Pradeep Nandrajog, J.
1. Aggrieved by the order dated 18th May, 2001 disposing of is No. 3075/2000, plaintiff/appellant has filed the present appeal. By the impugned order appellant has been directed to pay license fee @ 21 % of its gross turnover.
2. In brief, facts relevant for the determination of the present appeal may be noted. The respondent/NDMC, being the owner of a parcel of land at Windsor Place, Janpath, invited offers from parties to have the land licensed to them on certain terms and conditions. The site was to be used for construction of a Five Star Hotel. Various offers were received. One of the offer received was from M/s Pure Drinks (New Delhi) Ltd. This was accepted by the respondent. The offer was that the licensee offered to pay a license fee of 23% of the gross turnover or Rs. 2.68 crores per annum, which ever was higher. This offer of 23% of the gross turnover was subsequently reduced to 21% of the gross turnover.
3. A license agreement dated 16.4.1981 was executed. Rights of the licensee M/s Pure Drinks New Delhi Ltd. were assigned/taken over by the appellant and on 14.7.1982 a license agreement was entered into.
4. As per the license deed dated 14.7.1982, the demised parcel of land measuring 4.29 acres was licensed to the appellant. The stipulated license fee was 21% of the gross turnover or 2.68 crores per annum, whichever was higher.
5. Due to certain reasons, the hotel building could not be completed within the time envisaged by the appellant. Appellant wrote letters to the respondent to re-consider the quantum of license fee (reduce the same) and reschedule the license fee which had become payable. Matter dragged on till 1990. The respondent issuing a letter dated 6.3.1990 to the appellant, calling upon the appellant to stop user of the plot of land and hand over vacant possession of the same to the respondent and further pay a sum of Rs. 13,11,24,758.89 on account of the arrears of license fee. There was also a threat of disconnection of the electric supply to the hotel constructed by the appellant. Two proceedings were initiated by the appellant. A Civil Writ Petition being CW No. 356/89 was filed challenging the threatened action of disconnection of electric supply. Petition under Section 20 of the Indian Arbitration Act, 1940 was also filed for appointment of an Arbitrator to decide the disputes, which according to the appellant arose in relation to the demand raised by the respondent. Since the respondent had initiated eviction proceedings under the Public Premises (eviction of unauthorised occupants) Act, 1971, the appellant sought interim protection to restrain the Estate Officer from proceeding further in the matter, stay was also sought against recovery of the arrears of license fee.
6. By order dated 16th October, 1990 the application for interim stay in the proceedings initiated under Section 20 of the Indian Arbitration Act, 1940 was decided and stay was declined. An appeal was preferred against the order dated 16.10.1990 declining the interim relief.
7. Parties arrived at some settlement outside the Court. What was agreed to, was reduced into writing and a supplementary agreement dated 11.03.1991 was executed.
8. Recitals of the said supplementary agreement dated 11.03.1991 traced out the background of the dispute between the parties which led to the execution of the supplementary agreement.
9. Since the supplementary agreement was re-scheduling the license fee, which had fallen in arrear, a chart was annexed thereto containing the details of the schedule of Installments. It worked out the arrears of license fee payable and granted time up to 2003 for payment of the same. The license fee computed for determination as being payable up to the date of agreement was taken at 2.68 crores per annum.
10. Preceeding and succeeding the date of supplementary agreement, various requests were made by the appellant to the respondent that license fee payable had rendered the hotel as an unviable unit. Certain grievances were raised that the NDMC was responsible for delay in sanction of the building plans and in the erection of the hotel. Appellant had been making requests that the license fee should be reduced. According to the appellant, in May, 1993 L&DO; appointed IFCI, as a consultant to go into the question regarding fairness of the license fee and its effect on the viability of the project. According to the appellant IFCI submitted its report on 4th July, 1994 to the effect that the license fee was extremely exorbitant and required reduction. The appellant contends that the issue was deliberated thereafter in meetings held on 6.3.1995 and 7.3.1995 to sort out the issue pertaining to the reduction in the license fee. According to the appellant, since its financial condition had improved, in modification of the term in the supplementary agreement dated 11.3.1991, to pay arrears @ Rs. 45 lacs per month, appellant acceded to the request of the respondent to accelerate the payment of arrears and started liquidating the same at the rate of Rs. 60 lacs per month, apart from paying the annual license fee with effect from the year 1991 at the rate of Rs. 2.68 crores p.a., which was the minimum assured sum. According to the appellant, it met the administrator of the respondent on 25.7.1997 who accepted and assured that the redetermination of the license fee would be done on the appellant enhancing the arrear payment to a sum of Rs. 1 crore per month. According to the appellant, it agreed to the same on the assurance that the matter pertaining to the reduction in license fee would be sorted out. With effect from September, 1997, appellant started making payment @ 1 crore per month towards liquidation of the arrears of license fee. The enhancement of the monthly Installment from 45 lacs to Rs. 60 lacs was reduced into writing by a further supplementary agreement dated 4.8.1995. The further enhancement of payment of arrears @ 1 crore per month were reduced into writing by a supplementary agreement dated 31st March, 1998.
11. We may note that the terms of the supplementary agreements dated 4.8.1995 & 31.3.1998 did not vary the terms of the supplementary agreement dated 11.3.1991, save and except record a change in the amount of monthly payment to be made towards liquidation of the arrears of the license fee.
12. On 31.12.1998 the respondent sought information from the appellant to appreciate the viability of the license fee, which according to the appellant was provided.
