ORDER
A.K. SIKRI, J.
1. Petitioner No.1. a Public Limited Company, is the owner of a 5-star Hotel called Hotel Le Meridien. This Hotel is constructed at 8, Windsor place. New Delhi, after taking the land from Respondent N.D.M.C. on license basis for which license Agreement dated 16.4.1981 was executed. Whereby plot of land measuring 4.5 Acres (Approx.) was licensed to M/s. Pure Drinks New Delhi Limited. This agreement was substituted with another license Agreement dated 14.7.1982 between N.D.M.C. and M/s. C.J. International Hotels Limited hereinafter referred to as petitioner.
Notwithstanding the lapse of almost 18/19 years. Since the aforesaid agreement which, inter alia. Incorporated the clauses relating to license Fee payable by the petitioner to N.D.M.C., a dispute in respect of the said license Fee still persists and has become subject matter of long drawn controversy between the parties. This is, in fact, second round of litigation, the first dispute having started with the filing of suit in the year 1989.
2. To appreciate the rival contentions and the circumstances which led to filling of present writ petition by the petitioners, it would be appropriate to state the factual matrix woven round the controversy. However, this factual matrix is confined to relevant facts narrated hereinafter omitting unnecessary details. I may state at this stage itself that a strong objection is raised to the maintainability of the writ petition and arguments were addressed by both the parties, at length, on this issue and keeping in mind this aspect which is to be decided, relevant facts from this angle only are stated.
3. Hotel Le Meridien has been constructed by the petitioner on a plot of land measuring 4.29 acres at Windsor Place, New Delhi. This plot of land was allotted to NDMC by the central Government for construction of a five star hotel accommodation for Asian Games to be held in 1982 and the land was allotted at the rate of Rs.2,400 per sq.yd. for FAR (floor Area Ratio) 150. It was clearly stipulated that NDMC would not sub lease the land in favor of any other party and it could, however, make such arrangement for constructing and running the hotel as would not involve sub-leasing the plot. NDMC invited offers from parties for the purpose. In response to an advertisement out in by NDMC seventeen parties gave their offers. As a result of general discussion, only fourteen parties furnished their offers and the offer of Pure Drinks (New Delhi) Ltd. being the highest was accepted. It was for a land area of 4.5 acres and Pure Drinks had offered to pay at the rate of 2.68 crores per annum or 23% of the gross turnover of the hotel business which was higher. Since the land which was handed over was actually measuring 4.29 acres the percentage of gross turnover was reduced to 21% while the minimum guaranteed license fee of 2.68 crores annually remaining the same. Negotiations for construction of this five star hotel, thus first took place between NDMC and Pure Drinks. The first document on record is letter dt. 9.3.1981 of Pure Drinks to NDMC. In this letter a reference has been made to an earlier letter dt. 12.2.1981 of Pure Drinks to NDMC and to personnel discussions held when Pure Drinks gave a revised offer as under:-
'offer:
Fixed rental of Rs.2.68 crores p.a. or 23% of the gross turnover, whichever is higher for use of land and building etc.'
The offer of the Pure Drinks having been accepted a license agreement dt. 16.4.1981 was executed between NDMC and Pure Drinks. The license was in respect of the plot of land for construction of five star hotel building vesting in NDMC. The possession of the plot was given in bits from 15.6.1981 to 23.9.1981. license fee was payable in advance for each year commencing from 28.9.1981, license fee commencing only when entire possession of the plot had been given to the petitioner and that was on 28.9.1981. By a supplementary agreement dated 13.1.1982 Pure Drinks was allowed to float a Public Limited Company. This is how M/s. C.J. International Hotels Ltd. the petitioner herein was born. The petitioner is for all intent and purposes successor of Pure Drinks and a fresh license agreement dt. 14.7.1982 was executed between NDMC and the petitioner and the recital therein mentioned that a sum of Rs.2.68 crores had been paid being advance license fee for the first year commencing from the date of handing over possession of the plot in question. Under the license agreement the petitioner was to construct and commission a five star hotel building by 31.12.1984. Further, in the license agreement, the petitioner was granted moratorium from making payment of license fee falling due in 1982 and 1983 and these payments were agreed to be made in ten half yearly installments payable with the license fee falling due in the years 1984 onwards. Then under clause 10 of the license agreement, the petitioner sought permission of NDMC by its letter dated 19.7.1982 for raising loan on creating security to obtain funds from financial institutions. Before the start of Asian Games, the petitioner was able to complete construction of 100 rooms and temporary occupancy certification was granted by NDMC by letter dated 29.10.82. By letter dt. 23.3.1983 the petitioner asked for extension for completion of hotel building for a further period of six months ending on 30.6.1985. Under the agreement it was to complete the construction by 31.12.1984. The reasons given were that plot was handed over piecemeal and there was delay in sanctioning the building plans. It was also stated that clearance from Urban Arts Commission/DDA for building plans also took considerable time. On these accounts six months extension was requested. By letter dt. 29.3.1984 the petitioner requested for grant of moratorium in the payment falling due in 1984. It was stated that this was 'in order to facilitate the construction expeditiously' and further stated that accumulated license fee for the period of moratorium would be payable in 15 half yearly installments. Same reasons were given for grant of moratorium i.e. handing over of the plot in piecemeal and also of an area of 4.29 acres instead of 4.5 acres and delay in sanctioning the building plans. It was also stated that NDMC took considerable time in Granting sanction for securing loan from the financial institutions for construction of the hotel building. It appears by letter dt. 30.4.1984 NDMC demanded interest on account of delayed remittances of advance license fee. The petitioner by letter dated 28.5.1984 contested this claim and stated that the claim for interest on account of delayed payments was much less than the loss suffered by the petitioner for which the petitioner stated it would be submitting a separate claim against NDMC. It, thereforee, requested that the matter be settled amicably and the interest claimed be waived off. The petitioner estimated that its project cost has gone up at least by 221.20 lakhs on account of delays caused by NDMC. A statement showing the increase in project cost/financial losses caused by NDMC was attached by the petitioner with this letter. Then by letter dated 23.8.1984 the petitioner sought extension of time for completion of the hotel up to 31.12.85, moratorium in payment of license fee falling due in 1985 and payment of accumulated license fee for the period of moratorium 1982, 1983,1984 and 1985 to be paid in twenty half yearly installments. NDMC replied by its letter dt. 22.10.84. It granted permission for completion of the building up to 31.12.1985. Moratorium of payment was also granted and it was stated that no interest would be charged from the petitioner on the referred payments if paid punctually failing which interest would be charged at 15% per annum for the entire period till such time the accounts were finally squared up. The demand of the petitioner as contained in its letter dt. 28.5.1984 was rejected. At the same time, NDMC demanded payment of Rs.37,29,331.89 which demand had been made earlier and comprised of the following items: 1. Intt. on delayed payment of advance license fee for the 1st year at the rate of 15% p.a. 33,80,032.272. Intt. on delayed payment of depreciated value of the bungalows which existed on the hotel site. 41,572.623. Shifting of electric cables from the hotel site. 1,61,870.004. Shifting of filtered waterlines and connections of Sewer lines etc. 1,45,857.00Total Rs. 37,29,331.89
The petitioner by its letter dt. 9.11.1984 sought waiver of interest and referred to its earlier claim of Rs. 21.21 lakhs on account of delays caused by NDMC. By letter dt. 9.12.1985 the petitioner asked for further extension for completion of the project by six months up to 30.6.1986. Yet again by letter dt. 16.8.86 the petitioner further asked for extension for completion of the building. By letter dt. 26.12.86 NDMC granted extension to complete and commission the hotel up to 30.9.1987. On the request of the petitioner it also granted moratorium in payment of license fee up to 30.11.1987 and arrears of accumulated license fee being payable in twelve half yearly installments, first installment falling due on 10.12.1987. Interest was also to be charged on aforesaid on delayed payments. The petitioner was told that the first installment of deferred payment and current license fee for the period from 28.9.1987 to 27.9.1988 would be payable by 10.12.1987.
4. Petitioners replied and alleged that due to delay in granting permission to raise loan, delay in granting occupation certificate on trivial grounds refusal of NDMC to grant provisional occupancy certificate for 110 rooms after it had granted a partial occupancy certificate at the time of November, 1982 Asiad and delay in granting full load of electrical power for the hotel project. On all these accounts the petitioner stated that the project which was conceived to cost Rs. 44.86 crores, in fact cost Rs. 98.16 crores. It claimed to have sustained loss not only by the way of increase of cost but also by way of loss of revenue from 1.4.1985 to 31.6.1987 totaling Rs. 78,074 crores for which claim was laid and NDMC asked to compensate. This letter of the petitioner, as would be seen above was written on the eye when advance license fee falling due in 1988 (28.9.1988 to 27.9.1989) fell due. Before this letter could reach NDMC, NDMC wrote a letter dt. 23.9.89 to the petitioner stating that an amount of Rs. 16,08,00,000/- apart from interest had become due on account of arrears of license fee for the period from 28.9.1982 to 27.8.1988 and further that the minimum guaranteed amount of Rs. 2.68 crores towards advance license fee for the year 1988 commencing from 28.9.1988 had become due. It was also pointed out that the first installment of Rs. 53,60,000/- of the accumulated arrears for the period of moratorium was also payable along with the annual license fee falling due on 28.9.1988. Besides this. NDMC also claimed the aforesaid amount of Rs. 37,29,33.89. It also called upon the petitioner to make the payment of the license fee falling due on 28.9.1988, the first installment of the accumulated arrears of license fee for the period of moratorium and the amount of Rs. 37,29,331,89 totaling Rs. 3,58,89,331.89. The petitioner acknowledged this letter of NDMC by its letter dt. 3.10.1988. it said that the amounts of Rs. 1,61,870/- and Rs. 1,45,857/- out of the amount of Rs. 37,29,331.89 had already been paid. NDMC by its letter dt.6.1.1989 rejected the claim of the petitioner in its letters dated 28.9.1988 and 3.10.1988. By letter dt. 7.2.1989 NDMC rejected the request of the petitioner for revaluation of the license fee contained in its letter dt. 17.1.1989. By letter dt. 10.5.1989 NDMC acknowledged the receipt of payment of Rs. 50 lakhs from the petitioner and said that after adjusting this amount, an amount of Rs. 3,62,49,331.89 was still due and payable by the petitioner. By this time a further installment of Rs. 53,60.000/- had become due being the second half yearly installment of the license fee of the period of moratorium. Petitioner was told that the amount of interest due from it would be intimated to it in due course. The amount of Rs. 50 lacs, the petitioner had sent by its letter dt. 12.4.89. By letter dt. 7.12.89 NDMC again called upon the petitioner to make payment of arrears of license fee which by this time had totaled up to Rs. 6,84,09,331.89. Petitioner was called upon to show cause as to why allotment/licence of the hotel site to question might not be withdrawn/cancelled on account of non-payment of license fee besides disconnection of electric supply and taking action under sec. 57 of the P.P. Act. By this time advance license fee falling due on 28.9.1988 and the third installment of the moratorium period had become due. Ultimately by letter dated 6.3.1990. NDMC after detailing the facts called upon he petitioner to stop the use of plot of land with the structure constructed thereon for any purpose whatsoever forthwith and to hand over the vacant possession of the same to the NDMC and further to pay the amount of Rs. 13,11,24,758.89 on account of arrears of license fee and other charges as detailed in the letter.
