time upto 09.02.2011, neither he has chosen to pay the franchisee fee nor opened the restaurant. It is pertinent to note that in this case principles of natural justice have been clearly followed; repeated notices were given and time was also extended periodically. In spite of that, he has neither made use of the time granted by the respondents nor complied with the order of the respondent. Hence, the petitioner is not entitled to any discretionary relief at the hands of this Court. Once, it is proved that there is no violation of contract, in spite of specific notices and granting of time, off and on, https://hcservices.ecourts.gov.in/hcservices/ 5 the petitioner is not entitled to any relief. Therefore, I find that there is no irregularity or illegality in the impugned order of the respondents. The respondents are well within their right in issuing the order. The petitioner has not made out any case on merits and therefore, this Writ Petition is liable to be dismissed. 8. Among all other things, after all, the dispute is in respect of the contract. In contractual dispute, time and again, the Apex Court as well as this Court have held that a Writ Petition will not lie. There are a catena of decisions in this regard dealing with the issue in question. It is relevant to point out that in Pimpri Chinchwad Municipal Corpn. v. Gayatri Construction Co., reported in (2008) 8 SCC 172, 177, the Apex Court has elaborately dealt with the issue in question. In the said decisions, various judgments are referred to to hold that the Writ Petition in the nature of contract is not maintainable, which are usefully extracted below:- “12. In National Highways Authority of India v. Ganga Enterprises it was inter alia held as follows: (SCC p.415, para 6) “6. The respondent then filed a writ petition in the High Court for refund of the amount. On the pleadings before it, the High Court raised two questions viz.: (a) whether the forfeiture of security deposit is without authority of law and without any binding contract between the parties and also contrary to Section 5 of the Contract Act; and (b) whether the writ petition is maintainable in a claim arising out of a breach of contract. Question (b) should have been first answered as it would go to the root of the matter. The High Court instead considered Question (a) and then chose not to answer Question (b). In our view, the answer to Question (b) is clear. It is settled law that disputes relating to contracts cannot be agitated under Article 226 of the Constitution of India. It has been so held in Kerala SEB v. Kurien E. Kalathil, State of U.P. v. Bridge & Roof Co. (India) Ltd. and Bareilly Development Authority v. Ajai Pal Singh. This is settled law. The dispute in this case was regarding the terms of offer. They were thus contractual disputes in respect of which a writ court was not the proper forum. Mr Dave, however, relied upon Verigamto Naveen v. Govt. of A.P. and Harminder Singh Arora v. Union of India6. These, however, are cases where the writ court was enforcing a statutory right or duty. These cases do not lay down that a writ court can interfere in a matter of contract only. Thus on the ground of maintainability the petition should have been dismissed.” 13. In Kerala SEB v. Kurien E. Kalathil this Court dealt with the question of maintainability of petition under Article 226 of the Constitution and the desirability of exhaustion of remedies and availability of alternative remedies, as also difference between statutory contracts and non-statutory contracts. In paras 10 and 11 of the judgment it was noted as follows: (SCC pp. 298-99) “10. We find that there is a merit in the first contention of Mr Raval. Learned counsel has rightly questioned the maintainability of the writ petition. The interpretation and implementation of a clause in a contract cannot be the subject-matter of a writ petition. Whether the contract envisages actual payment or not is a question of construction https://hcservices.ecourts.gov.in/hcservices/ 6 of contract. If a term of a contract is violated, ordinarily the remedy is not the writ petition under Article 226. We are also unable to agree with the observations of the High Court that the contractor was seeking enforcement of a statutory contract. A contract would not become statutory simply because it is for construction of a public utility and it has been awarded by a statutory body. We are also unable to agree with the observation of the High Court that since the obligations imposed by the contract on the contracting parties come within the purview of the Contract Act, that would not make the contract statutory. Clearly, the High Court fell into an error in coming to the conclusion that the contract in question was statutory in nature. 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.” 14. Reference can also be made to State of Gujarat v. Meghji Pethraj Shah Charitable Trust. In para 22 it was observed as follows: (SCC pp 568-69) “22. We are unable to see any substance in the argument that the termination of arrangement without observing the principle of natural justice (audi alteram partem) is void. The termination is not a quasi- judicial act by any stretch of imagination; hence it was not necessary to observe the principles of natural justice. It is not also an executive or administrative act to attract the duty to act fairly. It was—as has been repeatedly urged by Shri Ramaswamy—a matter governed by a contract/agreement between the parties. If the matter is governed by a contract, the writ petition is not maintainable since it is a public law remedy and is not available in private law field e.g. where the matter is governed by a non-statutory contract. Be that as it may, in view of our opinion on the main question, it is not necessary to pursue this reasoning further.” 15. Again, in State of U.P. v. Bridge & Roof Co. (India) Ltd. this Court dealt with the issue in paras 15 and 16 in the following manner: (SCC p.30) “15. In our opinion, the very remedy adopted by the respondent is misconceived. It is not entitled to any relief in these proceedings https://hcservices.ecourts.gov.in/hcservices/ 7 i.e. in the writ petition filed by it. The High Court appears to be right in not pronouncing upon any of the several contentions raised in the writ petition by both the parties and in merely reiterating the effect of the order of the Deputy Commissioner made under the proviso to Section 8-D(1). 16. Firstly, the contract between the parties is a contract in the realm of private law. It is not a statutory contract. It is governed by the provisions of the Contract Act or, maybe, also by certain provisions of the Sale of Goods Act. Any dispute relating to interpretation of the terms and conditions of such a contract cannot be agitated, and could not have been agitated, in a writ petition. That is a matter either for arbitration as provided by the contract or for the civil court, as the case may be. Whether any amount is due to the respondent from the appellant Government under the contract and, if so, how much and the further question whether retention or refusal to pay any amount by the Government is justified, or not, are all matters which cannot be agitated in or adjudicated upon in a writ petition. The prayer in the writ petition viz. to restrain the Government from deducting a particular amount from the writ petitioner’s bill(s) was not a prayer which could be granted by the High Court under Article 226. Indeed, the High Court has not granted the said prayer.” In view of the illuminating decisions referred to above, on the ground of maintainability, on the face of it, this Writ Petition can be dismissed. 9. Apart from that, it is not the case of the petitioner that he initiated or made any attempt to start the arbitration. In fact, as per clause 39 of the agreement, if there is any dispute, the dispute has to be referred to arbitration. When there is an arbitration clause is available, invoking of the writ jurisdiction is not maintainable. 10. In view of foregoing reasons and decisions cited supra, this Writ Petition stands dismissed. Consequently, the connected miscellaneous petitions are also closed. No costs. SD/- Assistant Registrar (P&A) /True Copy/ Sub Assistant Registrar To 1.The Managing Director, Tamil Nadu Tourism Corporation Ltd, Tamil Nadu Tourism Complex, No.2, Walajah Road, Chennai-600 002. 2.The Regional Manager, Tamil Nadu Tourism Corporation Ltd, Hotel Tamil Nadu, Azhagarkoil Road, Madurai-625 002. 3.The Regional Manager (Madurai), Hotel Tamil Nadu, Tiruchendur-628 215. +1 CC TO MR. P. ARUN JAYATRAM, ADVOCATE S.R NO. 14505 Order made in W.P.(MD).No.1540 of 2011 20.04.2011 ssm PAM 06.05.2011/5C/7P https://hcservices.ecourts.gov.in/hcservices/