13. Thereafter the appellant requested the respondent to constitute a committee for re-determination of the license fee. As per the appellant, on 30th July, 1999 a meeting took place between the appellant and the respondent in which it was agreed that an independent committee would be appointed to determine the license fee and that the appellant would deposit a sum of Rs. 3 crores as license fee and continue to pay license fee @ 50 lacs per month till the date of appointment of the Committee. Appellant claims to have honoured its commitment as per the agreement arrived at on 30th July, 1999.
14. Grievance of the appellant is that without appointing a committee and without re-considering the matter pertaining to revision(lowering) in the license fee, respondent issued a notice dated 12th November, 1999 demanding license fee at a rate of 21% of the gross annual turnover, which according to the appellant stood waived. On 22nd November, 1999, the respondent is stated to have declined to constitute an independent committee to determine the fair license fee. Appellant was directed to deposit the payment of license fee as demanded. Alternatively, it was pleaded by appellant that if letter dated 12.11.1999 was the letter declining the request for redetermination of the license fee, in as much as, it affected a valuable civil right of the appellant, decision being without reasons was vocative of principles of natural justice.
15. Appellant filed a writ petition being CW No. 7163/99 in this Court. The said writ petition was held to be not maintainable by order dated 7th March, 2000 by A.K. Sikri, J. It was held that disputed questions of fact were involved and grant of relief was dependent on prior adjudication of facts which needed investigation, an exercise for which writ proceedings was not an appropriate remedy.
16. Thereafter, the present suit came to be filed by the appellant. Prayer was made for interim relief to suspend the demand towards license fee, which as noted above was declined. The respondent has denied the averments of the appellant
17. Submissions of Sh. Amarjeet Singh Chandhiok, Senior Advocate on behalf of the appellant, in brief, may be noted as under:-
1) Relying upon the pleadings made in suit plaint and the letters exchanged between the parties and meeting held culminating in supplementary agreement dated 11.3.1991 it was argued that as reflected in Clause-7 of the agreement there was an express promise held out by the respondent to the appellant to re-consider the license fee payable to it and till this was not done, the demand raised by the respondent prima facie, could not be enforced.
2) That it was evident from the supplementary agreement dated 11.3.1991, as evidenced by the chart annexed therewith containing the schedule of payment of the arrears of license fee, that an agreement was arrived at, that pending re-determination of the license fee, appellant would pay license fee at the minimum rate of Rs. 2.68 crores p.a. It was contended that in the year 1991, balance-sheets of the appellant for the year 1989 & 1990, taken on the basis of gross turnover showed license fee payable was more than 2.68 crores p.a. In drawing the schedule for future payment for liquidation of the arrears of license fee, by taking the same @ 2.68 crores p.a. it was evident that the respondent had given a go by to the concept of maximum license fee.
3) That after 1991, till the period of dispute, appellant liquidated current license fee @ 2.68 crores p.a. And not as per the gross turn over. According to the learned senior counsel this was yet another indication of the fact that the respondent had agreed to charge license fee at the minimum rate of 2.68 crores p.a. till it was re-determined.
To support these three contentions following judgments were relied upn at :- : [1950]1SCR30 . Based on the aforesaid judgments it was contended that extrinsic evidence is admissible to determine the effect of an instrument. The surrounding circumstances attending the execution of the document have to be considered and that acts done by a party under a written document constitute evidence as to what was the intention of the parties.
4) That even otherwise, the respondent being a public authority was enjoined to act fairly, justly and reasonably with the appellant. Elaborating on this argument, it was contended that not only was there a contractual element (crystallized in submission 1, 2 & 3 noted above) but there was also a public duty element involved, in that, the respondent was estopped from retracting from the assurance held out to the appellant that it was re-consider the issue of license fee. The facts giving rise to the plea of promissory estopple being the various letters written by the respondent calling upon the appellant to furnish information to enable it to arrive at a just and fair conclusion on the license fee payable, reports sought from IFCI and given by the IFCI as also the deliberation in the various meetings where the respondent agreed to appoint a committee to re-examine this issue. Further evidence of this, according to the learned senior counsel was found in the files of the respondent whether nothings existed that the matter had to be re-examined. It was argued that the notes contained admissions that the license fee at 21% of the gross annual turnover was exorbitant. This argument was further extended to include within it, the legitimate expectations, which the appellant was entitled to; that the matter would be fairly and reasonably re-considered. The terminal end of this submission was that the respondent was bound to reconsider the matter fairly and reasonably as a public body and was to give a reasoned decision.
Decisions relied upon were : [1976]102ITR281(SC) for the proposition that the respondent was obliged to give a reasoned decision. for the proposition that representations had to be conside : [1979]118ITR326(SC) red and that the appellant had a legitimate expectation that before action would be taken; the representation would be considered that the respondent was obliged to place all material before the court; it could not be a judge of its own obligations and that the respondent could not act arbitrarily. In respect of the plea of estopple judgments relied were : [1979]118ITR326(SC) . Based on judgment it was contented that the respondent was bound by its nothings and decisions taken on the file and the assurance held out in the meetings that it would reconsider the lowering of the license fee.
5) That decision taken in earlier proceeding under Section 20 of the Arbitration Act, 1940 could not operate as rest judicata because (i) it was a decision on an interim application, and (ii) by the supplementary agreement dated 11.3.1991 all disputes pending on said date came to be settled and issue had to be decided on basis of supplementary agreement and events subsequent thereto.
6) That in any case, the demand raised could not be enforced because it was based on an alleged gross turnover claimed by the respondent. Contention was that as per original license deed, appellant was to pay license fee at 21% of the gross turnover as 'certified by the statutory auditor' of the appellant.