5. On receiving the aforesaid notice, the petitioner invoked Arbitration Clause and referred the dispute to arbitration by Lt. Governor, Delhi Petitioner also filed writ petition being CWP No. 356/89 in this court challenging Show Cause Notice dated 7.12.89 of NDMC whereby disconnection of electric supply was threatened. Petitioner also filed Suit No. 1193 of 1990 under section 20 of the Indian Arbitration Act, 1940 for appointment of Arbitrator. In the said suit he also filed I.A. No. 2957 of 1990 under clause (b) of section 41 read with II schedule of the Arbitration Act, 1940 seeking an order restraining the Estate Officer under the public premises (Eviction of Unauthorised Occupants) Act. 1971, from proceeding further in pursuance to two notices issued by him under section 4(1) and section 7(3) of the PP Act. This is was heard and dismissed with costs by detailed judgment and order dated October 16, 1990 passed by D.P. Wadhwa, J. (as he then was). Catena of case law was referred to in the aforesaid judgment, Since Shri Kirit Rawal, learned Addl. Solicitor General of India, heavily relied upon this judgment in support of his submissions. Which would be noticed at appropriate stage it would, be useful to refer to some of the pertinent observations made by the learned Judge in this judgment and order:
'Now in the present case before me offers had been invited and that of the petitioner being the highest was accepted. The license agreement with Pure Drinks is dated 16.4.1982 and that with the petitioner 14.7.1982. It was much after the license agreement with the Bharat Hotels Ltd. had been entered into. Then as noted above. many meetings had been held by NDMC with for construction of hotel Project and those meetings had been attended by representatives of Bharat Hotels Ltd. as well as the petitioner. As far back as in 1981 the petitioner was well aware of the license fee paid by Bharat Hotels Ltd., and wet it had agreed to offer at a higher rate. The land of the petitioner hotel is far better located than that of the Bharat Hotels Ltd. Rights of the parties even otherwise arise out of contractual obligations and any comparison with Bharat Hotels Ltd. is not only misplaced but thoroughly inappropriate. In the circumstances. NDMC can't be restrained from exercising its rights under the license agreement on the failure of the petitioner to abide by the terms of the license agreement in making payments. Court would be loathe to exercise any discretion in favor a party in the grant of interim stay when it seeks to back out from its solemn obligation under taken in a mutually agreed upon contract. The court also cannot start with any presumption that a solemn obligation need not be adhered to on account of some specious plea. Here are two parties barosining on equal termed. They have agreed to certain terms which deemed to them to be good. It is too late in the day for the petitioner to contend that any terms under the lease agreement were unreasonable or wrong.
NDMC has been constituted under the Punjab Municipal Act, 1911 as extended to Delhi. It has various functions to perform as a local body. The license fee and other charges payable to the NDMC under the agreement form parts of its municipal funds. But for the claim raised by the petitioner moneys are certainly due to NDMC under the agreement. While granting moratorium of the payments falling due it was agreed that these payments will be made in equal half yearly installments and in case of delay interest was payable at the rate of 15% per annum. Now when the petitioner has itself given a go bye to the agreement regarding payment of license fee and the license for revoked/cancelled on that account, the whole of the arrears of license fee with interest becomes due and payable to the NDMC. NDMC is a local body and funds needed for various functions to be performed by it under the punjab Municipal Act. Balance of convenience certainly lies in favor of the NDMC. Further I am of the view that the disputes raised by the petitioner are not bona fide. Its only purpose appears to be in raising the disputes to delay the payment of lawful dues to NDMC under the agreement. Petitioner is using prime land where hotel building has been constructed without paying anything for it. It has offered to pay during the course of hearing only. Rs.1 crores only against an agreed minimum amount of Rs. 2.68 crores. It has suppressed its accounts and has raised claims which are not tenable. It got extensions in the completion and commission of the hotel project and also moratorium on the license fee payable. When the hotel project got into operation an license fee became due and payable and moratorium ended. Is it that only then it downed upon the petitioner that the license fee was excessive or that it had claim for damages which points it never raised while seeking extension or moratorium. It was contended before me that the hotel of the petitioner Le Meridien was the best in the chain of hotels of similar names in the world over and that irreparable loss would occasion to the petitioner if NDMC was allowed to exercise its right of re-entry. It could not appreciate this type of argument. NDMC has invoked the provisions of the P.P. Act and it is not that it has taken the law into its own hands. Further, if under the agreement a right accrues to NDMC on account of any default committed by the petitioner, the petitioner certainly cannot complain about that. Petitioner must have known the consequences of his default. Conduct of the petitioner does not command to me and this conduct disentitles the petitioner to any discretionary relief.
I find that it is the petitioner who is in breach. It is utilizing land and building in breach of the agreement. Equity certainly is not in its favour, NDMC put trust on the representation of the petitioner and granted extension of time for completion and commission of the hotel project and also agreed to moratorium on payments running into crore of rupees and to accept the same in twenty half yearly installments. It even agreed to forgo interest on the amounts which had already fallen due and accepted the request of the petitioner to charge interest only if the installments were delayed. It appears the petitioner never honestly intended to pay. This application is, thereforee, dismissed with costs. Counsel fee Rs. 2.000/-.'
6. Petitioner preferred appeal against the aforesaid judgment and order dated 16.10.1990 and during the pendency of this appeal, out of court, a settlement was reached between the parties which culminated into supplementary agreement dated 11.3.1991 having been executed between the petitioner and NDMC.
7. Recital of this Agreement traced out the background of dispute between the parties, in brief, and then stipulates that petitioners have approached NDMC for an out of court settlement and also for grant of installments for payment of license fee due, on account of deferred payment payable up to 27.9.1999 and interest accrued thereon up to 31.3.1991 as well as to liquidate current demand. It further mentions that NDMC, after considering the above request of the petitioner has agreed to grant installments for payment on account of licence, deferred payment and interest. Various clauses in the agreement thereafter mention as to how the advance annual fee as well as accumulated arrears of interest would be payable, as clauses 4, 7, 8 and 9 of the Supplementary Agreement are the bone of contentions between the parties. Let me reproduce these clauses of the agreement at this stage:-
'4. That the LICENSEE has already paid a lump sum Rs.one crore on 29.1.91 and a sum of Rs. 54,26,348/- on 10.2.91 and has paid 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 exceed 180 months w.e.f. 1st April, 1991.
7. That the LICENSEE has soreed 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 in respect which schedule of payment has been actually agreed to between the LICENSOR and the LICENSEES and further incorporated in this SUPPLEMENT TO PREVIOUS AGREEMENT. The LICENSER 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 I 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 instalment, 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.
9. THIS SUPPLEMTARY AGREEMENT will form an integral part of the license deed already executed by the LICENSOR and the LICENSEE. On 14.7.1982 and subsequent supplement Agreement executed on 20.7.1984, 20.11.1984 and 31.3.1987, the other terms and conditions will remain the same and are to be read in conjunction thereof and these will form a compact unit of the license deed dated 14.7.1982.'
Petitioner started making the payment as per the time frame mentioned in the Supplementary Agreement dated 11.3.1991 and also continued making payment at the rate of Rs. 45 lacs per month as per clause 4 of the said Agreement. This was followed by another Supplementary Agreement dated 4.8.1995 whereby the amount of Rs. 45 lacs payable per month was increased to Rs.60 lacs per month. Another Supplementary Agreement dated 31.5.98 was executed between the parties enhancing this monthly Payment from Rs. 60 lacs to Rs. 1 crore per month.
8. In terms of Clause 7 of Supplementary Agreement dated 11.3.1991. petitioner started making representations for reconsidering the terms of license fee based on 21% of the gross turn over. Details of such representations and outcomes thereof would be stated while recording the arguments of the counsels for both parties. To complete the narration of events, it may be mentioned that while the petitioner was making monthly payment to NDMC, a Show Cause Notice dated 28.5.1998 was sent by NDMC requesting the petitioner to make payment as huge arrears were outstanding against the petitioner. It was followed by letter dated 2.7.1998 sent by the Director (Estates) of NDMC requiring the petitioner to deposit entire dues immediately. Petitioner replied this letter by letter dated 9.7.1998 disputing the arrears payable and mentioning that the letter dated 2.7.1991 was under misconception and all dues towards license Fee had been paid up to the year 2003. This evoked another Show Cause Notice dated 25.9.93 from NDMC. Petitioner intimated that in case entire outstanding dues were not deposited within 15 days, action under P.P. Act would be initiated against the petitioner. However, thereafter another letter dated 31.12.98 was issued by Director (Estates) of NDMC for certain information which was replied by letter dated 14.1.1999. After this exercise, NDMC sent another Show Cause Notice dated 28.6.1999 calling upon the petitioner to deposit Rs. 109,82,16,368/- due up to 31.6.1999. By reply dated 27.7.1999, the petitioner disputed this amount again maintaining that the petitioner had in fact, paid the license fee till 2003 and no such amount was payable. Petitioner also stated in the said reply that-
'....that the terms of the original license deed being discriminatory. It was agreed by the Respondent No.1 to reconsider the license fee objectively and thereforee the Supplementary Agreement incorporated this understanding. It was also stated that the petitioner No.1 had been repeatedly making representations from time to time. for review/revaluation of the license fee of the hotel and the Respondents were requested to constitute a committee comprising of representatives of Ministry of Urban Development, Finance Ministry, Delhi Admn. and NDMC to make a fair and equitable assessment with regard to license fee on a rational basis which would be payable by the hotel. The License Fee on basis of 21% of gross turnover is unrealistic and is making the entire project economically unviable. It was also pointed out that the re-evaluation of the license fee was necessary for the very survival of the hotel project. It was also mentioned that on 20.4.93. The Chairman of IFCI lead financial institution involved in the project wrote a letter to the Secretary, Ministry of urban Development requesting him to review the license fee payable by the hotel to NDMC for the survival of the project. In reply the Secretary, Ministry of Urban Development, requested IFCI to have the entire project studied by an expert agency independently. The consultants who studied the project M/s. Reivil & Horwath Consultancy Services Pvt. Ltd., M/s. Advisory & Financial Service Corporation of India Ltd. and M/s. Hotels and Consultancy Services Pvt. Ltd. stated in the report that 'the Hotel project would not be viable at present license fee, in view of the fact that if the Hotel were to be able to service the entire license fee obligations and financial charges, it would be required to operate at 90% occupancy, which is generally unsustainable at an ARR (Average Room Rent) that is higher than achieved by any hotel in Delhi by 2000% and it must simultaneously increase its food and beverage revenue by about 250%. This is clearly unachievable for the very best of properties internationally leave alone the Meridien in New Delhi'.
