Case: Sri Ram Builders Vs. State Of M.P.

4. In 1979, Respondent No.2 / Madhya Pradesh Road Transport Corporation (hereinafter referred to asproposed to construct a bus stand at Vijay Nagar, Indore. To this end, an Agreement for Lease dated 2nd November, 1981 was entered into between the Transport Corporation and Respondent No.5/ Indore Development Authority (hereinafter referred to asby which the land belonging to IDA, admeasuring 10 acres situated at Vijay Nagar, Indore (hereinafter referred to as) was agreed to be allotted to the Transport Corporation, initially, for 30 years. In pursuance of the Lease Agreement, possession of the proposed site was handed over to the MPRTC.5. The Council of Ministers, State of Madhya Pradesh, vide order dated 8th November, 2001, authorised the Transport Corporation to construct a commercial complex on the land owned by it or allotted to it on lease, under a Build, Own-Operate and TransferScheme through open tenders. The revenue generated from the said project(s) was to be used to discharge the liability of the MPRTC. On 13th April, 2003, a notice inviting bids for selection of a developer under the BOT Scheme was issued and published in the leading newspapers. In response to this notice, a total number of ten applications were received; and out of those ten applications, five were found to have satisfied the eligibility criteria. Appellant was placed at Sr. No.1 in the list of the candidates satisfying the eligibility criteria. Thereafter, a Special Committee was constituted for the scrutiny of tenders received for construction of the bus stand/commercial premises under the B.O.T. Scheme. On 3rd July, 2003, the Special Committee recommended that since the premium amount offered by the bidders was less, further negotiations be held with all the qualified bidders. Accordingly, the Special Committee held negotiations with the qualified bidders on 7th July, 2003, wherein thebid for the B.O.T. Scheme was found to be the highest.6. MPRTC, after scrutiny of the financial bid and the proposal submitted by the Appellant for B.O.T. scheme, approved its bid vide Acceptance Letter dated 3rd October, 2003. In the Acceptance Letter, the Appellant was directed to deposit 25 per cent amount of the total premium amount of Rupees One Crore Sixteen Lac Thirty Seven Thousand Seven Hundred and Fifty (Rs.1,16,37,750/-) within 15 days of the issuance of the Acceptance Letter. Accordingly, Appellant deposited the first installment of Rs.1,16,37,750/-. The appellant also have to pay a further sum of Rs.7,33,320/- demanded by MPRTC as consultancy fees.7. In pursuance of the Acceptance Letter, an Agreement dated 4th February, 2004 was entered into between the Appellant and the MPRTC. This agreement inter alia provided that the tender document with scope of work general conditions, special conditions, general specifications, list of brands and offer price bid shall form part of the agreement.8. The MPRTC issued a work order dated 16th March, 2004 to the Appellant for demolishing the existing structure on the land; to be replaced by the commercial complex. On 11th May, 2004, the State Government issued a notification, in exercise of powers under Sections 35(2) and 35(3) of the Madhya Pradesh Nagar Tatha Gram Nivesh Adhiniyam, 1973 (hereinafter referred to asby which out of 10 acres of land at Vijay Nagar which had been earmarked for the bus stand (proposed site), 3.59 acres of land was permitted to be used for commercial purposes.9. On 14th May, 2004, the Appellant requested the MPRTC to hand over the possession of the proposed site, so that the structure existing thereon could be demolished and new bus stand-cum-commercial complex could be constructed, in accordance with the terms and conditions of the tender/agreement.10. On 27TH May, 2004, a lease deed was executed in favour of MPRTC by the IDA upon payment of Rs. 24,27,052/- by the Appellant. This payment was made by the Appellant in order to let the Transport Corporation pay its arrears to IDA. Subsequently on 24th June, 2004, IDA gave a No Objection Certificateto the MPRTC for the proposed BOT project. Also, the Deputy Director, Town and Country Planning granted approval to the MPRTC for the construction of the Bus Stand and Commercial Complex.11. On 28th June, 2004, Writ Petition No. 801 of 2004 came to be filed by one Suresh Seth, before the Indore Bench of the High Court of Madhya Pradesh, assailing the Notification dated 11th May, 2004. By this notification, as observed earlier, reservation of land use of 3.59 acres was changed by the State Government. The High Court, vide order dated 9th September, 2004, sought reports from the State Government as well as the MPRTC and IDA. In their respective reports, the State Government, MPRTC and IDA stated that the said BOT project was in public interest and justified the Notification dated 11th May, 2004.12. Meanwhile on 6th January, 2005, the Joint Director, Town and Country Planning sanctioned the detailed site plan of proposed BOT project. The Appellant also applied the Municipal Corporation, Indore for sanction of the building plan, but the same was not granted on the ground that Writ Petition No. 801 of 2004 was pending before the High Court.13. On 23rd February, 