Case: Orissa Industrial Infra.Dev. Corporation Vs. M/S Mesco Kalinga Steel Ltd.

different quarters, administrative as well as political.xxx xxx xxx32.We have carefully gone through the provisions of the 2009 Act and find that they do not even remotely deal with the issue of allotment of land to the educational institutions. Therefore, the Division Bench of the High Court was not at all justified in ordering transfer of the plot to Respondent 1 and that too by ignoring its own finding that the said respondent was a ranked defaulter and the writ petition was filed after a time gap of 13 years without any tangible explanation."(emphasis added by us)20. Mesco was required to do several acts in this case as per the general terms and conditions subject to which the lease was to be granted. Nothing has been performed including payment of instalments etc. and in such a situation no relief is permissible to be given as held by this Court in Raj Kishore (Dead) by LRs. v. Prem Singh & Ors., 2011(1) R.C.R.(Civil) 383 : (2011) 1 SCC 657 in which this Court has referred to Halsburys Laws of England thus :"33.This Court also quoted with approval the following passage from Halsburys Laws of England, Vol. 14, IIIrd Edn., p. 622, Para 1151:"1151. Conditions must as a general rule be strictly observed.-Where under a contract, conveyance, or will a beneficial right is to arise upon the performance by the beneficiary of some act in a stated manner, or at a stated time, the act must be performed accordingly in order to obtain the enjoyment of the right, and in the absence of fraud, accident or surprise, equity will not relieve against a breach of the terms.""It is apparent that when several acts are to be done in a stated manner and in stipulated time and none of them has been performed, as in the instant case, such gross breach became irremediable and no equitable principle could have come to the rescue of Mesco as it has utterly failed to fulfil its obligations.21. It was submitted on behalf of Mesco that IDCO is bound by promissory estoppel. We find the submission to be wholly unworthy of acceptance. It is not the case of Mesco that there was any assurance given to it on the basis of which it has acted upon. The State Government had withdrawn its initial offer of equity participation of Rs. 25 crores well before the order of allotment was issued. It was made clear in the order that the State Government had directed IDCO to allot 2500 acres of land subject to execution of lease deed. In such a situation there is no room to entertain the plea of promissory estoppel and it is not the case that any of the authorized persons had at any point of time, without execution of lease deed, asked Mesco to do anything. Any such assurance even if it had been given, would be of no consequence as held by this Court in Mumbai International Airport Private Ltd. v. Golden Chariot Airport & Anr., 2011(1) R.C.R.(Rent) 472 : (2010) 10 SCC 422. Therein a question arose that the Airports Authority of India being a statutory body constituted under section 3 of the Airports Authority of India Act, 1944 was required to execute the contract in a particular form as provided under the Act and the Regulations. As such it was held that even if oral assurance of execution of licence is proved, such assurance cannot bind the statutory body. In the facts of the instant case, the principle of promissory estoppel is not attracted at all. IDCO is a statutory body and can act only in the mode prescribed and Mesco was informed of the lease deed to be executed in prescribed format. Thus the High Court could not have issued the impugned direction.22. In the writ petition, a prayer had been made for grant of relief of a declaration that Mesco has acquired full title to hold the property in question for a period of 99 years from the date of possession and IDCO has lost its title to the said land and has the remedy to recover the balance amount by filing a suit. The prayer was wholly misconceived. In the instant case, on the basis of MOU or allotment letter, no right has accrued to Mesco, and it having failed to perform its mandatory part, the MOU/offer became void and unenforceable. IDCO was fully justified in resuming the land.23. The High Court has totally misdirected itself in directing to lease out the balance land. The High Court has also ignored that certain intervening events have taken place and there was total failure on the part of Mesco to carry out its obligations. The High Court could not have issued the direction more so in the changed situation and in view of the defaults committed by Mesco. As a matter of fact, Mesco was never inclined to abide by the terms of the letter dated 4.7.2003. When resumption was made on 25.7.2003, a representation was submitted on 20.8.2003 by Mesco. In that, an attempt was made to dictate its own terms in the garb of prayer for payment. As a matter of fact, it is apparent from the conduct of Mesco that it had no justification at any point of time not to execute the lease deed. It was delaying the same for the reasons best known to it which was wholly impermissible conduct, particularly after taking possession. The breach was not remedied for several years much less for three months in which it was to be remedied. Thus, High Court misadventured into holding the action of IDCO of resumption of land to be illegal. There was no equitable or legal consideration in favour of the respondent herein and a writ is not issued to perpetuate an illegality. Not only the conduct of Mesco was unfair, third party rights had also intervened. Lawful method had been exercised for resumption of land and cancellation of letter of handing over the possession.