This reply was followed by series of communications from the petitioner reiterating the aforesaid request of re-fixing the license fee. Meeting with the Chair person of the respondent also took place in August. 1999. However, it seems that no amicable solution to the problem was found and another Show Cause Notice dated 12.11.99 was issued to the petitioner requiring the petitioner to appear before the Chair Person, NDMC on 22.11.1999. This notice stated that revaluation of license Fee was neither possible nor warranted. Petitioner sent reply dated 16.11.99 to this notice again reiterating its earlier stand and making passionate request for re-valuation of license fee as according to petitioner. license fee at 21% of the gross turn-over was not economically viable. The petitioner alleges that in the meeting which took place on 22.11.99 with the Chairman, petitioner agreed to pay a sum of Rs. 3 crores on a clear understanding that an independent agency/committee would be constituted would be constituted by NDMC shortly to determine the fair and equitable quantum/rate of license fee. However, Chair person refused appointment of any committee and gave one week time to the petitioner to make payment falling which NDMC would terminate the license on 29.11.99 and take possession of the Hotel as well as withdraw the amenities namely water and electricity. When this threat allegedly loomed large. Petitioner rushed to this court and filed the present writ petition.
8. In this writ petition the petitioners have prayed for the following relief :-
a) Issue a writ of certiorari or any other writ order or direction to quash the show cause notices dated 28.6.99 and 12.11.99 issued by the respondent No.1 and
b) Issue a writ of mandamus or any other appropriate writ or order directing the respondents to constitute a committee of independent agencies/bodies/persons to evaluate the legitimate/fair license fee payable in respect of the said land, having regard to the license fee paid by other hotels which are similarly situated as well as the economic viability of the petitioners hotel, and consistent with the Supplementary Agreement dated 11.3.1991 and
c) Pass an order declaring the demand raised by the respondent No.1 vide the aforesaid show cause notices dated 28.6.1999 and 12.11.1999 to be illegal and arbitrary; and
d) Pass an order restraining the respondents from dispossessing the petitioner from the hotel Le Meridien without due process of law and from the disconnection, withholding or causing to be withheld any amenities including electricity and water to the said hotel premises; and
e) Pass such other or further orders as this Hon'ble court may deem fit, just and proper in the facts and circumstances of the present case and in the interest of justice.'
10. As pointed out by me in the earlier part of the judgment the maintainability of such a petition filed under Art. 226 of the Constitution of India is challenged vigorously by respondent/NDMC. Apart from other submissions the NDMC has raised preliminary submissions to the effect that the matter comes within the realm of a contract in private law field and the enforcement of such a contract and/or any other right and obligations following there from cannot be the subject matter of writ petition. According to NDMC the appropriate remedy, if any, is to file Suit or take out Arbitration proceedings as per arbitration clause contained in the agreement executed between the parties. Accordingly, the matter was heard on this aspect. albeit at great length.
11. Mr. A.S. Chandiok, learned senior counsel appearing for the petitioners formulated his submissions by arguing that writ was maintainable in as much as respondent was a state and/or 'another authority,' within the meaning of Article 12 of the Constitution of India being constituted under N.D.M.C. Act 1994 and thus a statutory body. As state it was bound to act fairly in all its dealings including in contractual matters with individual and corporation. The contract in question which was entered into by N.D.M.C. with petitioners was in exercise of N.D.M.C. statutory power contained in N.D.M.C. Act (sections 142 to 144). Procedure governing the contract was provided in sections 142 to 144 of the N.D.M.C. Act. Moreover, according to petitioner, subject matter of the writ petition falls squarely under the realm of public law and affects public interest in as much as -
a) The quantum/rate of license fee affects the entire viability of the project.
b) This in turn not only adversely affects the petitioners, but the lives and livelihood of about 1200 direct employees and a host of ancillary service/and other ventures which support the running of the hotel.
c) The hotel is being run with financial help from banks and financial institutions. In fact, there are two nominees of the banks/financial institutions on the Board of the petitioner No.1. Public money is at stake in the project.
d) The hotel enjoys international repute and promotes international tourism, thereby earning valuable foreign exchange. Currently the hotel earns about Rs. 45-50 crores in foreign exchange every year.
e) An outgo of license fee as demanded by the petitioner, would not only lead the petitioner No.1. to liquidation but also result in breach of contracts with foreign nationals who have agreed to use the hotel premises as well as principals abroad. Any event which alters its very viability would erode public perception abroad, and bring disrepute to India. It clear that public law element is involved in the instant case.
f) The Hotel industry provides essential services which affect public life.
It was further submitted that ambit of the present writ petition was not purely contractual and involves following elements of public elements of public law:-
a) The root of the matter is the Respondent No.1 is promise to the petitioner No.1 to examine the license fee and consider the petitioners representations and come to a reasonable decision/conclusion. Upon hearing the petitioners:
b) This representation formed the basis of the supplementary agreement of 1991, as also of 1995 and 1998:
c) Based on these promises, the Respondent No.1 induced the petitioner No.1 to withdraw its claims, including the appeal filed against the order dated 16.10.90, thereforee, effectively inducing the petitioner No.1 to part with its constitutional rights of judicial review:
d) The writ petition seeks, inter alia, to enforce pre contractual promises, which were subsequently incorporated into the supplementary agreements:
e) Prior to the supplementary arrangements, the Respondent No.2 supported the formation of a committee to go into the question of a fair and equitable license fee payable. Even after 1991, the supplementary agreements of 1995 and 1998 reiterate the Respondent No.1's commitment to consider the petitioners representations, after hearing the petitioners. However, the Respondents have failed to consider the same and are taking a blatantly arbitrary stand:
f) The petitioners right to move the present writ petition springs from the earlier promise to consider the Petitioners representation with regard to the license fee payable, which has continued to be reiterated till as late as in 1999:
g) The right of hearing is a part of public duty, and not merely contractual:
h) To enforce this public duty in the light of the Respondent arbitrary, conduct the petitioners are entitled to a remedy under the writ jurisdiction of this Hon'ble Court.
It was further submitted that the writ petition filed by the petitioners was maintainable because the stand of the Petitioners was per as arbitrary and in such circumstances provisions of Article 14 could be invoked by the Petitioners. To demonstrate this aspect the learned counsel for the petitioners submitted that after the order was passed by Wadhwa, J. in is filed by the petitioners in Suit referred to above which was dismissed. Petitioners filed appeal against the same. During the pendency of the appeal, agreement dated 11.3.1991 was arrived at between the parties and para 7 of the said Agreement clearly stipulated that the petitioners would make representation in respect of license fee which would be examined by NDMC on merits. It is on this assurance that petitioners withdrew the appeal as well as its claims in the suit for appointment of Arbitrator invoking the arbitration clause. Petitioners also paid the license fee as per this agreement. Thus as far as petitioner is concerned, it fulfillled all its obligations contemplated in this agreement. There were two supplemental agreements executed in the years 1995 and 1998 revising the fee and even this fee was paid as per the agreements. The supplemental agreements of 1995 and 1998 kept clause 7 of the Agreement dated 11.3.91 in tact. Petitioners kept on making representations, as per the said clause for re- examination of the license fee. This was the only obligation imposed on the NDMC as per this agreement. However, the respondents failed to fulfilll its obligation and acted in an arbitrary manner. It was further submitted that arbitrariness of the respondent was writ large in the stand taken by the respondent in the counter affidavit. Referring to para6 of the counter affidavit filed by NDMC it was submitted that a palpably false stand was taken in contending that NDMC never agreed to consider the representation with regard to revaluation of license fee and it was only agreed to reconsider any variation in installments. Show Cause Notice dated 12.11.99 stated that such examination was 'neither possible nor warranted'. On the other hand at the time of argument it was submitted that the matter was considered and rejected. Thus, the stand of NDMC was contradictory. In any case, it was argued that the Chairman, NDMC had agreed, as recent as in the year 1999, also that the NDMC would constitute a Committee to reconsider the question of license fee if the further amounts are paid. Reference was made to letter dated 31.12.98 as per which, meeting was held on 31.10.1998 regarding payment of license fee and viability of license fee was discussed. Petitioners also relied upon various letters written by the Petitioners to NDMC as per which payments were made on the understanding that an independent agency/committee would be constituted by NDMC to determine the fair and equitable quantum/rate of license fee payable by the Petitioners and it was submitted that the petitioners kept on making these payments with the aforesaid understanding but respondents have failed to act fairly by not adhering to the promise held out by them in as much as neither the committee was constituted nor matter regarding viability of license fee was examined. In this way, it was argued, Petitioners paid substantial amount to NDMC and after receiving all these amounts. NDMC has issued Show Cause Notice demanding the amount as per original agreement which is highly excessive, enviable and exhorbitent. Without determining the quantum of license fee no Show Cause Notice could have been issued and such attitude of respondents smacks of arbitrariness and thus writ petition was maintainable. It was also argued that after holding of the representation to the petitioners the viability of license fee shall be reviewed by appointment of an independent committee, there was legitimate expectation which accrued to the petitioners who acted to its prejudice by withdrawing all claims as well as cases and making huge payments to the NDMC and thus principle of promissory, estoppel and legitimate expectation also become applicable. Such action of the Respondent and the reliefs claimed by the petitioners on the basis of arbitrary action of the Respondent/NDMC come within the domain of public law and not based on only contractual obligation and thereforee, writ petition was maintainable. The petitioners further submitted that respondent NDMC could not rely on the order dated 16.10.90 passed by Wadhwa, J. as it was only an interim order in an I.A. the effect of which vanishes after the main suit itself was withdrawn. It was also argued that in any case, the order was mainly based on the conduct of the petitioners as at that time, the petitioners had not made any payment in terms of License Agreement. However, after Agreement dated 11.3.1991 was entered into . Petitioners have paid a sum of Rs.47 crores to NDMC and thus showed its bonafides. Today equities are in favor of the petitioners and there fore, petitioners are entitled to seek the relief by way of present writ petition which is proper remedy invoked by the petitioners. In support of aforesaid submissions. Petitioners relied upon the following judgments:-
1. DFO South Kheri Vs . Ram Sanehi Singh : AIR1973SC205
2. Mahabir Auto Stores and Others Vs . Indian Oil Corpn. and Others : [1990]1SCR818
3. Kumari Shrilekha Vidyarthi etc. Vs . State of UP and Others : AIR1991SC537
4. LIC of India and Another Vs . Consumers Education and Research Centre and Others : AIR1995SC1811
12. Countering the aforesaid arguments, Mr. K. Rawal, learned Addl. Solicitor General. who appeared on behalf of NDMC vehemently argued that matter was simply in the realm of contract between Petitioners and NDMC which was governed by law of contract in private field and there was no public element involved. Merely by giving gloss of Article 14 of the Constitution, Petitioners could not ignore the real controversy which was that the petitioner was trying to enforce the contract. It was submitted that the petitioner is seeking to invoke Article 226 of the Constitution to evade and wriggle out its contractual obligations. At an open bid, the petitioner's bid pertaining to payment of 21% of the annual gross turn over was accepted. The conduct of the petitioner in the commercial transaction was to seek to oust other prospective persons from the zone of consideration relating to the grant of license for running the hotel. The Petitioner cannot now be permitted to resile there from. No writ was maintainable during working of a contract between the parties a writ may be maintainable during the process of entering into a contract. Giving a purely contractual dispute, a glose of breach of Article 14 or any constitution and provision, does not change the basic nature of the dispute. viz. that it is for resolution of disputes arising from the contract and the writ is essentially for enforcing contractual rights.