2005, IDA issued a certificate indicating therein that in respect of the proposed B.O.T. Project, premium as well as 15lease rent had already been deposited. On the basis of the above, the IDA indicated that there shall be no objection, if land in question is mortgaged with any bank, financial institution or the Government.14. In the meanwhile, there was a move by the State Government for closure of the MPRTC. In this context, the Government of India granted no objection to the State Government on 23rd March, 2005, subject to the condition that the State Government shall ensure and be fully responsible for ensuring compliance of any existing/future order(s) passed by various Courts, including Tribunals, in any/all matters relating to MPRTC.15. The Appellant filed Writ Petition No. 636 of 2005 in the High Court seeking a direction to the MPRTC to immediately hand over possession of the land in question to the Appellant and grant permission to demolish the existing structure. On 5th August, 2005, the Writ Petition No. 636 of 2005 was disposed of by the High Court with the followingt petitioner shall deposit the entire balance amount within a period of one month alongwith interest @ 18% per annum, w.e.f. July 2004 when the 2nd installment became dueii. Upon depositing entire amount the respondent shall handover the vacant possession to the petitioner, within two weeks, with a permission, to demolish the structure as per the agreement. Respondent shall also pursue the matter with the Municipal Corporation to handover all part of the premises, which is in their occupation.iii. Respondent shall deposit the map for sanction before the competent authorities immediately, if not submitted, so far. In case the map has already been submitted the respondent shall give the authority to the petitioner, to pursue the matter before the competent authorities for obtaining the permission and shall extend all the assistance for the purpose of obtaining permission. iv. After taking possession, the petitioner shall construct and hand over the construction property to the respondent as per terms of the tender notice/agreement.v. The competent authorities shall consider the application of the respondent for permission and shall grant the permission in accordance withAppellant deposited Rs.2,95,03,752/- towards premium and a further sum of Rs.27,53,536/- towards interest to the MPRTC, in terms of the aforesaid order. Thereafter, again, the Appellant requested the Respondents herein to hand over the possession of the proposed site to the appellant. A Notice was issued by the appellant to the MPRTC dated 12th September, 2005, requesting to hand over possession of the land, in terms of the directions of the High Court dated 5th August, 2005.16. At that stage, the Principal Secretary, Transport Department/Respondent No. 2 herein, recorded a note dated 15th September, 2005, questioning the justification for constructing bus stand and observed that the construction was not in public interest particularly when a decision had been taken by the State Government to wind up the MPRTC. Soon thereafter, the MPRTC filed Special Leave Petition No. 20038 of 2005 before this Court challenging the order dated 5th August, 2005 passed by the High Court. This SLP was dismissed by this Court vide order dated 7th October, 2005.17. Possession of the proposed site still not having been delivered, the Appellant filed Contempt Petition No. 466 of 2005 (renumbered as Contempt Petition No. 469 of 2008) before the High Court of Madhya Pradesh. In this Contempt Petition, the Appellant moved an application for injunction on 11th November, 2005 (I.A. No. 1060 of 2005) restraining the MPRTC from handing over the possession of the proposed site to the State Government for establishing the Regional Transport Office. The High Court on 14th November, 2005, directed MPRTC to maintain status quo and not to handover the possession of the proposed site or to create any 3rd party interest. In spite of the aforesaid order, the possession of the proposed site was handed over by the MPRTC to the Transport Department on 16th November, 2005, for opening the R.T.O. A test centre for driving licences has been established on the land meant for the commercial complex.18. In the meantime, State of Madhya Pradesh moved an application, MCC No. 1072 of 2005, before the High Court, seeking recall of the order dated 5th August, 2005 passed in Writ Petition No. 636 of 2005. The MPRTC also filed MCC No. 5 of 2006, seeking identical relief, i.e. recall of order dated 5th August, 2005. It was claimed that a decision had been taken by the M.P. State Government to wind up MPRTC. On 23rd March, 2005, MPRTC had been issued a notice of demand for recovery of Rs.2387/- crores as Tax dues. The property earmarked for the commercial complex, was one of the properties seized by the State Authorities on 19th July, 2005. Since the possession was already taken by the State, no direction for delivery of possession to the Appellant could have been issued on 5th August, 2005. These facts could not be placed before the High Court, as the State was not impleaded as a party in Writ Petition No. 636 of 2005.19. Thereafter, Appellant moved I.A. No. 7064 of 2006 in the Contempt