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M/S Chokhani Business Ltd. v. State Of U.P. Thru' Secy. Industrial Devlp. & Ors. - WRIT - C No. 32242 of 2004 [2004] RD-AH 521 (12 August 2004)


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M/s. Chokhani Business Ltd. ------ Petitioner


State of U.P. & ors. ------ Respondents.


HON. Dr. B.S. Chauhan, J.

HON. D.P. Gupta, J.

(By Hon'ble Dr. B.S. Chauhan, J.)

This writ petition has been filed for quashing the orders dated 20.01.2004 (Annex. 9) and 3rd August, 2004 (Annex. 15), by which a sum of Rs. 4,50,66,636/- has been demanded being outstanding dues towards the petitioner and for non-payment of it, the allotment made in favour of the petitioner of Plot No. P-4, Sector 18, Noida, stood cancelled.

The facts and circumstances giving rise to this case are that vide letter dated 3rd June, 1989, petitioner was allotted Plot No. P-4, Sector 18, Noida for commercial purposes. Its possession was handed over to the petitioner on 19th August, 1989 and a lease deed in respect of the said plot was also executed on the same date. The building plan of the petitioner had been approved vide order dated 31.08.1989. Petitioner did not complete the constructions as per terms and conditions of the allotment. The Noida Authority issued a letter dated 1st June, 2001 to the petitioner to submit the completion certificate. In response to the same, the petitioner applied for extension of time of two years to complete the construction. There had been a demand from the Noida authority of certain penalty and lease rent etc. The correspondence remained going on between the parties for years together. Respondents had been requested to waive the penal rent and further to allow the petitioner to deposit the outstanding dues in easy instalments. A demand of Rs. 4,50,66,636/- was made as outstanding dues towards lease rent, interest/penal interest on the lease rent and the amount outstanding for non-completing the construction within stipulated period as per terms of agreement vide order dated 20.01.2004 (Annex. 9). As the said amount had not been paid, the allotment has been cancelled vide impugned order dated 03.08.2004 (Annex. 15). Hence this petition.

Shri Shashi Nandan, learned Senior Counsel assisted by Shri Vinai Saran, Advocate, appearing for the petitioner has submitted that the Noida Authority is also liable for its inaction for such a long period, suddenly it cannot be permitted to issue notice of demand to the petitioner arbitrarily; and secondly, the demand of lease rent and penal interest thereon is in contravention of the contract/lease deed. More so, the authority did not have a right to demand any penalty for not completing the construction within the stipulated period, hence the impugned orders are liable to be quashed.

Shri Anurag Khanna, learned counsel appearing for the Noida has submitted that as per the terms of the allotment letter/lease deed, the construction was to be completed within two-and-a-half years from the date of allotment, and further extension could be given by the Noida authority for a similar period on depositing an amount equivalent to 10 % of the premium of the said plot, or any other condition, which could have been considered to be fit by the Chief Executive officer, be imposed. The lease deed was executed on 19th August, 1989; building plan had been approved by Noida on 31st August 1989; and the construction ought to have been completed by 28th February, 1992. Petitioner did not complete the construction even after expiry of one decade thereof and it has approached this Court after 12 years of expiry of the period of completing the construction as per the terms of allotment; the petitioner cannot be permitted to take the benefit of its own mistake, shifting the blame upon the Authority for its non-action; and as the petitioner never applied for extension of time for construction, after expiry of two and -a-half years from the initial period as per the terms of agreement, the petition is liable to be dismissed.  

We have considered the rival submissions made by the learned counsel for the parties and perused the record.

It has been said from time and again by the Hon'ble Supreme Court that a party cannot be permitted to dispute the contractual obligations by invoking the extraordinary writ jurisdiction. In Bareilly Development Authority & anr. Vs. Ajay Pal Singh & ors., AIR 1989 SC 1076, a similar contention had been raised. The Apex Court considered a catena of judgments, particularly, M/s. Radha Krishna Agarwal & ors. Vs. State of Bihar & ors., AIR 1977 SC 1496; Premji Bhai Parmar & ors. Vs. Delhi Development Authority & ors., AIR 1080 SC 738; and the Divisional Forest Officer Vs. Bishwanath Tea Co. Ltd., AIR 1981 SC 1368, and arrived at the conclusion that where the contract entered into between the State and the persons agreed is non-statutory and purely contractual and the rights are governed only by the terms of the contract, writ petition under Article 226 of the Constitution of India is not maintainable. Similar view has been taken in State of Gujarat & ors. Vs. Meghji Pethraj Shah Charitable Trust & ors., (1994) 3 SCC 552; and Noida Enterpreneurs Association Vs. U.P. Financial Corporation & anr., 1994 Suppl. (2) SCC 108.