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]14. In the instant case it is apparent that possession had been enjoyed by Mesco without execution of the lease deed. The conduct of IDCO was also not diligent. Notice was served in the year 1997 for resumption but thereafter up to July, 2003 nothing was done by either IDCO or Mesco. Not even a single communication has been placed on record by Mesco containing its proposal to remedy breach and on a specific query being made to the learned counsel appearing for Mesco, they were unable to explain as to what transpired between 1997 and 2003 except a vague submission was made that it was mired in certain litigations which fact has not been even pleaded. Thus, no explanation, good, bad or otherwise has been placed on record for inaction on the part of Mesco. The transaction became void, due to Mescos own lapse and negligence, and it has forfeited the right to get the lease deed executed. After taking possession, it could not have waited for so many years. What was required to be performed by Mesco was not done. It also failed to make any development of worth on the land. We find no force in the submission that they have spent a sum of Rs. 22 crores as they were unable to explain how they spent the said amount, and only a bald statement was made that they have constructed a boundary wall. It has not been established that a sum of Rs. 22 crores had been spent by Mesco. Apart from that, having failed to execute the lease deed, they were to invest at their own peril. In case they have invested some amount, on that basis they cannot claim any legal or equitable right.15. IDCO is a statutory authority and it can act only on the basis of written lease deed. The execution of lease deed is necessary and it is in public interest to prevent unauthorized leasing out of property on its behalf. Lease is required to be executed in a prescribed format in the shape of formal document which is sine qua non. In the absence thereof, it would not be permissible to hold that relationship of lessor and lessee came into being. A situation arose under section 175(3) of the Government of India Act, 1935 a formal document was required to be executed which provision was pari materia to Article 299 of the Constitution, this Court held in Bhikraj Jaipuria v. Union of India AIR 1962 SC 113   that for a contract between Government and private individuals, formal document is necessary and where it is required that a thing shall be done in the prescribed manner or form but does not set out the consequences of non- compliance, the question whether the provision was mandatory or directory has to be judged in the light of the intention of the legislature as disclosed by the object. If the provisions of statute are mandatory, the thing done not in the manner or form prescribed can have no effect or validity. This Court also observed that it is in the interest of the public that the question whether a binding contract has been made between the State and a private individual should not be left to dispute and litigation.It is apparent that there is a manner of executing the lease deed with the Corporation. Prescribed form of draft lease deed had been sent by IDCO to Mesco but it failed to execute it. Thus, there was no contract which could have been enforced and it became void due to inaction of Mesco itself.16. Forfeiture of amount of Rs. 1.25 crores was also appropriate. In State of West Bengal v. M/s. B.K. Mondal and Sons AIR 1962 SC 779  , this Court held that the provision of section 175(3) is mandatory and non-compliance makes the contract invalid and section 70 of the Contract Act prevents unjust enrichment. It applies as much to individuals as to corporations and Government. Section 70 of the Contract Act deals with the cases where a person does a thing not intending to act gratuitously and others enjoyed it. In such a situation compensation can be claimed under section 70 and this Court has held that section 175(3) of the Government of India Act is not in conflict with the principles enunciated under section 70 of the Contract Act. Thus, we find no force in the submission on the part of Mesco with respect to the forfeiture of amount of Rs. 1.25 crores. In addition, they would be liable to pay as compensation for retaining possession so long. In New Marine Coal Co. (Bengal) Private Ltd. v. The Union of India AIR 1964 SC 152   also, this Court has held that when a contract is found to be void due to the provisions of section 175(3) of the Government of India Act it becomes unenforceable but in case a party had performed its obligation, section 70 is attracted in order to recover compensation.There is no question of estoppel or ratification in such cases. In Mulamchand v. State of Madhya Pradesh AIR 1968 SC 1218  , this Court observed thusThe principle is that the provisions of Section 175(3) of the Government of India Act, 1935 or the corresponding provisions of Article 299(1) of the Constitution of India are mandatory in character and the contravention of these provisions nullifies the contracts and makes them void. There is no question of estoppel or ratification in such a case. The reason is that the provisions of Section 175(3) of the Government of India Act and the corresponding provisions of Article 299(1) of the Constitution have not been enacted for the sake of mere form but they have been enacted for safeguarding the Government against unauthorised contracts. The provisions are embodied in Section 175(3) of the Government of India Act and Article 299(1) of the Constitution on the ground of public policy - on the ground of protection of general public -and these formalities cannot be waived or dispensed with. If the plea of the respondent regarding estoppel or ratification is admitted, that would mean in effect the repeal of an important constitutional provision intended for the protection of the general public. That is why the plea of estoppel or ratification cannot be permitted in such a case. But if money is deposited and goods are supplied or if services are rendered in terms of the void contract, the provisions of Section 70 of the Indian Contract Act may be applicable. In other words if the conditions imposed by Section 70 of the Indian Contract Act are satisfied then the provisions of that section can be invoked by the aggrieved party to the void contract. The first condition is that a person should lawfully do something for another person or deliver something to him; the second condition is that in doing the said thing or delivering the said thing he must not intend to act gratuitously; and the third condition is that the other person for whom something is done or to whom something is delivered must enjoy the benefit thereof. If these conditions are satisfied, Section 70 imposes upon the latter person the liability to make compensation