Petition before the High Court to implead the Transport Department - Respondent No. 2 herein, as a respondent in the Contempt Petition. This I.A. was allowed by the High Court by order dated 6th October, 2006. During the course of hearing of this Contempt Petition, Appellant moved another I.A. No. 6906 of 2007, seeking a direction to the respondents to place on record theOn what date and which inward number the order of the government directing the RTO, Indore to attach the MPSRTC Property at Indore was received by RTO, Indore pursuant to which the so called attachment dated 9.7.2005 was made.1(b) On what date, by which letter number and under what dispatch number the fact of attachment and acquisition of property/land was sent by RTO, Indore to the State Government (Original Letters, original dispatch register). And on what date, by which the inward number this information wasto the Appellant, the respondents could not furnish the said information to the Court, despite having sought a number of opportunities in that regard.20. Meanwhile on 2nd November, 2007, the IDA cancelled the lease of the MPRTC for violation of the lease terms by running the RTO. Cancellation of the lease was challenged by the MPRTC through Writ Petition No. 6770 of 2007 in the High Court of Madhya Pradesh. On 11th December, 2007, the High Court without issuing notice to the Appellant, who was impleaded as Respondent No.3, disposed of the Writ Petition with the followingOn 17th November, 2008, the Central Government, Department of Transport & Highways informed the State Government of Madhya Pradesh that the request for permission for closure of MPRTC under the provisions of the Road Transport Corporation Act, for which earlier no-objection had been given, was being declined keeping in view the decision of Ministry of Labour & Employment, and that it would now have to continue its current operations.22. The Appellant submitted representation dated 20th February, 2009, wherein attention of the Chief Secretary was drawn to the pendency of the review petitions filed by the State of Madhya Pradesh and the MPRTC; and the Contempt Petition filed by the Appellant and the order passed therein, whereby status quo was ordered to be maintained.23. In spite of the aforesaid representation, Respondent No. 1 held the meeting on 4th March, 2009 as directed by the High Court, wherein it was inter alia decided asOrder dated 02.11.2007 and notice dated 30.06.07 for cancellation of lease of the land in question of the Transport Corporation by the I.D.A. be cancelled.II. R.T.O. be ordered for releasing the land by the Transport Department for attachment.III. The M.P. Road Transport Corporation shall hand over land in question to I.D.A.IV. The amount which has been received by the Transport Corporation from Sh. Ram Builders shall be returned along with interest to Sh. Ram Builder.V. Decision with respect to further use and management of the land shall be taken by I.D.A.Aggrieved by Clause (III), (IV) and (V) of the aforesaid decision, Appellant preferred Writ Petition No. 2937 of 2009 before the High Court of Madhya Pradesh. It was inter alia contended that the directions in aforesaid clauses were in violation of order dated 5th August, 2005 of the High Court and in violation of the principles of natural justice.25. The High Court disposed of the Writ Petition on 27th September, 2012 with the followingThe order dated 5.8.2005 passed in Writ Petition No. 636/2005 directing the corporation to deliver possession of site to the petitioner cannot be implemented after the lease deed was cancelled by the IDA. It is this cancellation which became the subject matter of writ petition No.6770/2007 and the writ petition was decided vide order dated 11.12.2007 by another Single Judge Bench directing the Chief Secretary for resolving the dispute. As already mentioned above, the petitioner did not challenge the order dated 11.12.2007 and submitted a detailed representation dated 20.02.2009 to the Chief Secretary. The impugned decision taken by the Chief Secretary is in pursuance of the directions given by the High Court in Writ petition No. 6770/2007 in which the petitioner was also a party. There is, thus, no violation of the principles of natural justice. The decision reached by the Chief Secretary directs that the entire amount paid by the petitioner be returned to it with interest. The decision does not fix the rate of interest but we feel that 9% will be the proper interest having regard to all the circumstances. In view of the direction to return the amount with interest, as decided by us, there would be apparently no loss to the petitioner. The respondents are directed to return the amount with interest within four months from today. If the petitioner still feels that there has been a breach of contract, it can pursue the remedy of specific performance or damages before a competent civil court. We, therefore, decline to interfere with the decision of the Chief Secretary except fixing the rate of interest, as indicated above.In view of the aforesaid directions, the High Court also disposed of the Contempt Petition No. 469 of 2008, Review Application Nos. MCC No. 99 of 2009 and MCC No. 893 of 2008 without any further directions.