13. It was thus submitted that after order dated 30.10.90 was passed by Wadhwa J in is in the suit filed by the Petitioners in which the Petitioners lost and as the petitioners found that there was no hope of success in the matter, it represented for amicable settlement of the case by agreeing to pay the amount. In these circumstances, supplementary agreement dated 11.3.91 was entered into between the parties. Mr. Rawal referred to the preamble of the said agreement to advance his submissions that the only concession which was given by this agreement was to enable the petitioners to pay amount in installments and particularly referred to the following portions of the Agreement:-
'AND WHEREAS the Licensee, M/s. C.J. International Hotels Ltd., New Delhi vide their letter dated 5.11.90 have approached the LICENSEOR- NDMC for an out-on-court settlement and also for grant of installments in the payment in the payment of license fee, dues on account of deferred payment payable up to 27.9.90 and interest accrued thereupon up to 31.3.91 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 payment on account of license deferred payments and interest'
14. He further submitted that a perusal of paragraphs 1 to 4 would show that the installments were provided for liquidating the existing dues on account of license fee deferred payments and interest. He further stated that the Petitioner was wrongly interpreting clause 7 of this agreement which no where provides that the matter regarding alleged viability of license fee would be reconsidered, clause 7 reads as under :-
'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 estats officer in respect of which schedule of payments 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.'
As per this clause it was argued that both the parties agreed to withdraw their claim and counter claims pending in courts and this clause further gave only liberty to the petitioners to make any representation in respect of license fee which was to be examined by the Licensor/NDMC on merits. He submitted that intention was not to change the license fee but the manner in which license fee was payable can be reconsidered. Otherwise, according to him, it was clearly stipulated in para 9 of this agreement that all other clauses of the main agreement dated 14.7.82 and subsequent supplementary agreements dated 20.7.84, 20.11.94 and 31.3.87 were to remain the same which included the quantum of license fee also payable by the petitioners as per the main agreement. In any case and without prejudice to the aforesaid submission. It was further argued that there was a consideration of the matter by the NDMC as is clear from the Show Cause Notice and communication of the respondent to this effect. Reference was made to penultimate para of communication dated 12.1.99 which was sent to the petitioners after considering the petitioners reply to show Cause Notice reading as under :-
'That your reply dated 27.7.99 in view of the Show Cause Notice and subsequent letters for re-writing the contract for the past for reducing the license fee have been examined. The matter regarding reconsideration of the percentage of turnover is neither possible nor warranted'.
According to him, the aforesaid para clearly stipulates that the matter regarding re-writing the contract for the past for reducing the license fee was examined and reconsideration was not possible meaning, thereby the request of the petitioner was rejected. Reference was also made to para 6 of the reply affidavit on the basis of which it was contended that aspect pertaining to examination of license fee as contained in supplementary agreement dated 11.3.91 was significantly not present in subsequent agreements dated 4.8.95 and 31.3.98 which clearly shows that there has been reconsideration and nothing was left thereafter. It was also argued that the whole attempt of the Petitioners was to set out a new agreement which was not present in the license deed and this was impermissible under sec. 92 of the Evidence Act. The whole endeavor of the petitioners was to somehow that the attempt of the NDMC the realise whopping sum of Rs.109 crores from the petitioners which were the legitimate dues of NDMC. Public benefit in the present case outweighs the case of personal gain of the Petitioners in withholding these legitimate dues. It was sub- mitted that the petitioners were only raising the bogey of public duty on the part of respondent/NDMC and there was no public element involved at all in the entire case. The matter was purely and simply contractual one and petitioner was trying to avoid this contractual obligation. Even if it is presumed that there was any contractual breach the part of the respondent (although none remedy of writ was not maintainable for enforcing contractual terms. The graveness of the charge of the petitioners against NDMC put at the highest was that respondent was that respondent was not adhering to its promise contained in Clause-7 of the supplementary agreement. The writ, thereforee, clearly intended to enforce this clause and such a writ was not maintainable as per well settled law. It was further submitted that NDMC has specifically denied in para 3 of its counter affidavit that Chairperson has assured the petitioner that any committee would be constituted to consider re-writing the contract. Letters of petitioner are self-serving in nature. The verification of the counter affidavit of Director (Estate). NDMC mentioned that this denial was based on information received from the Chairperson are believed to be correct. In any case, such disputed questions of fact are normally not tried in a writ petition. Non-filling of affidavit of Chairperson is inconsequential in these circumstances. Petitioner's own balance sheet and profit and loss account show that substantial sums of money were payable to NDMC, although a self-serving qualification has been added thereon. Referring to the various portions of Show Cause Notice given to the petitioners from time to time, the blameworthy conduct of the petitioners was highlighted. Strong reliance was placed upon the order dated 16.10.90 passed by Wadhwa J to expose the conduct of the Petitioner which was wholly ineqitable. It was submitted that the payments were made by the petitioners during pendency of Show Cause Notice dated 28.6.91 and not on the basis of any alleged promise held out by the Chairman, NDMC for constitution of the Committee. It was further submitted that in any case the matter raised disputed questions of facts and that the alternate efficacious remedy by way of suit or arbitration was available to the petitioners wherein such disputed questions of facts could also be resolved. It was improper on the part of the petitioners to invoke extraordinary jurisdiction of this court by filing the instant writ petition. It was lastly contended that the petition is only against a Show Cause Notice dated 28.6.1999 and Notice dated 12.11.1999. The said notices relate to the petitioners breach of the license deed in failing to pay license fee of Rs.109 crores. The cause of action, if any, is a premature one. Number of judgments were cited in support of the argument that writ petition was not maintainable.
15. Before dealing with the respective contentions of the parties, let me first re-state the law on the point as evolved by Apex court by series of judgments. I had the occasion to deal with this aspect in a recent judgment in the case of M/s. Delhi Cranex Pvt. Ltd. v. M/s. Hindustan Steel Works Construction Ltd. and Others (CWP No. 2238/98 decided on 24th December, 1999). However, in addition to the case law considered in the aforesaid judgment. Counsel for both the parties referred to some more judgment on this aspect and their valuable assistance prompts me to take stock of all these judgments and deal with this aspect exhaustively.
16. In M/s. Radha Krishan Aggarwal and Others Vs . State of Bihar. : [1977]3SCR249 action of the state Government revising the rate of royalty revising the rate of royalty payable by the petitioner/appellant under a lease of 1970 and after Cancelling the lease by a letter of 15.3.1975 was subject matter of challenge and revision of rate of royalty payable by the petitioner under the lease to collect and exploit seeds from forest was challenged as illegal during the subsistence of lease and consequently it was the case of the petitioner that cancelling of lease itself was illegal for various reasons. Writ petition was filled challenging the action of the state Government and the question arose whether such a writ petition was maintainable. In paragraph 2 of the judgment the case of the petitioner was set up. Para 2 reads as under :-
'Primarily, the case of the petitioners is that of a breach of contract for which the state would be liable ordinarily to pay damages if it had broken it. If the petitioners could establish some right, either contractual or equitable to continue in possession, the state could be prevented by appropriate proceedings, from ousting the petitioners from the forest land from which the petitioners have been gathering sal seeds. The petitioners had also set up mala fides on the part of the conservator of Forest, in enhancing the royalty unreasonably and then cancelling the lease, allegedly acting under the influence of friends and associates of the Forest Minister of Bihar.'
The court noted that as per relevant clause of the Lease Agreement between the parties, the Govt. had right to revise the royalty. The argument of the petitioner that action of the state Government in terminating the contract was in violation of lease agreement has been answered has been answered in the following words in para 5 of the Judgment:
'........The questions which apparently arose appertained to action alleged by the state to fall within the terms of the agreement between the parties regulated by the duly signed contract which was presumably executed in compliance with the provisions of Art. 299 of the constitution, prima Facie, thereforee, the appellants can only get their remedies, if they can obtain any at all, through ordinary suits for damages or for injunctions to restrain breaches of contract provided they could show how the contracts were broken or were going to be broken'.
However, the judgment thereafter proceeded in noticing the arguments of the petitioner that the state in its executive capacity through its Government or its officers, even in the contractual field, cannot escape the obligation imposed upon it by part III on the constitution i.e. Article 14. Answering this contention, the court observed in para 9 of the judgment as under:-
'Dr. Singhvi's argument that the state Government had some special obligations attached to it would have appeared more plausible if it could be shown that the state or its officers or agents had practiced some discrimination against the petitionersppel lants at the very threshold or at the time of entry into the field of contract so as to exclude them from consideration when compared with others on any unreasonable or unsustainable ground struck by Art. 14 of the Constitution. It is true that Art. 14 of the Constitution imports a limitation or imposes an obligation upon the state's executive power under Art. 298 of the Constitu- tion. All constitutional powers carry corresponding obligations with them. This is the rule of law which regulates the operation of organs of government functioning under a Constitution. And, this is exactly what was meant to be laid down by this court in Erusian Equipment & Chemicals Ltd. Vs . state of West Bengal : [1975]2SCR674 ) on which learned counsel for the appellants sought to rely strongly'.
Explaining the ratio laid down in Erusian Equipment case (supra) and distinguishing decision from the facts of the case in hand before the court, the law on the point was explained as under in paras 10 and 11 of the Judgment:
'10. It is thus clear that the Erusian Equipment & Chemicals Ltd's case : [1975]2SCR674 (supra) involved discrimination at the very threshold or at the time of entry into the field of consideration of persons with whom the Government could contract at all. At this stage, no doubt, the State act purely in its executive capacity and is bound by the obligations which dealings of the state with the individual citizens import into every transaction entered into in exercise of its constitutional powers. But, after the State or its agents have entered into the field of ordinary contract, the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines rights and obligations of the parties inter se. No question arises of violation of Art. 14 or of any other constitutional provision when the State of its agents, purporting to act within this field perform any act. In this sphere, they can only claim rights conferred upon them by contract and are bound by the terms of the contract only unless some statute steps in and confers some special statutory power or obligations on the state in the contractual field which is from contract.