to the former in respect of, or to restore, the thing so done or delivered. The important point to notice is that in a case falling under Section 70 the person doing something for another or delivering something to another cannot sue for the specific performance of the contract, nor ask for damages for the breach of the contract, for the simple reason that there is no contract between him and the other person for whom he does something or to whom he delivers something. So where a claim for compensation is made by one person against another under Section 70 it is not on the basis of any subsisting contract between the parties but on a different kind of obligation. The juristic basis of the obligation in such a case is not founded upon any contract or tort but upon a third category of law, namely, quasi-contract or restitution. In Bibrosa v. Fairbairn, 1943 AC 32 Lord Wright has stated the legal position as follows:"... any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep. Such remedies in English Law are generically different from remedies in contract or in tort, and are now recognised to fall within a third category of the common law which has been called quasi-contract or restitution".In the light of aforesaid decision, when we consider the overall conduct of Mesco in the instant case, we are fully satisfied that the High Court has adventured into an avoidable illegality while directing execution of lease deed. It is a settled law that equity follows the rule of common law in respect of such contracts. Renewal of lease is a privilege and if a tenant wishes to claim the privilege, he must do so strictly within the time limited for the purpose. This Court has further considered the question where there is no time limit, an application may be made within a reasonable time. If delay is on the part of lessee for renewal arising out of mere neglect on his part and which could have been avoided by reasonable diligence, would not entitle him to claim renewal. Applying the same principle to the instant case, it is apparent that the conduct of Mesco was unfair and unpardonable. The conduct disentitled it from indulgence by Court in any manner. We are constrained to observe that a number of times the High Court had unnecessarily directed the matter to be reconsidered and on each and every occasion there was rejection of the representation by the concerned authorities. Thus, no equitable consideration was available with Mesco to invoke the writ jurisdiction for the reliefs sought. Relief granted is not permissible as per law.It was submitted on behalf of Mesco that IDCO is bound by promissory estoppel. We find the submission to be wholly unworthy of acceptance. It is not the case of Mesco that there was any assurance given to it on the basis of which it has acted upon. The State Government had withdrawn its initial offer of equity participation of Rs. 25 crores well before the order of allotment was issued. It was made clear in the order that the State Government had directed IDCO to allot 2500 acres of land subject to execution of lease deed. In such a situation there is no room to entertain the plea of promissory estoppel and it is not the case that any of the authorized persons had at any point of time, without execution of lease deed, asked Mesco to do anything. Any such assurance even if it had been given, would be of no consequence as held by this Court in Mumbai International Airport Private Ltd. v. Golden Chariot Airport & Anr., 2011(1) R.C.R.(Rent) 472 : (2010) 10 SCC 422.   Therein a question arose that the Airports Authority of India being a statutory body constituted under section 3 of the Airports Authority of India Act, 1944 was required to execute the contract in a particular form as provided under the Act and the Regulations. As such it was held that even if oral assurance of execution of licence is proved, such assurance cannot bind the statutory body. In the facts of the instant case, the principle of promissory estoppel is not attracted at all. IDCO is a statutory body and can act only in the mode prescribed and Mesco was informed of the lease deed to be executed in prescribed format. Thus the High Court could not have issued the impugned direction.22. In the writ petition, a prayer had been made for grant of relief of a declaration that Mesco has acquired full title to hold the property in question for a period of 99 years from the date of possession and IDCO has lost its title to the said land and has the remedy to recover the balance amount by filing a suit. The prayer was wholly misconceived. In the instant case, on the basis of MOU or allotment letter, no right has accrued to Mesco, and it having failed to perform its mandatory part, the MOU/offer became void and unenforceable. IDCO was fully justified in resuming the land.23. The High Court has totally misdirected itself in directing to lease out the balance land. The High Court has also ignored that certain intervening events have taken place and there was total failure on the part of Mesco to carry out its obligations. The High Court could not have issued the direction more so in the changed situation and in view of the defaults committed by Mesco. As a matter of fact, Mesco was never inclined to abide by the terms of the letter dated 4.7.2003. When resumption was made on 25.7.2003, a representation was submitted on 20.8.2003 by Mesco. In that, an attempt was made to dictate its own terms in the garb of prayer for payment. As a matter of fact, it is apparent from the conduct of Mesco that it had no justification at any point of time not to execute the lease deed. It was delaying the same for the reasons best known to it which was wholly impermissible conduct, particularly after taking possession. The breach was not remedied for several years much less for three months in which it was to be remedied. Thus, High Court misadventured into holding the action of IDCO of resumption of land to be illegal. There was no equitable or legal consideration in favour of the respondent herein and a writ is not issued to perpetuate an illegality. Not only the conduct of Mesco was unfair, third party rights had also intervened. Lawful method had been exercised for resumption of land and cancellation of letter of handing over the possession.