7) That at this stage of the matter the issue had to be looked at from the point of view of Order 39 i.e. whether the appellant had a prima facie case, whether balance of convenience was in favor of the appellant or the respondent and whether the appellant would suffer irreparable loss and injury in case interim relief as prayed for was declined.
18. These were, in substance the pleas raised by the appellant. Incidental pleas pertaining to issues of rest judicata, relevance of surrounding circumstances, effect of pleas not taken by the respondent in the written statement but which were sought to be urged during arguments before the learned Single Judge and arguments pertaining to construction of deeds and agreements were also advanced.
19. The response of the respondent to the aforesaid submissions were as under:-
1) That issue was to be resolved on an interpretation of the supplementary agreement dated 11.3.191 and no more. If an agreement was reduced into writing and its terms were clear, parole evidence was inadmissible, was the short submission of Sh.Valmiki Mehta, Senior Counsel for the respondent. He contended that the document dated 11.3.1991 merely gave a concession for liquidation of the license fee which had fallen in arrear and no more. It was elaborated that such an important issue of material change in the amount of the license fee could not have been left by the authors of the document to be determined by looking to collateral circumstances. As regards the submission that the schedule annexed with the agreement quantified the license fee, which had fallen in arrears, at the minimum rate of 2.68 crores p.a. It was contended that the position was explained in reply to para 15 of the suit plaint, where it was stated that the appellant had filed the audit reports which contained the balance-sheets for the period 1988-89 to 1990-91, only on 11.1.1992. Thus, the determination of the arrears of license fee was at the minimum rate of Rs. 2.68 crores p.a. No waiver in respect of the quantum of license fee payable per annum could thus be inferred was the submission made. It was further elaborated that there were numerous letters written after 11.1.1992, when the annual audit reports were received for the years 1989-90 to 1990-91, asking for liquidation of the license fee with effect from said period calculated at 21% of the gross annual turnover. Letters were written for the subsequent years as well that the re-scheduling of the arrears of license fee was not to be construed as waiving the liability of the appellant to pay license fee @ 2.68 crores p.a. or 21% of the gross annual turn over, whichever is higher.
2) Relations between the parties were governed by contract and the principles of reasoned decision, legitimate expectations, promissory estopple fairness and reasonableness in action etc. flowing from the concept of judicial review over administrative action, were inapplicable to a case of a contract and it hardly matters whether the respondent was a State or a public authority. Respondent could not rely on the internal nothings and recommendations made by officers of the respondent as they were never communicated to the appellant. The respondent had rejected the request for reduction in license fee and was not obliged to give any reasons for the same.
3) That appellant had no prima facie case. Being a money claim, there was no question of irreparable injury being caused if injunction was refused. Respondent being a public authority was to provide civic amenities and needed funds, hence balance of convenience was in favor of respondent.
20. Since we are concerned with an order refusing to grant interim injunction as prayed for and issues have to be thrashed out between the parties on merits, we would be over stepping our jurisdiction if we analyze the letters on which the parties are relying, the internal notes of NDMC etc. as if they constitute primary evidence from which we would be entitled to draw inferences of facts and law. This would be in the domain of the trial judge once evidence is concluded. We do not propose to deal with the large number of authorities relied upon by counsel for the appellant nor on the judgments relied upon by the respondent save and except what would be required in the bare minimum to decided the present appeal.
21. Needless to say that issues pertaining to interim injunction, pending determination of the main decision in the suit are governed by the three well known principle: (i) prima facie case, (ii) balance of convenience and (iii) irreparable loss and injury. (two other principles namely he who seeks equity must come with clean hands and he who seeks equity must approach the court at the earliest are not attracted in the facts of the present case).
22. In the facts of the present case as noted above and in light of the rival contentions, extracted in brief above, is the decision of the learned Single Judge correct that the appellant has filed to establish a prima facie case? For if there is no prima facie case in favor of the appellant, the issues of balance of convenience and irreparable loss and injury need not to be further considered.
23. Dispute between the parties relates to the supplementary agreement dated 11.3.1991 and events thereafter, and hence litigation prior thereto any orders passed therein are of no consequence. They have only a historical value.
24. As noted, from the submission of Sh. Amarjeet Singh Chandiok, learned Senior Counsel for the appellant, the basis of a prima facie case are two folds :-
(a) An express waiver of not charging the license fee @ 21% p.a. of the annual gross turnover as contained in the supplementary agreement dated 11.3.1991, and promises held out from time to time that payment of license fee would be redetermined. (1st three submissions of learned counsel)
(b) the duty of the respondent to act fairly and reasonably, which was not honoured.( 4th submission of learned counsel)
25. It was contended that the documents filed showed the existence of a bona-fide dispute in respect of the above, issue had been framed pertaining to the effect of the documents and hence a prima facie case existed.
26. Turning to the submissions, which are within the realm of a contract, in our opinion, the appellant would succeed in establishing a prima facie case, only if, from the agreement dated 11.3.1991, it can be inferred that the respondent had waived the term of the earlier agreement to charge license fee @ 21% of the gross annual turnover pending re-determination of what should be the quantum of license fee payable.
27. A contract is a result of two parties being ad idem. Once there is a common meeting point of the minds and this is reflected in a written docment, the written document becomes the primary source of the intention of the parties and where the language of a document is clear and admits of no doubt, no surrounding circumstances or parole evidence is required to be looked into. Where the document is doubtful or capable of more than one meaning, surrounding circumstances; conduct of the parties before and after the execution of the document, any other document exchanged between the parties pertaining to the subject matter to which the document relates can be looked into, to interpret the document.