11. In the cases before us the contracts do not contain any statutory terms or obligations and no statutory power or obligation which could attract the application of Art. 14 of the Constitution is involved here. Even in cases where the question is of choice or consideration of competing claims before an entry into the field of contract fats have to be investigated and found before the question of a violation of Art. 14 could arise. If those facts are disputed and require assessment of evidence the correctness of which can only be tested satisfactorily by taking detailed evidence, involving examination and crossexamination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Art. 226 of the Constitution. Such proceedings are summary proceedings reserved for extraordinary cases where the exceptional and what are described as perhaps not quite accurately. 'Prerogative' powers of the Court are invoked. We are certain that the cases before us are not such in which powers under Art. 226 of the Constitution could be invoked.'
The contention of the petitioner to the contrary was noticed in para 18 and repelled in subsequent paragraphs which may be worth quoting and the relevant portions are quoted below:-
'18. Learned counsel for the appellants cited certain authorities in an attempt to support his submission that the State and its officers are clothed with special Constitutional obligation including those under Art. 14 of the Constitution in all their dealings with the public even when a contract is there to regulate such dealings. The authorities cited were: D.F.O. South Kheri v. Ram Sanehi Singh AIR 1954 SC 205 (supra) where all that was decided relying upon K.N. Guruswamy Vs . state of Mysore. : [1955]1SCR305 (supra) was that, Where the source (a right was contractual but the action complained of was the purported exercise of a statutory power relief could be claimed under Art. 226 and Calculate Gas Co. (Proprietary) Ltd. Vs . State of West Bengal. : AIR1962SC1044 where the real question considered was whether the petitioner had a locus standi to question the validity of an enactment, Basheshar Nath Vs . Commr. of Income Tax, Delhi and Rajashthan, : [1959]35ITR190(SC) which has nothing to do with any breach of contract but only lays down that 'Article 14 protects us from both legislative and administrative tyranny of discrimination' State of M.P. Vs . Thakur Bharat Singh 0043/1967 : [1967]2SCR454 which lays that even executive action must not be exercised arbitrarily but must have the authority of law to support it: S.C. Sawhney Vs . D. Ramarathnam, Asstt. Passport Officer. Govt. of India, New Delhi : [1967]3SCR525 which repeats requirements of action which satisfy Arts. 14 and 21 of the Constitution where compliance with these provisions is obligatory.
19. We do not think that any of these cases could assist the appellants or is at all relevant. None of these cases lays down that when the state or its officers purport to operate within the contractual field and the only grievance of the citizen could be that the contract between the parties is broken by the action complained of the appropriate remedy is by way of a petition under Article 226 of the Constitution and not an ordinary suit. There is a formidable array of authority against any such a proposition. In Lekhraj Sathramdas v. M.M. Shah AIR 1965 SC 334 (supra) this Court said (at page 337):
'In our opinion, any duty or obligation falling upon a public servant out of a contract entered into by him as such public servant cannot be enforced by the machinery of a writ under Art. 226 of the Constitution'. In Bachhanidhi Rath Vs . State of Orissa, : AIR1972SC843 this court declared (at page 845).
'If a right is claimed in terms of a contract such a right cannot be enforced in a writ petition'.
In Har Shankar Vs . DY. Excise and Taxation Commer : [1975]3SCR254 a Constitution Bench of this Court observed (at page 265) (of SCR): (at page 1126 of AIR): 'The appellants have displayed ingenuity in their search for invalidating circumstances but a writ. petition is not an appropriate remedy for impeaching contractual obligations'.
xx xx xx xx xx xx 23. A rather desperate argument which has been addressed to us on behalf of the appellants is that they were entitled to an opportunity to show cause against the cancellation of the leases. It was urged, on the strength of A.K. Kraipak Vs . UOI : [1970]1SCR457 that the distinction made between administrative and quasi judicial action is thin and a vanishing one. This argument appears to us to be wholly irrelevant in as much as a question of the distinction between an administrative and quasi judicial decision can only arise in the exercise of powers under statutory provisions. Rules of natural justice are attached to the performance of certain functions regulated by statutes or rules made there under involving decisions affecting rights of parties. When a contract is sought to be terminated by the officers of the state, purporting to act under the terms of an agreement between parties, such action is taken in purported exercise of a statutory power to all.
17. In the State of Punjab Vs . Balbir Singh and Others, : (1976)IILLJ4SC , this question again came up for consideration. It was again a case where in an auction for country liquor vends, respondent was the highest bidder and his bid was accepted and license was issued. But when he committed breach of conditions of Licence, demand for payment of stillhead duty was made and on his failure to pay the same license was cancelled. His writ petition was allowed by the High Court. Reversing the decision and relying upon Her Shanker's case (supra) the supreme court held that writ was not maintainable.
18. The next case which may be relevant is State Bank of Haryana and Others Vs . Jage Ram and Others : [1980]3SCR746 . That was the case where retail vend of country spirit known as 'Biswan Meel'. Sonepat was auctioned and respondents who offered the highest bid became successful bidder and was granted licence, under the relevant statutory rules, namely, Punjab Liquor license Rules, 1956. However, it failed to pay the installments as per the license Agreement. Notice was accordingly issued by the Excise & Taxation Officer. Rohtak calling upon the respondents to make good the short fall of the license fee. As respondents failed to pay the amount demanded in the notice, Show Cause Notice was issued calling upon the respondents as to why their license should not be canceled for their failure to comply with the terms of auction. The respondents submitted their reply stating that they were illiterate villagers and that the terms of auction were not explained to them. It was also stated that District of Rohtak was in the grip of severe drought leading to a fail in the sale of liquor and that April being the summer month. Consumption of liquor was less as compared to the consumption during the winter month and that there was, in fact, no default on their part. Hearing was given and thereafter license was cancelled under sec. 36(b) & (c) of the Punjab Excise Act. Respondents filed Civil Writ Petition challenging this action which was allowed by the High Court quashing the order of cancellation. However, High Court granted Certificate to Appeal to Supreme Court under Art. 133(1)(A) of the Constitution and this is how the case came up for consideration by the Apex Court. The Court noticed that auction by which the respondents bid was accepted was governed by statutory rules namely Punjab Liquor license Rules, 1956. Notwithstanding the fact that contract entered by the state was in exercise of power contained in statutory rules, the court considered the question of the maintainability of the writ petition. It referred to its earlier judgments in the cases Har Shanker Vs . Dy.Excise & Taxation Commissioner : [1975]3SCR254 and dealt with the aspect of maintainability of the writ petition in para 15 of the judgment by making the following pertinent observations:-
'15. What is important for our purpose in this appeal is that the state of punjab, which was respondent to the appeal in Har Shankar raises a preliminary objection to the maintainability of the writ petition filed by the appellants and that objection was upheld by this court. The preliminary objection was that such of the appellants who offered their bids in the auctions did so with a full knowledge of the terms and conditions attaching to the auctions and that they could not be permitted to wriggle out of the contractual obligations arising out of the acceptance of their bids. Holding that the preliminary objection was well founded, this court observed (SCC PP745-746 para 16).
Those interested in running the country liquor vends offered their bids voluntarily in the auction held for granting licences for the sale of country liquor. The terms and conditions of auctions were announced before the auctions were held and the bidders participated in the auctions without a demur and with full knowledge of the commitment a which the bids involved. The announcement of conditions governing the auctions were in the nature of an invitation to an offer to those who were interested in the sale of country liquor. The bids given in the auctions were offers made by prospective vendors to the government. the government's acceptance of those bids was the acceptance of willing offers made to it. On such acceptance, the contract between the bidders and the government became concluded and a binding agreement came into existence between them. The successful bidders were then granted licences evidencing the terms of contract between them and the government, under which they became entitled to sell liquor. The licencees exploited the respective licences for a portion of the period of their currency. presumably in expectation of a profit. Commercial considerations may have revealed an error of judgment in the initial assessment of profitability of the adventure but that is a normal incident of trading transactions. Those who contract with open eyes must accept the burdens of the contract along with its benefits. The powers of the Financial Commissioner to grant liquor licences by auction and to collect license fees through the medium of auctions cannot by writ petitions be questioned by those who had their venture succeeded, would have relied upon those very powers to found legal claim. Reciprocal Fights and obligations arising out of contract do not depend for their enforceability upon whether a terms of the contract. BY such a test no contract could ever have a binding force. (page 263).
At page 266 (SCC p. 748) of the Report, the court further observed that the writ jurisdiction of High Courts under Article 226 was not intended to facilitate avoidance of obligations voluntarily incurred'.
In para 16 of the judgment the court observed that case in hand also related to the contract with state Authorities. Which contract the respondents entered with full knowledge of conditions which they had to carry out in the conduct of their business. On which they had willingly and voluntarily embarked. It further observed that the occurrence of the commercial difficulty, inconvenience or hardship in the performance of those conditions like the sale of liquor being less in summer than in winter can provide no justification in not complying with the terms of the contract which they had accepted with open eyes and that respondents could not, thereforee, invoke the writ jurisdiction of the High Court, to avoid the contractual obligations. Some of the observations made in para 18 are also relevant and it could be fruitful to quote this para as well:-
'18. In view of these decisions, the preliminary objection raised by the learned SolicitorGeneral to the maintainability of the writ petitions filed by the respondents has to be upheld. We hold accordingly that the High Court was in error in entertaining the writ petitions for the purpose of examined whether the respondents could avoid their contractual liability by challenging the Rules under which the bids offered by them were accepted and under which they became entitled to conduct their business. It cannot ever be that a licensee can work out the license if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the licence, if he finds it commercially inexpedient to conduct his business.'
19. Next case in the line of such cases is Bareilly Development Authority Vs . Ajai Pal Singh and Others, : [1989]1SCR743 . That was the case where Appellate Authority had undertaken construction of dwelling units for people belonging to different income groups and the cost at which such flats were to be allotted to t he allottees. However, it was mentioned that the cost stated was only estimated cost and subject to increase or decrease according to rise or fall in the price at the time of completion of property. The authority increased the cost and monthly installment rates which it demanded from the allottees were almost doubled and cost and rates of installments initially stated in the brochure. Respondents/allottees filed writ petition challenging the same and in this context question of maintainability of the writ petition arose. High Court, relying upon the judgment of supreme Court in the case of Ramana Dayaram Shetty Vs . Airport Authority of India : (1979)IILLJ217SC allowed the writ petition by observing as under :-
'It has not been disputed that the contesting opposite party is included within the term `other authority' mentioned under Article 12 of the constitution. thereforee, the contesting opposite parties cannot be permitted to act arbitrarily with the principle which meets the test of reason and relevance. Where an authority appears acting unreasonably, this court is not powerless and a writ of mandamus can be issued for performing its duty free from arbitrariness or unreasonableness.'