Court's reasoning:
. On first blush, the submission made by Mr. Nariman seems to be very attractive, but factually it has to be noticed that much more water has flown under the bridge since the passing of the order dated 5th August, 2005. Subsequently, the lease to MPRTC was cancelled on 2nd November, 2007 by the IDA. The appellant did not challenge the order dated 2nd November, 2007 passed by the IDA. The aforesaid order was challenged by MPRTC in Writ Petition No.6770 of 2007. On 11th December, 2007, the High Court without issuing notice to the appellant, who was impleaded as respondent No.3, disposed of the writ petition. The High Court noticed that two instrumentalities of the State have chosen to bring their disputes in open court. In such circumstances, the High Court was of the opinion that the entire dispute ought to be decided by the Chief Secretary of the State of Madhya Pradesh by holding meetings between the Principal Secretary of the Transport Department, Principal Secretaries of Housing and Environment Department and the Managing Director of the MPRTC. The appellant accepted the aforesaid order passed by the High Court and submitted a detailed representation before the Chief Secretary on 20th February, 2009. The Chief Secretary in the meeting held on 4th March, 2009 took a comprehensive decision on all the issues involved in writ petition with regard to the cancellation of the lease deed in favour of MPRTC by IDA. The Chief Secretary revoked the order dated 2nd November, 2007 and notice dated 30th June, 2007 cancelling the lease of land in question granted to the MPRTC by IDA. RTO was directed to release the leased land from attachment. It is noteworthy that the appellant has not chosen to challenge the aforesaid two directions. However, as noticed earlier, the appellant challenged the directions issued in Clauses III, IV and V in Writ Petition No.2937 of 2009 in the High Court of Madhya Pradesh. It was, inter alia, contended that the directions in the aforesaid clauses were in violation of the order dated 5th August, 2005. It is noteworthy that even in this writ petition, challenging the direction Nos. III, IV and V issued by the Chief Secretary, the appellant had not challenged the competence of the Chief Secretary to decide the issues. The appellant cannot now be permitted to state that the aforesaid directions are without jurisdiction. Under the orders of the Chief Secretary dated 4th March, 2009, the possession of the land has already been delivered to IDA. Therefore, it would not be possible at this stage to direct that the mandamus granted on 4th August, 2005 in Writ Petition No.636 of 2005 shall be enforced.51. In the ultimate analysis, the whole controversy boils down to a breach of contract by MPRTC entered into with the appellant. The scope of judicial review is very limited in contractual matters even where one of the contracting parties is the State or an instrumentality of the State. The parameters within which power of judicial review can be exercised, has been authoritatively laid down by this Court in a number of cases.In our opinion, the case put forward by the appellant would not be covered by the aforesaid ratio of law laid down by this Court. The High Court, in our opinion, has rightly observed that the appellant can seek the appropriate relief by way of a civil suit. The High Court in exercise of its jurisdiction under Article 226 of the Constitution of India would not normally grant the relief of specific performance of a contract. This view is supported by Ramchandra Murarilal Bhattad vs. State of Maharashtra. [(2007) 2 SCC 588] This Court relying upon the earlier decision in Noble Resources Limited vs. State of Orissa [(2006) 10 SCC 236] held as…this Court would not enforce specific performance of contract where damages would be adequate remedy. It was also held that conduct of the parties would also play an important role.51. The expansive role of courts in exercising its power of judicial review is not in dispute. But as indicated hereinbefore, each case must be decided on its own facts.At no stage, the appellant had any privity of contract with IDA. MPRTC entered into a BOT contract with the appellant contrary to the terms and conditions of the lease which provided specifically that the land shall be used for constructing a bus stand–cum commercial complex. MPRTC had no legal right to create any further right in favour of the appellant with regard to the receiving of the premium on the constructed units sold to third party(ies). Even otherwise, the appellant seems to be flogging a dead horse. Admittedly, the possession of the proposed site was delivered to MPRTC on 22nd January, 1982. The maximum lease period was for 30 years. By efflux of time the aforesaid lease period expired on 21st January, 2012. We do not accept the submission of Mr. Nariman that as the entire rent had been paid, MPRTC would be entitled to automatic renewal of the lease for 90 years. The renewal clause in the lease subsequently provides that the renewal shall be with the consent of IDA. This consent by the IDA is not a mere formality. We are, therefore, not inclined to accept the submission of Mr. Nariman that the term of the lease has to be understood to have commenced from 26.05.2004.54. This apart, there is much substance in the submission of Mr. Cama that no application has been filed even for this formal