28. A contract being the result of a consensus ad-idem, can be varied only by a consensus ad-idem and not by the unilateral act of a party. Where variation is effected to an earlier agreement by a subsequent agreement, it becomes important to ascertain what part of the prior contract is being varied.
29. Two issues were confronting the parties when the agreement dated 11.3.1991 was executed. The first was the manner in which the arrears of license fee had to be liquidated and the second was the variations in the original license deed pertaining to the percentage of the annual gross turnover to be paid as license fee which is noted above was stipulated at 21%.
30. The recitals to the agreement dated 11.3.1991 indicate the circumstances which led to the execution of the agreement and the operative clauses contained the agreement. Relevant recitals and operative clauses read as under:-
'WHEREAS the licensee are in use and occupation of a plot of and measuring 4.29 acres at Windsor Place, New Delhi, owned by the LICENSOR and licensed for construction of a 5-Star Hotel, on which the Licensor has constructed a 5-Star Hotel.
AND WHEREAS the request of the licensee for grant of moratorium in the payment of license fee due in the year 1987 was also acceded to, in order to facilitate the construction and completion of the hotel expeditiously. The accumulated license fee for the period of moratorium were payable in 30 half yearly Installments. The first Installment of the deferred payments Along with annual license fee falling due in the year 1988 was payable by the 28th September, 1988. Save as provided above, no interest will be charged from the licensees on the deferred payments if paid punctually in the aforesaid manner, failing which interest will be charged at 15% p.a. for the entire period till such time the accounts are finally squared up.
31. Further, if the interest/additional interest is charged by the Government of India from the LICENSOR on the deferred payments towards the cost of land, the same shall also be charged from the licensees. The licensee will be liable to pay the same as and when and in the manner claimed by the Government of India from the LICENSOR. However, in case the Government of India do not charge any interest/or additional interest on the Installments towards the cost of land, the same shall not also be charged from the licensee.
AND WHEREAS THE license, M/s International Hotels Ltd., New Delhi, vide their letter dated 5.11.1990 have approached the LICENSOR-NDMC for an out-of-court settlement and also for grant of Installments in the payment of license fee, dues on account of defer payments payable up to 27.9.1990 and interest accrued thereupon up to 31.3.1991, as well as to liquidate the current demand.
AND WHEREAS the LICENSOR after considering the above request of the licensee has agreed to grant Installments for the payments for the payment on account of license, deferred payments and interest.'
32. Witnesses as follows:-
'1) That the payment of advance annual license fee fallen due on 28.9.1989 Along with 4 Installments or deferred payments of moratorium together with the interest at 15% p.a. due thereupon (minus the payment of Rs. 50 lacs made to the LICENSOR on 19.4.89) shall be paid by the licensee in 180 equal monthly Installments commencing from 1.4.1991.
2) That the advance annual license fee fallen due on 28.9.1990 Along with 5th Installments of deferred payments of the moratorium amount and the 6th Installment failing due on 28.3.1991 Along with interest at 15% p.a. Will be paid in the 12 equal monthly Installments commencing from 28.9.1990. Thereafter the advance annual license fee falling due on 28.9.1991, 28.9.1992, 28.9.1993 and 28.9.1994 will also be paid in the similar manner along with due Installments of deferred payments of the moratorium period.
3) That the licensee will also pay an amount of Rs. 2,03,64,300/- being the accumulated arrears of interest up to 31.3.1991 due on the license fee and deferred payment (licensee fee due on 28.9.1988, 28.9.1989 and 4 Installments of the deferred payment of moratorium amount fallen due up to 28.3.1990). This amount will be paid by the licensees in a manner so as to square up within a maximum period not exceeding 180 months w.e.f. 1st April, 1991.
4) That the licensee has already paid a lump sum Rs. 1 crore on 29.1.1991 and a sum of Rs. 54,26,348/- on 10.2.1991 and has a sum of Rs. 53,78,298/- on 10th March, 1991 Along with the execution of this SUPPLEMENTARY AGREEMENT. Thereafter the licensee will pay a minimum amount of Rs. 45 lacs every month latest by 10th of each English calendar month. This amount will be paid by the licensee in a manner so as to square up this within a maximum period not exceeding 180 months w.e.f. 1st April, 1991.
It is also been agreed by the licensee that in the event of the monthly Installment as indicated in Clause-1, 2 & 3 of this Supplement agreement coming down to Rs. 44 lacs or below, a minimum of Rs. 25,000/- will be adjusted towards arrears of interest as indicated in Clause 3 and balance of difference towards discharge of the liability as indicated above in Clause-1 of this Agreement.
It has also been agreed that in the event of the monthly Installment coming down to Rs. 38 lacs or below, the entire balance out of 45 lacs will be adjusted against the arrears of interest as mentioned in Clause No. 3 of this Agreement.
It has further been agreed by the licensee that in the event of the monthly Installment further coming down to Rs. 40 lacs or below, a minimum of Rs. 50,000/- will be adjusted towards arrears of interest as mentioned in Clause No. 3 and balance towards discharge of the liability of the principal amount, as indicated in Clause-1 of this Agreement.
5) That the LICENSOR has agreed to revoke the cancellation of license on payment of Rs. 11,000/- as damages only against cheque No. 240331 dated 9.3.1991.