In appeal filed by the Authority, the Apex Court, on fact, noted that respondents had applied for registration only by acceptance of terms and conditions contained in brochure. Moreover, subsequently letter was written by the Authority about the enhancement of the cost of the houses/flats as well as increase in monthly installments. Rate of yearly interest requesting allottees to give their written acceptance and the respondents except respondent No.4 had sent their written acceptance and it was on the basis of the written acceptance that name of first respondent was included in the draw and he was successful in getting allotment of a particular house. The court observed that respondent were under no obligation to seek allotment of house/flats even if they had registered themselves. Notwithstanding, the voluntarily registered themselves as applicants only after fully understanding the terms and conditions of the brochure including relating to variance in prices. On the basis of these facts. Apex court observed that the aforesaid observations of the High Court relying upon Ramana Dayaram Shetty case (supra) were not correct. Thus observed the court speaking through Ratnavel Pandian. J.
'The finding in our view, is not correct in the light of the facts and circumstances of this case because in Ramana Daya Shetty case, there was no concluded contract as in this case. Even conceding that the BDA has the trappings of a state or would be comprehended in 'other authority' for the purpose of Article 12 of the constitution, while determining price of the houses/flats constructed by it and the rate of monthly installments to be paid, the Authority or its agent after entering into the field of ordinary contract acts purely in its executive capacity. Thereafter 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 the contract in the absence of any statutory obligations on the part of the authority (i.e. BDA in this case) in the said contractual field.
22. There is a line of decisions where the contract entered into between the state and the persons aggrieved is non-statutory and purely contractual and the rights are governed only by the terms of the contract, no writ or order can be issued under Article 226 of the Constitution of India so as to compel the authorities to remedy a breach of contract pure and simple Radhakrishna Agarwal v. State of Bihar, Premi Bhai Parmar v. Delhi Development Authority and DFO v. Biswanath Tea Company Ltd.'
20. Next case of relevance is the Divisional Forest officer Vs . Bishwanath Tea Co. Ltd. : [1981]3SCR662 . In that case respondents took on lease certain land from Government. Initially, period of lease was 15 years. The lease was to be extended for cultivation and raising tea garden and was subject to condition set out in the Lease Agreement and generally to Assam Land & Revenue Regulation and Rules made thereunder. Respondent Company approached appellant seeking permission to cut 7000 cub.ft. of timber. Appellant took the stand that as the timber was required for a particular use which was not within the Grant, full royalty will be payable on timber so cut and removed. Respondent company paid the amount of royalty under protest and filed writ petition under Article 226 of the Constitution in the High Court alleging that upon a trued construction of the relevant clauses of the Grant as also proviso to Rule 37 of the Settlement Rules, it was entitled to cut and remove timber without payment of royalty and thereforee, the recovery of royalty being unsupported by law. the appellant was liable to refund the same. A preliminary objection was taken by the appellant to the maintainability of the writ petition on the ground that claim of the respondent flows from terms of lease and such contractual rights and obligations can only he enforced in a civil court. This preliminary objection was overruled by the High Court which proceeded to hear the matter and allowed writ petition of the respondent company. The appellant appealed to the supreme court and Supreme Court reversed the decision of the High Court holding writ as not maintainable. Reliance was placed on the earlier judgment of the Constitutional Bench in Har Shankar case (supra) Following observations may usefully be quoted:-
'8. It is undoubtedly true that High Court can entertain in its extraordinary jurisdiction a petition to issue any of the prerogative writs for any other purpose. But such writ can be issued where there is executive action unsupported by law or even in respect of corporation there is a denial of equality before law or equal protection of law. The Corporation can also file a writ petition for enforcement of a right under a statute. As pointed out earlier, the respondent company was merely trying to enforce a contractual obligation. To clear the ground let it be stated that obligation to pay royalty for timber cut and felled and removed is prescribed by the relevant regulations, the validity of regulations is not challenged. thereforee, the demand for royalty is supported by law. What the respondent claims is an exception that in view of a certain term in the indenture of lease, to writ, Clause 2, the appellant is not entitled to demand and collect royalty from the respondent. This is nothing but enforcement of a term of a contract of lease. Hence, the question whether such contractual obligation can be enforced by the High Court in its writ jurisdiction.
9. Ordinarily, where a breach of contract is complained of, a party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed, or the party may sue for damages. Such a suit would ordinarily be cognizable by the Civil Court. The High Court in its extraordinary jurisdiction would entertain a petition either for specific performance of contract or for recovering damages. A right to relief flowing from a contract has to be claimed in a Civil Court where a suit for specific performance of contract or for damages could be filed....'.
In DFO South Kheri and others Vs . Ram Sanehi Singh : AIR1973SC205 , the court held writ petition to be maintainable. That was the case where respondent had purchased right to cut timber in an auction held by Forest Officer/Appellant. During the period of contract, Divisional Forest Officer passed an order that the sleepers 'against the tally dated October 29, 1966 in the allotment of 1965-66 season being wrong' since they were cut in the month of November 1966, do stand canceled and that the sleepers be 'passed against' the tally after getting the hammer-marks canceled and be 'reinspected against the allotment for 1966-67 season'. By that order the timber which the respondent claims was actually removed by him with the sanction of the forest authorities under the tally dated October 29, 1966 was to be treated as if it was removed in November 1966.
21. Respondents filed writ petition in the High Court of Allahabad for restraining the DFO from giving effect to the order canceling his 'sleepers tally' pursuant to impugned order dated January 10,1967 and for quashing of the said order. The objection of the appellant to the maintainability of the writ petition was indicated in the following manner:-
'Counsel for the appellants contends that since the dispute arose out of the terms of the contract and the Divisional Forest officer under the terms of the contract had authority to modify any action taken by a subordinate forest authority remedy of the respondent was to institute an action in the civil court and that the writ petition was not maintainable. But in the present case the order is passed by a public authority modifying the order or proceeding of a subordinate forest authority,. By that order he has deprived the respondent of a valuable right. We are unable to hold that merely because the source of the right which the respondent claims was initially in a contract, for obtaining relief against any arbitrary and unlawful action on the part of a public authority be must resort to a suit and not to a petition by way of a writ. In view of the judgment of this court in K.N.Guruswamy's case : [1955]1SCR305 , there can be no doubt that the petition was maintainable even if the right to relief arose out of an alleged breach of contract, where the action challenged was of a public authority invested with statutory power.'
While upholding the decision of the High Court on merits, it was found that the order of the Divisional Forest Officer was without calling for any Explanationn of the respondent and that giving him any hearing and thereforee, vocative of principles of natural justice, as per the law laid down in the case of State of Orissa v. Dr. (Miss) Binapani Dei, AIR 1967 SC 1267.
22. In Mahabir Auto Stores and Others Vs . Indian Oil Corporation and Others. : [1990]1SCR818 , the question relating to maintainability of writ petition in contractual field was again considered at great length. That was the case where Appellant firm was carrying on business of sale and distribution of lubricants for is years after it was appointed as Lub Distributor by the respondent Indian Oil Corporation. However, after 18 years, Indian Oil Corporation abruptly stopped supply of lubricants to the firm without giving any notice or intimation. Appellants filed writ petition in the High Court challenging this action of the Indian Oil Corporation as arbitrary. High Court dismissed the writ petition as not maintainable as the appellants had sought the specific performance of certain alleged contract. Aggrieved by this decision of the High Court, appellants approached the Apex Court. The discussion, relevant for our purpose is contained in following paragraphs:-
'12. It is well settled that every action of the State or an instrumentally of the State in exercise of its executive power must be informed by reason. In appropriate cases actions uninformed by reason may be questioned as arbitrary in proceedings under Art. 226 or Article 32 of the Constitution. Reliance in this connection may be placed on the observations of this Court in M/s. Radha Krishna Agarwal Vs . State of Bihar : [1977]3SCR249 . It appears to us at the outset that in the facts and circumstances of the case, the respondent company, IOC is an organ of the state or an instrumentally of the State as contemplated under Article 12 of the Constitutions. The state acts in its executive power under Article 298 of the Constitution in entering or not entering in contracts with individual parties. Article 14 of the Constitution would be applicable to those exercises of power. thereforee, the action of state organ under Article 14 can be checked, See M/s. Radha Krishna Agarwal v. State of Bihar at p. 462 (at SCC) : (at p. 1499-1500 of AIR) (supra), but Article 14 of the constitution cannot and has not been construed as a charter for judicial review of state action after the contract has been entered into, to call upon the State to account for its actions in its manifold activities by stating reasons for such actions. In a situation of this nature certain activities of the respondent company which constituted State under Article 12 of the Constitution may be in certain circumstances subject to Article 14 of the Constitution in entering or not entering into contracts and must be reasonable and taken only upon lawful and relevant consideration, it depends upon facts and circumstances of a particular transaction whether hearing its necessary and reasons have to be stated. In case any right conferred on the citizens which is sought to be interfered. Such action is subject to Article 14 of the Constitution, and must be reasonable and can be taken only upon lawful and relevant grounds of public interest, Where there is arbitrariness in state action of this type of entering or not entering into contracts. Article 14 springs up and judicial review strikes such an action down. Every action of the State executive authority must be informed by reason. So, whatever be the activity of the public authority, in such monopoly or semimonopoly dealings, it should meet the test of Article 14 of the Constitution. If a Governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. In this connection, reference may be made to E.P. Rovappa Vs . State of Tamil Nadu : (1974)ILLJ172SC : Maneka Gandhi Vs . UOI : [1978]2SCR621 :, Ajay hasija Vs . Khalid Mujib Sehravardi, : (1981)ILLJ103SC , R.D. Shetty Vs . International Airport Authority of India : (1979)IILLJ217SC and also Dwarkadas Marfatis and Sons Vs . Board of Trustees of the port of Bombay, : [1989]2SCR751 . It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by state instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and nondiscrimination in the type of the transactions and nature of the dealing as in the present case.