renewal by MPRTC. In any event, MPRTC would not be in a position to continue with the lease as it is heavily indebted presently, to the tune of Rs. 3500 crores. The property of the corporation has been attached by the various creditors. Even the proposed site where the bus stand – cum – commercial complex was to be constructed is under attachment. The claim made by the appellant is in the nature of damages for breach of contract and/or the relief of specific performance of contract. So far as the breach of contract is concerned, the appellant will have no cause of action against IDA as there is no privity of contract between the parties. So far as the specific performance is concerned, it appears that the entire purpose of the contract has been frustrated by subsequent events.55. We are also not much impressed by the submission of Mr. Nariman that the doctrine of frustration cannot be applied here since it is aIn the case of Boothalinga Agencies (supra), this Court upon comparing and contrasting the English Law and the statement of Indian Law contained in Section 56 of the Indian Contract Act summed up the legal position with regard to frustration of contract as follows:-doctrine of frustration of contract is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of Section 56 of the Indian Contract Act. It should be noticed that Section 56 lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties.In English law therefore the question of frustration of contract has been treated by courts as a question of construction depending upon the true intention of the parties. In contrast, the statutory provisions contained in Section 56 of the Indian Contract Act lay down a positive rule of law and English authorities cannot therefore be of direct assistance, though they have persuasive value in showing how English courts have approached and decided cases under similarfail to see how the aforesaid observations are of any relevance in the facts and circumstances of this case.56. We are also unable to accept the submission of Mr. Nariman that the Doctrine of Frustration would not apply in the facts of this case as it is a self induced frustration. The aforesaid expression seems to have been borrowed from certain observations made by the Judicial Committee in the case of Maritime National Fish, Limited vs. Ocean Trawlers, Limited [(1935) A.C. 524]. The facts of that case, as narrated in Boothalinga Agencies (supra), would indicate that in that case, the respondents chartered to the appellants a steam trawler fitted with an otter trawl. Both the parties knew at the time of the contract that it was illegal to use an otter trawl without a licence from the Canadian government. Some months later the appellants applied for licences for five trawlers which they were operating, including thetrawler. They were informed that only three licences would be granted, and were requested to state for which of the three trawlers they would like to have the licences. They named three trawlers other than thetrawler, and then claimed that they would not be bound by the trawler of the respondent as it was frustrated. It was held by the Judicial Committee that the failure of the contract was the result of theown election, and, therefore, no frustration of the contract.57. This Court distinguished the aforesaid judgment and observed asthink the principle of this case applies to the Indian law and the provisions of Section 56 of the Indian Contract Act cannot apply to a case of. In other words, thedoctrine of frustration of contract cannot apply where the event which is alleged to have frustrated the contract arises from the act or election of a. In our opinion, these observations are of no assistance to the appellant as in this case, the lease has come to an end by efflux of time. This apart, MPRTC is heavily indebted and had sought permission of the State and the Union of India to wind up. Furthermore, there was also a breach of the terms and conditions of the lease on the basis of which it has been terminated in accordance with law.59. In any event, these are issues which would involve adjudication of disputed questions of fact which can only be suitably adjudicated in the civil suit as directed by the High Court in the impugned judgment. The appellant shall be at liberty to seek its remedies against MPRTC for breach of contract. Our conclusion that the High Court was right in rejecting the contentions of the Appellant herein is also supported by the law laid in Rajasthan Housing Board vs. G.S. Investments (supra) which was relied upon by Mr. Cama. We may notice here the followingCourt should exercise its discretionary power under Article 226 of the Constitution with great care and caution and should exercise it only in furtherance of public interest. The Court should always keep the larger public interest in mind in order to decide whether it should interfere with the decision of the authority.Also, we are not much impressed by the submission of Mr. Nariman that the order passed by the High Court on 11th December, 2007 has been challenged by the companion SLP (C) No 36887 of 2012. The aforesaid SLP has been filed merely to get over the earlier lapse of not challenging the order of the High Court at the appropriate time. Having submitted to the jurisdiction of the Chief Secretary, it would not be open to the appellant to challenge the order dated 11th December, 2007.