6) That it has also been agreed to between the LICENSOR and the licensee that this facility of paying the advance annual license fee, as envisaged in license agreement dated 14.7.1982 Along with two Installments as deferred payments of moratorium every year in 12 monthly Installments Along with interest at 15% p.a. basis will be valid only up to the period 27.9.1994 and position will be reviewed by the LICENSOR thereafter.
7) That the licensee has agreed to withdraw all claims and/or counter-claims pending in any Court, Judicial and/or quasi-judicial authority against the LICENSOR. The LICENSOR has also agreed to withdraw its claim preferred before the Estate Officer in respect of which schedule of payment has been mutually agreed to between the LICENSOR and the licensees and further incorporated in this SUPPLEMENT TO PREVIOUS AGREEMENTS. The licensee will be at liberty to make any representation in respect of the license fee which will be examined by the LICENSOR on merits as and when it is so preferred.
8) That the licensee will strictly adhere to the above schedule of payment in monthly Installments as contained in this Supplement to Agreement. Non-payment of any Installment as per terms & conditions of this Agreement will constitute breach of the terms and conditions of original license deed dated 14.7.1982 and the present Supplement to Agreement. It is further made clear that in case of default of any monthly Installment, the licensor will also claim further interest at the rate of 21% p.a. (as against 15% stipulated in license agreement dated 14.7.1982) Along with the arrears and interest already agreed to in this Agreement and the entire amount will be claimed in lumpsum.'
33. The recitals bring out the fact that it is only the re-scheduling of the arrears of license fee which was in the contemplation of the parties as also what interest should be paid for default. The terms of the agreement as extracted by us also show that the schedule for payment of the license fee which had fallen in arrears was being agreed too. We find force in the submissions made by learned senior counsel for the respondent that such an important issue of variations in the license fee could not have been left to be gathered from surrounding circumstances, and if there was any modification of the original contract on this account, the document would have made express provision thereof.
34. We may dilate upon the submission made by Sh. Amarjeet Singh Chandiok, Senior Advocate appearing on behalf of the appellant that Clause-7 of the supplementary agreement dated 11.3.1991 clearly stipulates that the appellant would be at liberty to make representation in respect of the license fee, and if so preferred would be examined by the respondent on merits. He, thus, argued that the documents itself expressly deals with this issue.
35. What would be the effect of Clause-7 of the agreement dated 11.3.1991, read by itself and in conjunction with the payment schedule annexed with the agreement?
36. We have noted above, the stand of the respondent that when the agreement was entered into, the audit reports were not given to the respondent and it was thus not in the knowledge of what was the gross annual turnover of the appellant and when documents i.e. the annual audit reports came into its possession in the year 1992 it immediately wrote that the license fee be paid at the agreed percentage of 21%. We may also note that in Clause-7 of the agreement dated 11.3.1991 there is no reference to reduction of the percentage of the annual gross turnover to be paid as license fee. What is recorded is that the respondent would consider on merits, request if any made by the appellant pertaining to the issue of license fee. At best it would be an agreement to consider a request as and when made and not an agreement to vary the terms of a written document. Thus, as we read Clause-7 of the agreement, it prima facie, supports the stand of the respondent and not the appellant. Further, if it was the intention of the parties that pending redetermination of the license fee operation of the clause in the original agreement was to remain suspended, nothing prevented the parties to so record. The omission to so record is prima facie indicative of the fact that clause in the license deed dated 14.7.1982 was not to be treated as suspended.
37. We may note in this context the observations made as far back as 1865 by Cockborn C.J. In Churchward v. Queen (1865) 1 QBD 173. The learned Chief Justice said:-
'Where a contract is silent, the court or jury who are called upon to imply an obligation on the other side which does not appear in the terms of the contract, must take great care that they do not make the contract speak where it was intentionally silent; and, above all, that they do not make it speak entirely contrary to what, as may be gathered from the whole terms and tenor of the contract, was the intention of the parties. This I take to be a sound and safe rule of construction with regard to implied convenants and agreements which are not expressed in the contract.'
38. Judgments relied upon by the appellant pertaining to construction of the supplementary agreement (noted by us in the preceeding paras) are not applicable on the facts of the present case.
39. We now deal with issues pertaining to legitimate expectations, promissory estopple and reasoned decision raised by the appellant in support of the contention that when approached from said facets, it had a prima facie case.
40. Article 14 of the Constitution of India protects individual against arbitrary State action. It mandates that the State shall not deny to any person the equality before the law or the equal protection of law. The article establishes equality of legal status for all and insulates an individual from discrimination. Any administrative and executive action of the State which is arbitrary, unguided, actuated by malice or based on irrelevant criteria has been treated as subjecting individual to a discriminatory treatment and thus vocative of Article 14. Over the years, most of the principles of judicial review as expanded by the Courts in England and America have, with suitable modification been brought within the extending horizon of judicial review over State action in this country. A corresponding horizon as to which authorities would constitute a State has taken place. The distinction between judicial, quasi-judicial, administrative or executive State action has been obliterated.
41. In the field of contract as well, there has been an extension of law on this subject. Since a State enters into a contract in exercise of its executive power, it has been held that State action in matters pertaining to contract cannot be taken out from the purview of judicial review. However, this evolution of law has to be understood and applied with a rule of caution.
42. Business requires total freedom to decide and take action in the best interest of business. Profit, is the aim of every business and, thereforee, when a State conducts business it must have all the freedom to do so. If shackled by the strict principles of judicial control over administrative action, it may become impossible for a State to conduct business, as business needs to be conducted.