13. The existence of the power of judicial review however, depends upon the nature (of) and the right involved in the facts and circumstances of the particular case. It is well settled that there can be 'malice in law'. Existence of such 'malice in law' is part of the critical apparatus of a particular action in administrative law. Indeed 'malice in law' is part of the dimension of the rule of relevance and reason as well as the rule of fair play in action.
xxx xxx xxx 16. Mr. Salve submitted that in private law field there was no scope no scope for applying the doctrine of arbitrariness or mala fides. The validity of the action of the parties have to be rested, it was urged on behalf of the respondent on the basis of 'right' and not 'power'. A plea of arbitrariness/malafides 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. M/s. Salve sought to urge that there are certain cases under Article 14 of arbitrary exercise of such 'power' and not cases of exercise of a 'right' arising either under a contract or under a statute. We are of the opinion that would 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. It appears to us that in respect of Corporation like IOC, when without informing the parties concerned, as in the instant case of the appellant firm herein on alleged change of policy and on that basis action to seek to bring to an end the course of transaction over 18 years involving large amounts of money is not fair action, especially in view of the monopolistic nature of the power of the respondent in this field. thereforee, it is necessary to reiterate that even in the field of public law, the relevant persons concerned or to be affect, should be taken into confidence. Whether and in what circumstances that confidence should be taken into consideration cannot be laid down on any straight jacket basis, it depends on the nature on the right involved and nature of the power sought to be exercised in a particular situation. It is true that there is discrimination (distinction) between power and right but whether the State or the instrumentality of a State has the right to function in public field or private field is a matter which, in our opinion, depends upon the facts and circumstances of the situation, but such exercise of power cannot be dealt with by the State or the instrumentality of the State without informing and taking into confidence, the party whose rights and powers affected or sought to be affected, into confidence. In such situations most often people feel aggrieved by exclusion of knowledge if not being taken into confidence.
19. Such transaction should continue as an administrative decision with the organ of the State, it may be contractual or statutory but in a situation of transaction between the parties for nearly two decades. Such procedure should be followed which will be reasonable, fair and just, that is, the process which normally be accepted to be followed by an organ of the state and that process must be conscious and all those affected should be taken into confidence.
20. Having regard to the nature of the transaction, we are of the opinion that it would be appropriate t o state that in cases where the instrumentality of the state enters the contractual field, it should be governed by the incidence of the contract. It is true that it may not be necessary to give reasons but in our opinion in the field of this nature fairness must be there to the parties concerned, and having regard to the large number or the long period and the nature or the dealings between the parties, the appellant should have been taken into confidence. Equality and fairness at least demands this much from an instrumentality of the state dealing with a right of the state not to treat the contract se subsisting. We must, however, evolve such process which will work.
23. The question came up for consideration again in the case of Kumari Shrilekha Vidyarthi etc. etc. Vs . State of U.P. and others. : AIR1991SC537 . In that case, State of U.P. had issued Government order dated 6.2.1990 whereby appointments of all Government Counsels (Civil, Criminal, Revenue) in all the Districts of the State of U.P. were terminated w.e.f. 28.2.1990, irrespective of the fact whether the term of the incumbents had expired or was subsisting. Validity of this G.D. was challenged by many of these Government Counsels whose appointments were terminated and one of the issues to be determined by the court was as to whether writ petition was maintainable challenging this G.D., as according to the Respondent State the appointment of these Government Counsels were purely contractual and writ petition to enforce the contract was not maintainable. It was also contended that relationship being purely contractual, cannot contend against will of either party and there was no scope for arguments that state does not have right to change the Government counsel at its will. After noticing this argument of the respondents, the Supreme Court formulated the question to be decided in the said case, in the following words:-
'The learned Additional Advocate General did not dispute that if Art. 14 of the Constitution of India is attracted to this case all State actions, the impugned circular would be liable to be quashed if it suffers from the vice of arbitrariness. However, his argument is that there is no such vice. In the ultimate analysis, it is the challenge of arbitrariness which the circular must challenge of arbitrariness withstand in order to survive. This really is the main point evolved for decision by us in the present case'.
The court then examined the nature of appointment of the Government counsel in the Districts with reference to the various legal provisions including legal Remembrance Manual and Section 24 Code of Criminal procedure as well as decision of Supreme Court in which character of engagement of a Government counsel was considered. After analyzing these provisions and case law, the Supreme Court concluded in the following manner, describing the nature of appointment of District Government counsel:-
17. We are, thereforee, unable t o accept the argument of the Ld. Addl. Advocate General that the appointment of District Government Counsel by the State Government is only a professional engagement like that between a private client and his lawyer, or that it is purely contractual with no public element attaching to it, which may be terminated at any time at the sweet will of the Government excluding judicial review. We have already indicated the presence of public element attached to the 'office' or post of District Government Counsel of every category covered by the impugned circular. This is sufficient to attract Article 14 of the Constitution and bring the question of validity of the impugned circular within the scope of judicial review.
18. The scope of judicial review permissible in the present case, does not require any elaborate consideration since even the minimum permitted scope of judicial review on the ground of arbitrariness or unreasonableness or irrationality, once Art. 14 is attracted, is sufficient to invalidate the impugned circular as indicated later. We need not, thereforee, deal at length with the scope of judicial review permissible in such cases since several nuances of that ticklish question do not arise for consideration in the present case.
19. Even otherwise and sans the element so obvious in these appointment and its concomitants viewed as purely contractual matters after the appointment is made, also attract Art. 14 and exclude arbitrariness permitting judicial review of the impugned state action. This aspect is dealt with hereafter.
20. Even apart from the premises that 'office' or post of D.G.Cs. has a public element which alone is sufficient to attract the power of judicial review for testing validity of the impugned circular on the anvil of Art. 14, we are also clearly of the view that this power is available even without that element on the premise that after initial appointment, the matter is purely contractual. Applicability of Art. 14 to all executive actions of the State being settled and for the same reason its applicability at the threshold to the making of a contract in exercise of the executive power being beyond dispute, can it be said that the State can thereafter cast off its personality and exercise unbridled power unfettered by the requirements of Art. 14 in the sphere of contractual matters and claim to be governed therein only by private law, principles applicable to private individuals whose rights flow only from the terms of the contract without anything more We have no hesitation in saying that the personality of the State, requiring regulation of its conduct in all spheres by requirements of Art. 14 does not undergo such a radical change after the making of a contract merely, because some contractual rights accrue to the other party in addition. It is not as if the requirements of Art. 14 and contractual obligations are allien concepts, which cannot co-exist.
21. The preamble of the Constitution of India resolves to secure to all its citizens Justice, social economic and political: and Equality of status and opportunity. Every State action must be aimed at achieving this goal. Part IV of the Constitution contains 'Directive principles of State Policy' which are fundamental in the governance of the country and are aimed at securing social and economic freedoms by appropriate State action which is complementary to individual fundamental rights guaranteed in part III for protection against excesses of State action, to realise the vision in the preamble. This being the philosophy of the constitution, can it be said that it contemplates exclusion of Art. 14 non arbitrariness which is basic to rule of law from State actions is contractual field when all actions of the State are meant fore public good and expected to be fair and just we have no doubt that the Constitution does not envisage or permit unfairness or unreasonableness in State actions in any sphere of its activity contrary to the professed ideals in the preamble. In our opinion, it would be alien to the Constitutional scheme to accept the argument of exclusion of Art. 14 in contractual matters. The scope and permissible grounds of judicial review in such matters and the relief which may be available are different matters but that does not justify the view of its total exclusion. This is more so when the modern t rend is also to examine the unreasonableness of a term in such contractual where the bargaining power is unequal so that these are not negotiated contracts but standard from contracts between unequal.
22. There is an obvious difference in the contracts between private parties and contracts to which the State is a party. Private parties are concerned only with their personal interest whereas the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it for public good and in public interest. The impact of every State action is also on public interest. This factor alone is sufficient to import at least the minimum requirements of public law obligations and impress with this character the contracts made by the State or its instrumentality. It is a different mater that the scope of judicial review in respect of disputes scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes. However, to the extent, challenge is made on the ground of violation of Art. 14 by alleging that the impugned act is arbitrary, unfair or unreasonable, the fact that the dispute also falls within the domain of contractual obligations would not relieve the State of its obligation to comply with the basic requirements of Art. 14. To this extent, the obligation is of a public character invariably in every case irrespective of there being any other right or obligation in addition thereto. An additional contractual obligation cannot divest the claimant of the guarantee under Art. 14 of non-arbitrariness at the hands of the State in any of its actions.
xx xx xx 34. In our opinion, the wide sweep of Art. 14 undoubtedly takes within its fold the impugned circular issued by the State of U.P. in exercise of its executive power, irrespective of the precise nature of appointment of the Government counsel in the districts and the other rights, contractual or statutory, which the appointees may have. It is for this reason that we base our decision on the ground that independent of any statutory right, available to the appointments, and assuming for the purpose of this case that the rights flow only from the contract of appointment, the impugned circular, issued in exercise of the executive power of the State, must satisfy Art. 14 of the Constitution and if it is shown to be arbitrary, it must be struck down. However, we have referred to certain provisions relating to initial appointment, termination or renewal of tenure to indicate that the action is controlled at least by settled guidelines, followed by the State of U.P. for a long time. This too is relevant for deciding the question of arbitrariness alleged in the present case'
24. Similarly, in State of Gujarat v. M.P. Shah Charitable Trust (1994) 3 SC 552. Supreme Court reiterated the principles that if the matter is governed by a contract, the writ petition is not maintainable since it is a public Law remedy and is not available in private law field, for example, where the matter is governed by a non-statutory contract.