In Indore Development Authority Vs. Smt. Sadhana Agarwal & ors., (1995) 3 SCC 1, the Hon'ble Supreme Court affirmed and approved the view taken by the Apex Court in Bareilly Development Authority (supra), but it further observed that the High Court, while exercising its extraordinary jurisdiction under Article 226 of the Constitution, may satisfy itself on the materials on record that the State has not acted in an arbitrary or erratic manner. A similar view has been taken by the Supreme Court in Union of India  & ors. Vs. M/s. Graphic Industries Co. & ors., (1994) 5 SCC 398. In the said judgment, the Apex Court referred to its earlier judgments, particularly in Kumari Shriekha Vidyarthi & ors. Vs. State of U.P. & ors., AIR 1991 SC 537; Mahabir Auto Stores & ors. Vs. Indian Oil Corporation & ors., (1990) 3 SCC 752; and M/s. Dwarkadas Marfatia & Sons Vs. Board of Trustees of the Port of Bombay, (1989) 3 SCC 293, and observed that even in contractual matters, public authorities have to act fairly and if the State or its instrumentalities have failed to do so, then writ jurisdiction of the High Court under Article 226 of the Constitution can be resorted to because acting unfairly and arbitrarily amounts to flagrant violation of Article 14 of the Constitution.

In L.I.C. Of India & anr. Vs. Consumer, Education & Research Centre & ors., (1995) 5 SCC 482, the apex Court observed as under:-

"While exercising the power under Article 226, the Court would be circumspect to adjudicate the disputes arising out of the contract depending on the facts and circumstances in a given case... each case is to be examined on its own facts and circumstances to find out the nature of the activity or scope and nature of the controversy..... If a contract or a clause in a contract is found unreasonable or unfair or irrational, one must look to the relative bargaining power of the contracting parties."

In Har Shankar & ors. Vs. The Deputy Excise and Taxation Commissioner & ors, AIR 1975 SC 1121, the Apex Court has held as under:-

"The writ jurisdiction of the High Court under Article 226 of the Constitution is not intended to facilitate avoidance of obligations voluntarily incurred."

Similarly, in State of Orissa & ors Vs. Narain Prasad & ors., AIR 1997 SC 1493, the Apex court has observed as under:-

"A person who enters into certain contractual obligations with his eyes open and works the entire contract, cannot be allowed to turn round....and question the validity of these obligations or the validity of the Rules which constitute the terms of contract. The extraordinary jurisdiction of the High Court under Article 226, which is of a discretionary nature and is exercised only to advance the interest of justice, cannot certainly be emp0loyed in aid of such persons. Neither justice nor equity is in their favour."

Similarly, in Raunaq International Ltd. Vs. I.V.R. Construction Ltd. & ors., AIR 1999 SC 393, the Hon'ble Supreme Court has held that in absence of mala fides or extreme case of arbitrariness, it is not permissible for the Writ Court to have a judicial review of contract or to enforce the contractual obligations in exercise of its jurisdiction under Article 226 of the Constitution.

In Kerala State Electricity Board & anr. Vs. Kurien E. Kalathil & ors., (2000) 6 SCC 293; the Hon'ble Supreme Court, in a similar situation, observed as under:-

"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 observation of the High Court 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 obligation imposed by the contract on the contracting parties come within the purview of the Contract Act, that would not make the contact statutory. Clearly the High Court fell into an error in coming to the conclusion that the contract in question was statutory in nature.... The contract between the parties is in the rem of private law. It is not a statutory contract. The dispute 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. This is a matter for adjudication by a civil court or in arbitration if provided for in the contract."

On the contrary, in Union of India & anr. Vs. State of Haryana & anr. (2000) 10 SCC 482, the Hon'ble Supreme Court clarified that where a pure question of law is raised, the issue can be considered by the Writ Court also. In the said case, the question whether provisions of telephone connections and instrument amount to sale and even so why the Union of India not exempted from payment of sales tax under the respective statute, was involved. The Hon'ble Supreme Court held that instead of relegating the parties to the statutory appellate authority, the High Court ought to have dealt with the issue.

In Century Spinning & Manufacturing Co. Ltd. & anr Vs. The Ulhasnagar Municipal Council & anr. AIR 1971 SC 1021, the Apex Court held that public bodies are as much bound as private individuals to carry out representations of facts and promises made by them. "The obligation arising against an individual out of his representation amounts to a promise which may be enforced ex-contract by a person who acts upon the promise." The Court further observed that merely because a question of fact is raised, the High Court will not be justified in requiring the party to seek relief by the somewhat lengthy, dilatory and exceptional process by a civil suit against a public body. The questions of fact raised by the petitioner in this case are elementary."