43. We may ignore the judgments dealing with the limitations on the power of the State at the time of entering into contract, for they would constitute a different category of cases. Disputes involving breach of alleged obligations by the State or its agent can be classified into three groups:-
(i) Where grievance relates to alleged breach of promise on part of the State where claimant has acted to his prejudice on basis of assurance or promise on the part of the State, but the agreement is short of a contract within the meaning of Article 299 of the Constitution;
(ii) Where the State after entering into a contract, acts in exercise of statutory power and the claimant alleges a breach on the part of the State; and
(iii)Where the rights are purely contractual and claimant alleges breach by the State of a term of the contract.
44. The present case before us has to be placed in the third category. Questions of pure alleged breaches of contract are raised.
45. Undoubtedly, a body like the respondent while exercising its powers or discretion is subject to the Constitutional limitations. The rule inhibiting arbitrary action will apply to the respondent in its dealing with the public. This rule flows directly from the doctrine of equality embodied in Article 14. As noted in : (1979)IILLJ217SC Ramana Dayaram Sethi v. IAAI the principles of reasonableness and rationality and non-arbitrariness as projected under Article 14 of the Constitution of India characterise every State action whether it be under authority of law or in exercise of execution power without making of law.
46. Has this principle been extended to State action under a contract pure and simple?
47. The decision of the Supreme Court : [1989]2SCR751 Dwarka Das Marfatia & Sons v. Board of Trustees of the Port of Bombay be noted. Action of the Board of Trustees Bombay Port pertaining to eviction of a tenant from its property came up for consideration. The argument of the appellant was that the action of the respondent in terminating its tenancy had a public law character attached to it and was, thereforee, subject to judicial review. It was asserted that every action of the respondent which was a State within Article 12 of the Constitution, whether it be in the field of contract, or any other field was subject to Article 14 of the Constitution (refer para 10). It was noted (refer para 11) that the eviction of the appellant was only in pursuance of a policy of the Port Trust. Relying upon the judgment in International Airport Authority case (supra) it was held that 'Government policy would be invalid as lacking in public interest, unreasonable or contrary to the protest standards', if it violates the mandate of Article 14 pertaining to arbitrariness and unreasonableness and any action taken pursuant thereto would be invalid.
48. Thus, it is to be noted that what was considered was a policy decision, which was applied thereafter to a contract and not a decision arising out of the contract.
49. Judgment of the Supreme Court reported as : [1990]1SCR818 (Mahavir Auto v. Indian Oil Corporation & ors) may be noted. Issue related to a post contract dispute (as was the situation in Dwarka Dass Marfatia's case). The following observations of the Supreme Court are relevant:-
'16) Mr. Salve submitted that in private law field there was no scope for applying the doctrine of arbitrariness or mala fides. The validity of the action of the parties have to be tested, it was urged on behalf of the respondent on the basis of ' right' and not ' power'. A plea of arbitrariness/mala fides as being so gross cannot shift a matter falling in private law field to public law field. According to Mr. Salve to permit the same would result in anomalous situation that whenever State is involved it would always be public law field, this would mean all redress against the State would fall in the Writ Jurisdiction and not in suits before Civil Courts.
'17) We are of the opinion that in all such cases whether public law or private law rights are involved, depends upon the facts and circumstances of the case. The dichotomy between rights and remedies cannot be obliterated by any straight jacket formula. It has to be examined in each particular case. Mr. Salve sought to urge that there are certain cases under Article 14 of the arbitrary exercise of a 'right' arising either under a contract or under a Statute. We are of the opinion that that should depend upon the factual matrix.
'18) Having considered the facts and circumstances of the case and the nature of the contentions and the dealings between the parties and in view of the present state of law, we are of the opinion that decision of the State/public authority under Article 298 of the Constitution, is an administrative decision and can be impeached on the ground that the decision is arbitrary or vocative of Article 14 of the Constitution of India on any of the grounds available in public law field.'
50. On facts, it was noted that the Ministry of Energy, Department of Petrolium had issued certain guidelines/directions, based on which Indian Oil Corporation had taken an administrative decision to discontinue business, inter alias with the appellant. Since, action was based pursuant to an administrative decision, it was held that principles of judicial review were attracted.
51. We may also note the observations of the Supreme Court in para 20 of the judgment as under:-
'20) Having regard to the nature of the transaction, we are of the opinion that it would be appropriate to state that in cases where the instrumentality of the state enters the contractual field, it should be governed by the incidence of the contract.'
52. Certain observations of the Supreme Court in Srilekha vidyarthi Vs . State of UP : AIR1991SC537 , in our opinion are relevant and need to be noted. Case related to the termination of the appointment of District Government Advocates, which was in the nature of a contractual appointment terminable at will on either side; not being appointment to a post under the Government. Pursuant to a policy decision taken by the State of Uttar Pradesh, circular was issued, pursuant thereto the services of the existing Government Counsel were dispensed with. Direct writ petition under Article 32 of the Constitution of India was filed as also the appeals arising out of judgment of the Allahabad High court dismissing the writ petition were heard together and decided. For the purposes of the present case, what is relevant to note is the question framed by the Hon'ble Supreme Court for being answered. In para 4 as under :-
'Broadly, two questions arise for decision by us in this bunch of matters. These are: Is the impugned circular amenable to judicial review?; and if so, is it liable to be quashed as vocative of Article 14 of the Constitution of India, being arbitrary?
Answering the question it was observed :- ' It can no longer be doubted at this point of time that Article 14 of the Constitution of India applies also to matters of governmental policy and if the policy or any action of the Government, even in contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional.(See Ramana Dayaram Shetty vs . The International Airport Authority of India : (1979)IILLJ217SC and Kasturi Lal Lakshmi Reddy Vs . State of Jammu and Kashmir : [1980]3SCR1338 . In Col. A.S. Sangwan Vs . Union of India, : AIR1981SC1545 , while the discretion to change the policy in exercise of the executive power, when not trammelled by the statute or rule, was held to be wide, it was emphasised as imperative and implicit in Article 14 of the Constitution that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touch-stone, irrespective of the field of activity of the State, has long been settled. Later decisions of this Court have reinforced the foundation of this tenet and it would be sufficient to refer only to two recent decisions of this Court for this purpose.'
53. As in the earlier judgments, it was also the decision which was found to be vocative of Article 14 and the action taken pursuant thereto in relation to contractual matters was struck down.
54. In : [1989]1SCR743 Bareilly Development Authority Vs Ajay Pal Singh it was held that after entering into the field of contracts, the 'relations are no longer governed by the constitutional provisions but by the legally valid contract which determines the rights and obligations of the parties inter se. In this sphere, they can only claim rights conferred upon them by contract.'
55. In : AIR2001SC3609 Verigamto Naveen v. Government of A.P. & ors, on a brief resume of its earlier judgments given on the issue where disputes arose purely in the contractual field, the Supreme Court referred to its decision in Mahabir Auto Store, Srilekha Vidyarthi, Dwarka Dass Marfatia (referred above) and a few other decisions. It was held :-
' Where the breach of contract involves breach of statutory obligation when the order complained of was made in exercise of statutory power by a statutory authority, though cause of action arises out of or pertains to contract, brings within the sphere of public law because the power exercised is apart from contract. The freedom of the Government to enter into business with anybody it likes is subject to the condition of reasonableness and fair play as well as public interest. After entering into a contract, in cancelling the contract which is subject to terms of the statutory provisions, as in the present case, it cannot be said that the matters falls purely in a contractual field.'
56. The aforesaid decisions of the Supreme Court when analysed, clearly brings out the distinction that where action is taken pure and simple under a contract, the principles of justness, fairness, arbitrariness, reasonableness etc. flowing out of Article 14 of the Constitution of India cannot be attracted. Where, however, the foundation of the action lies in an administrative or an executive policy decision taken and then applied to the contract, the merits of the administrative or executive decision taken are subject to judicial review. In each of the cases, aforesaid, before the Supreme Court it was noted that either the police decision taken suffers from the vice of arbitrariness or the administrative decision taken was found to be so suffering. In each and every decision the Supreme Court was at pains to clarify that their observations would not apply purely to a field of contract pure and simple.
57. The decision of the Supreme Court : [1994]2SCR67 Assistant Excise Commissioner v. Issac Peter & ors is another decision to which we may refer to. All the aspects of arbitrariness, reasonableness, promissory estopple, estopple by conduct and legitimate expectation in the field of contract, where Government was a party were considered. Earlier decisions referred by us above (except the decision in : AIR2001SC3609 ) were considered. We may extract the relevant observations:-
'24) Learned counsel for the respondents sought to invoke the rule of promissory estoppel and estoppel by conduct. The attempt is a weak one for the said rules cannot be invoked to alter or amend specific terms of contract nor can they avail against statutory provisions. Here, all the terms and conditions of contract, being contained in the statutory rules, prevail.
25) Learned counsel for the respondents also sought to rely upon the rule of legitimate expectation which the licensees entertained in view of the practice during previous years. Firstly, the rule cannot be invoked to modify or vary the express terms of contract, more so when they are statutory in nature. No decision has been brought to our notice supporting the said proposition. ................
26) Learned counsel for respondents then submitted that doctrine of fairness and reasonableness must be read into contracts to which State is a party. It is submitted that the State cannot act unreasonably or unfairly even while acting under a contract involving State power. Now, let us see, what is the purpose for which this argument is addressed and what is the implication?....................... Doctrine of fairness or they duty to act fairly and reasonably is a doctrine developed in the administrative law field to ensure the rule of law and to prevent failure of justice where the action is administrative in nature. Just as principles of natural justice ensure fair decision where the function is quasi-judicial, the doctrine of fairness is evolved to ensure fair action where the function is administrative. But it can certainly not be invoked to amend, alter or vary the express terms of the contract between the parties...............We are, thereforee, of the opinion that in case of contracts freely entered into with the State, like the present ones, there is no room for invoking the doctrine of fairness and reasonableness against one party to the contract (State), for the purpose of altering or adding to the terms and conditions of the contract, merely because it happens to be the State. In such cases, the mutual rights and liabilities of the parties are governed by the terms of the contract (which may be statutory in some cases) and the laws relating to contracts. It must be remembered that these contracts are entered into pursuant to public auction, floating of tenders or by negotiation. There is no compulsion on anyone to enter into these contracts. It is voluntary on both sides. There can be no question of the State power being involved in such contracts. It bears repetition to say that the State does not guarantee profit to the licenses in such contract. There is no warranty against incurring losses. It is a business for the licensees. Whether they make profit or incur loss is no concern of the State. In law, it is entitled to its money under the contract. It is not as if the licensees are going to pay more to the State in case they make substantial profits. We reiterate that what we have said hereinabove is in the context of contracts entered into between the State and its citizens pursuant to public auction, floating of tenders or by negotiation. It is not necessary to say more than this for the purpose of these cases.'
58. In view of the aforesaid authoritative pronouncements of the Supreme Court, we regret we cannot agree with the submissions made on behalf of the appellant.