In Life Insurance Corpn. Of India & ors. Vs. Smt. Asha Goel & anr., 2001 (2) SCC 160 while dealing with the similar issue the Hon'ble Apex Court held that High Court should not ordinarily entertain a writ petition for mere enforcement of a claim under a contract of insurance. The Court has to examine the facts and circumstances of the case, the nature of the dispute raised and the nature of the enquiry necessary to be made for determination of the questions involved. It is neither possible nor proper to enumerate exhaustively the circumstances in which such a claim can be enforced by filing a writ petition. The Court has to examine as to whether petition has been filed merely to enforce contractual rights or case involves important questions of law and constitutional issues.  

In Verigamto Naveen Vs. Govt. of A.P. & ors, (2001) 8 SCC 344, the Hon'ble Supreme Court held that a writ petition involving contractual matters can be entertained by the High Court where breach of contract involves breach of a statutory obligation and order complained of has been made in exercise of statutory power by a statutory authority. In such cases though the cause of action may arise out of a contract, but the dispute of this nature falls within ambit of public law, and therefore, writ may be entertained.

In State of Bihar & ors. Vs. Jain Plastic & Chemicals Ltd., (2002) 1 SCC 216 the Apex Court considering the same issue held that in case of a Government contract writ may not be a appropriate remedy. Where disputed questions or rival claims arising out of breach of contract are required to be investigated and determination, writ cannot be entertained.

In Style (Dress Land) Vs. Union Territory, Chandigarh & anr., (1999) 7 SCC 89, the Apex Court held that in case the procedure adopted by the authority is arbitrary or unreasonable, the case falls within the ambit of Article 14 of the Constitution and writ jurisdiction can be resorted to in such a matter.

Thus, there seems to be no law of universal application regarding the issue of maintainability of the writ petition in contractual matters, rather it would depend upon facts and circumstances of an individual case.

In National Highways Authority of India Vs. Ganga Enterprises & anr., (2003) 7 SCC 410, the Hon'ble Supreme Court cautioned the High Courts that while examining the contractual matters in a writ jurisdiction, the Court is duty bound first to examine the issue of maintainability for the reason that contractual matters cannot be entertained in a routine manner.

The allotment was made with a clear stipulation that construction would be completed within two and half years and in case, the construction could not be completed, further extension of two and-a-half years could be given on payment of an amount equivalent to 10 percent of the premium or imposing condition which may b e deemed fit by the competent authority. Petitioner did not complete the construction within the said period nor applied for extension of time. It is not only inaction on the part of the respondent-authorities but also on the part of the petitioner, for not seeking extension of further time after expiry of two and half years from the date of execution of the lease deed. The so-called administration wake up from the deep slumber only on 1st June, 2001 and issued a letter to the petitioner for submitting the completion certificate and then correspondence started and remained pending between the prties for about three years. There has been a demand of lease rent and interest and penal interest thereon which petitioner had been bargaining with the respondent-authorities and they had not been willing to waive and ultimately the demand notice impugned herein was sent in pursuance of which the petitioner did not deposit any amount, hence the allotment stood cancelled.

Whatever may be the merits of the case, admittedly, it is a case of culpable and total non-compliance of any term of the lease deed/letter of allotment on the part of the petitioner. Petitioner cannot be permitted to shift the blame of inaction on the part of the Noida authority, as no person can be permitted to take benefit of his own mistake. (Vide G.S. Lamba & ors. Vs. Union of India & ors., AIR 1985 SC 1019; Narender Chadha & ors. Vs Union of India & ors., AIR 1986 SC 638; Jose Vs. Alice & anr., (1996) 6 SCC 342; and T.Srinivasan Vs. Mrs. T. Varalakshmi, (1998) 3 SCC 112).

In the instant case, as both the parties have been at fault and never made any attempt to ensure compliance of the terms and conditions incorporated in the lease deed, the public interest does not require any interference in equity jurisdiction and it is desirable in such a case that the Court should keep its hands off where both the parties are found at fault as per the law laid down by  Hon'ble Apex court in Immani Appa Rao & ors. Vs. Gollapalli Ramalingamurthi & ors., AIR 1962 SC 370; and Major Chandra Bhan Singh Vs. Latafat Ullah Khan & ors., AIR 1978 SC 1814.

It is a unique case where neither of the parties considered itself to be bound by the terms and conditions of the contract and the same to have any sanctity at all, and proceeded in their own way. It is an example to show, with what responsibility the Development Authority, which now have become virtually a property dealer, behaved.

In view of the above, we are not inclined to exercise our discretionary jurisdiction. Petition is accordingly dismissed.




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