59. We may now deal with the argument that the decision of the respondent not to decrees the license fee ought to have been a reasoned decision. Judgments relied upon by appellant pertain to quasi-judicial or administrative decisions. Since these decisions are amenable to writ jurisdiction, the party affect must know the reasons for only then it can challenge the decision meaningfully. Contractual decisions need not contain reasons. Even in decision given in Mahavir Auto (Supra) the Supreme Court held that reasons need not be given for decision (Refer para 20 and 21). In view of the law extracted above we need not consider the various authorities relied upon by the appellant on this issue as they all relate to the branch of administrative law and are relatable to judicial control over executive or administrative actions.
60. Before concluding on this issue, we may observe that the license in the present case is a contract pure and simple between the parties. The appellant has voluntarily accepted the contract. The appellant has exploited to its advantage the benefit under the contract. It is not open to the appellant to resile from the terms of the license on the ground that the upper limit of license fee is an onerous condition. The appellant cannot contend that other parties have been given sites on better terms. The appellant took the land under license by excluding other competitors. Appellant cannot avoid the license, or any term thereof, on ground of inconvenience of terms or harshness of terms. The Appellant took calculated risk. May be, it was not wise in offering the bid. Surely, those in management of the appellant are experienced businessmen. Profit and loss is an incidence of a business. In every business there is an element of risk. Many unexpected development occur. They are all routine business hazzards.
61. Do we bring the curtains down? Not as yet. One last submission: Clause 3 of the license deed dated 14.7.1982 requires payment of license fee at Rs. 2.68 crores per annum or 21% of the gross turnover as certified by the statutory auditors of the appellant, which ever is higher and thereforee the respondent cannot demand license fee beyond what is certified by the statutory auditors and to this extent the demand has to be stayed was the argument of the appellant. This agreement, however, overlooks clause 8 of the license deed. Same reads as under:-
' The Licensor shall have at all times discretion to inspect the books of accounts and other relevant records of the licensees in respect of the sasid hotel with a view to satisfying itself that the total amount of the gross turnover as certified by the statutory auditors of the licensees represents a true and honest computation of the business actually handled by the licensees in relation to the said hotel. The Licensor shall for this purpose, have inspection done at its cost either by a person or persons in the employment of the Licensor or by such other persons or agents as the Licensor may nominate for the purpose. The Licensor shall, however, give to the licensees, a prior written notice for a period not less than fourteen (14) days before the date of commencement of such inspection.'
62. Thus the certificate of the statutory auditor is not final. Same is subject to the satisfaction of the respondent. The learned Single Judge has dealt with this issue and has returned the finding as under:-
' Though it is mentioned in the agreement that it is gross turnover of the hotel as certified by the certified auditors of the hotel on which the license fee is payable by the plaintiffs, however, prima facie, in my view, plaintiffs may not be entitled to all the appropriations mentioned by the auditors in their certificates. Prima facie, it appears to the Court that only that income which is compulsorily payable by the plaintiffs in terms of an agreement which it might have arrived at with the third party or statutory liability necessarily payable may only have be deducted for the purpose of arriving at the gross turnover of the hotel. The franchisee fee payable is 3% by the N.D.M.C. To the franchisee and it is only the 97% of the receipts which are received by the hotel. Prima facie, this 3% may have to be deducted from the room tariff. Luxury tax on behalf of the Government is also received by the hotel at the time of providing its services to the guests and since this tax does not come in the hands of the hotel, this may also have to be deducted from the gross turnover of the hotel. The other amount which may have to be deducted from out of the gross turnover of the hotel as shown in the balance sheets is the credit card commission as the amount which is received by the hotel on payments received through credit cards is net of commission charged by the credit card companies. Other component which may have to be deducted from the gross turnover is the interest income on the deposits with banks. The only other receipt to which the plaintiffs may be entitled to deduction is the telephone receipts. The plaintiffs may be said to be acting as agents for the Mahanagar Telephone Nigam Limited while the telecommunication services are provided to the guests. The payment, thereforee, which is actually made to the Mahanagar Telephone Nigam Limited may have to be deducted from out of the gross amount which is received by the plaintiff for providing telecommunication services so that the balance amount received by the hotel is taken as its income. Besides these deductions which, prima facie, may be permissible from the gross turn over of the hotel, in my view, the plaintiffs are not entitled to any other deduction from out of the gross turnover of the hotel. The cost of food and beverages is a part of running of the hotel and cannot, in my opinion, be deducted from out of the gross turnover of the hotel. If this is deducted from the gross turnover, what will be arrived at is the gross income and not the gross turnover. At this stage of deciding this application the Court is not deciding finally as to what would be the gross turnover of the hotel on which it is liable to pay the license fee and it is only a prima facie view of the Court that the aforesaid outgoings may have to be deducted from the gross turnover as reflected in the balance sheets.'
63. We agree. No further dilation is required on this issue.
64. Having failed to find any prima facie case in favor of the appellant we need not go into the issues of irreparable loss and injury, except to record that being a money claim, prima facie justified as per the license deed, no injury would be caused if the appellant pays. It can be restituted. On balance of convenience, respondent being a statutory body engaged in providing civic amenities in N.D.M.C. area needs the funds to meet its budgetary obligations in each financial year and hence balance of convenience lies in its favor.
65. We find no infirmity in the impugned order. The appeal stands dismissed. There shall be no order as to costs.
66. The final mantra: Nothing observed by us shall be taken as a final expression on the issues involved in the suit and the learned Single Judge shall decide the suit on merits based on evidence uninfluenced by our observations.