In Union of India Vs . M/s. Graphic Industries Co. and others : AIR1995SC409 , a Contractor, had invoked the extra-ordinary jurisdiction of High Court by filing the writ petition seeking Mandamus for payment of the amount on the basis of certain correspondence between the local M.P. and Railway Minister and between the Addl. Private Secretary to the Minister and the Director, Controller of Stores, as also the General Manager, Eastern Railway. The submission of the respondents was that it was clear from the aforesaid correspondence that respondent was entitled to payment to about half-a-corer Rupees by Railway which was wrongly not paid. The learned Single Judge took the view that correspondence in question cannot be treated as decision of the President of India and as visualised by Article 377 of the Constitution of India and thereforee, directed the respondent to move appropriate forum for redressal of the grievances including going in for arbitration as per the Contract, leaving all the questions to be decided in an appropriate forum. In appeal, however, Division Bench took the view that instructions contained in another letter dated 8/9th May, 1991 of Addl.Private secretary, addressed to General Manager Eastern Railway, Calcutta (which was written after the judgment of the Single Bench) were binding on the General Manager being subordinate authority and allowed the appeal directing the appellants to make the payment. The Division Bench also took the view that what was said in the letter was just and proper in the facts and circumstances of the case and was in consonance with views expressed by Supreme Court in Hindustan Sugar Mill v. State of Rajasthan AIR 1981 SC 1618 wherein it was held that Central Government should honour its obligation arising even out of contract and not drive a citizen to file a suit. It was reiterated in that judgment that in a democratic society governed by Rule of Law, it is the duty of the State to do what is fair and just to a citizen and State should not seek to defeat the legitimate claim of the citizen by adopting a legalistic claim of the citizen by adopting a legalistic attitude but should do what fairness and justice demands. Against this judgment of Division Bench Union of India preferred SLP to Supreme Court. Before Supreme Court, respondents did not rely upon the letter dated 8/9th May, 1991 addressed by Addl.Private Secretary but the main argument adduced was that it was the duty of the Government to act fairly which obligation had to be discharged even in matters pertaining to contractual right. The case was, thereforee, examined from the angle as to whether Government had acted unfairly in withholding payment of the respondent and on facts came to the conclusion that the materials which Division Bench of the High Court had noted do not make out the case of unfairness. However, after coming to this conclusion, the question as to whether writ is maintainable in the field covered by the contractual right and obligations was not decided. What was stated on this aspect can be noticed in paragraphs 10 and 11 of the judgment which are reproduced below:-
'10. We are not satisfied from what has been stated in the impugned judgment that the Railways had acted unfairly in withholding the payment of the respondents. In view of this, we need not dilate on the submission of shri Ganguli that even in contractual matters public authorities have to act fairly: and if the fail to do so approach under Article 226 would always be permissible because that would amount to violation of Article 14 of the Constitution. In support of this submission, Shri Ganguli has mainly relied upon a two-judge Bench decision of this court in Kumari Shrilekha Vidyarthi v. State of U.P., of which this aspect of the matter has been dealt with by stating that the requirements of Article 14 being the duty to act fairly, justly and reasonably, there is nothing which militates against the concept of requiring the State always to so act even in contractual matters (see paragraph 24). What has been stated in paragraph 28 is that it would be difficult and unrealistic to exclude the State action in contractual matters, after the contract has been made, from the purview of the judicial review to test its validity on the anvil of Article 14. The Bench thereafter referred to various earlier decisions of this Court on this point including Mahabir Auto Stores v. Indian Oil Corpn. and Dwarkadas Marfatia v. Board of Trustees of the port of Bombay.
11. Having come to the conclusion that the materials which the Division Bench noted do not make out a case of unfairness. It is not necessary to examine the question as to whether in the field covered by contractual rights and obligations it would always be permissible to invoke the extraordinary jurisdiction of the High Court under Article 226 of the Constitution. It would be enough to say that this remedy being discretionary, it would be open to the High Court to take a view on the fact situation before it that invocation of power under Article 226 would not be proper exercise of discretion, leaving the aggrieved person to seek remedy in some other forum or to take recourse to arbitration if that be visualised by the agreement between the parties.'
LIC of India and another v. Consumer Education and Research Centre and others 1995 5 SCC 582, is the next case which requires serious consideration and on which reliance was placed by counsel for the petitioners. The subject of permissibility to file writ petition in matters relating to State in contractual field is discussed in detail in this judgment. Certain conditions of LIC policy under table 58, were challenged in the writ petition, as arbitrary, unjust and discriminatory, whereby the particular policy was restricted only to specified classes namely Salaried persons in government/Quasi Government for reputed commercial firms. Amongst various issues which arise in that case, one of the issues was that it was the business of the insurer namely LIC and of acceptance of the proposal by the insurer in the Life Insurance business, the policy holders get rights under the policy. thereforee, insurer could put conditions in the proposal and the persons seeking to be insured could not enforce any right flowing from such conditions in as much as they cannot use judicial process to create right in their favor unless binding contract emerges by acceptance of proposal of insurance and acted upon.
25. Dealing with the aforesaid contention in para 20, the court made the following pertinent observations:-
'20. It is true that life insurance business as defined under section 2(11) of the Insurance Act, 1938, is business of effecting contracts of insurance upon human life, including any contract whereby the payment of money is assured on death (except death by accident only) or the happening of any contingency dependent on human life, and any contract which subject to payment of premiums for a term dependent on human life including those enumerated in clauses (a) to (c) thereof. Thereby, the contract of insurance is hedged by bilateral agreement on human life upon payment of premia subject to the covenants contained thereunder. But as stated earlier, is the insurer entitled to impose unconstitutional conditions including that which denied the right of entering into the contract, limiting only to a class of persons under a particular policy We made it clear at this juncture that the insurer is free to evolve a policy based on business principles and conditions before floating the policy to the general public offering on insurance of the life of the insured but as seen earlier, the insurance being a social security measure, it should be consistent with the constitutional animation and conscience of socio-economic justice adumbrated in the Constitution as elucidated hereinbefore.'
Thereafter the court referred to the earlier judgments in the cases of Erusian Equipment & Chemicals Ltd. Vs . State of West Bengal : [1975]2SCR674 : Sagir Ahmed Vs . State of Uttar Pradesh : [1955]1SCR707 : A. Sanjeevi Naidu v. State of Madras (1970) SCC 443: Ramana Dayaram Shetty Vs . International Air port Authority of India : (1979)IILLJ217SC : Kasturi Lal lakshmi Reddy Vs . State of J&K; : [1980]3SCR1338 : M.C. Metha Vs . UOI : [1987]1SCR819 : LIC Vs . Escorts Limited : 1986(8)ECC189 : Dwarka Dass Marfatia & Sons Vs . Board of Trustees of the port of Bombay : [1989]2SCR751 : Mahavir Auto store Vs . India Oil Corpn. : [1990]1SCR818 .
26. It also quoted Benzamin N. Cardozo from his book Judicial process and from Administrative Law by H.W.R. Wade. Thereafter the court reiterated the proposition of law in the following words:-
'26. This Court has rejected the contention of an instrumentality of the State that its action is in the private law field and would be immuned from satisfying the tests laid under Article 14, The dichotomy between public law and private law rights and remedies, though may not be obliterated by any strait-jacket formula, it would depend upon the factual matrix. The adjudication of the dispute arising out of a contract would, thereforee, depend upon facts and circumstances in a given case. The distinction between public law remedy and private law field cannot be demarcated with precision. Each case will be examined on its facts and circumstances to find out the nature of the activity, scope and nature of the controversy. The distinction between public law and private law remedy has now become too thin and practicably obliterated.
27. In the sphere of contractual relations the State, its instrumentality, public authorities or those whose acts bear insignia of public element, action to public duty or obligation are enjoined to act in a manner i.e. fair, just and equitable, after taking objectively all the relevant options into consideration and in a manner that is reasonable, relevant and germane to effectuate the purpose for public good and in general public interest and it must not take any irrelevant or irrational factors into consideration or appear arbitrary in its decision. Duty to act fairly is part of fair procedure envisaged under Articles 14 and 21. Every activity of the public authority or those under public duty or obligation must be informed by reason and guided by the public interest.
28. In Kumari Shrilekha vidyarthi v. State of UP this court in para 22 pointed out that the private parties are concerned only with their personal interest but the public authority are expected to act for public good and in public interest. The impact of every action is also on public interest. It imposes public law obligation and impresses with that character the contracts made by the state or its instrumentality: (SCC PP 236-37, para 22).
'It is a different matter that the scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes. However, to the extent, challenge is made on the ground of violation of Article 14 by alleging that the impugned act is arbitrary, unfair or unreasonable, the fact that the dispute also falls within the domain of contractual obligations would not relieve the State of its obligation to comply with the basic requirements of Article 14. To this extent, the obligation is of a public character invariably in every case irrespective of there being any other right or obligation in addition thereto. An additional contractual obligation cannot divest the claimant of the guarantee under Article 14 of non-arbitrariness at the hands of the state in any of its actions'.
29. In Food Corporation of India v. Kamdhenu Cattle Feed Industries (SCC at p.76 in para 8) this Court held that :
'The mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right but failure to consider and give due weight to it may render the decision arbitrary and this is how the requirement of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness, a necessary concomitant of the rule of law. Every legitimate expectation is a relevant factor requiring due consideration in a fair decision-making process'.
In Sterling Computers Ltd. v. M.& N. Publications Ltd. (SCC at p. 464. para 28), it was held that even in commercial contracts where there is a public element it is necessary that relevant considerations are taken into account and the irrelevant consideration discarded. In Union of India v. Graphic Industries Co. this Court held that even in contractual matters public authorities have to act fairly: and if they fail to do so approach under Article 226 would always be permissible because that would amount to violation of Article 14 of the constitution. The ratio in General Assurance Society Ltd. v. Chandumull Jain relied on by the appellants that tests laid therein to construe the terms of insurance contracts bears no relevance to determine the constitutional conscience of the appellant in fixing the terms and conditions in Table 58 and of their justness and fairness on the touchstone of public element. The arms of the High Court are not shackled with technical rules or procedure. The actions of the State, its instrumentality, any public authority or person whose actions bear insignia of public law element or public character are amenable to judicial review and the validity of such an action would be tested on the anvil of Article 14. 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. The distinction between the public law remedy and private law field cannot be demarcated with precision. Each case has to be examined on its own facts and circumstances to find out the nature of the activity or scope and nature of the controversy. The distinction between public law and private law remedy is now narrowed down. The actions of the appellants bear public character with an imprint of public interest element in their offers regarding terms and conditions mentioned in the appropriate table inviting the public to enter into contract of life insurance. It isn't a pure and simple private law dispute without any insignia of pubic element. thereforee, we have no hesitation to hold that the writ petition is maintainable to test the validity of the conditions laid in Table 58 term policy and the party need not be relegated to a civil action.'
27. The next case which may be relevant for our purpose is State of Uttar Pradesh Vs . Bridge & Roof Co. (India) Ltd. : AIR1996SC3515 . In that case, respondent had entered into the work Contract with Government of U.P. for rehabilitation and improvement of certain stretches of road in U.P. It completed the work. However, certain payments which according to the respondent were due to it were not paid by the Government of U.P. on the ground that it was entitled to retain. To claim this amount, respondent filed writ petition and in that context question arose as to whether writ petition was maintainable. This question was answered by the Supreme Court in the following manner:-
'15. In our opinion, the very remedy adopted by the respondent is misconceived. It is not entitled to any relief in these proceedings, i.e. in the writ petition filed by it. The High Court appears to be right in not pronouncing upon any of the several contentions raised in the writ petition by both the parties and in merely reiterating the effect of the order of the Deputy Commissioner made under the proviso to Section 8-D (I).
16. Firstly, the contract between the parties is a contract in the realm of private law. It is not a statutory contract. It is governed by the provisions of the Contract Act or, may be, also by certain provisions of the sale of Goods Act. Any dispute relating to interpretation of the terms and conditions of such a contract cannot be agitated, and could not have been agitated, in a writ petition. That is a matter either for arbitration as provided by the contract or for the civil court, as the case may be. Whether any amount is due to the respondent from the appellant-Government under the contract and, if so, how much and the further question whether retention or refusal to pay any amount by the Government is justified, or not, are all matters which cannot be agitated in or adjudicated upon in a writ petition. The prayer in the writ petition, viz. to restrain the Government from deducting a particular amount from the writ petitioner's bill (s) was not a prayer which could be granted by the High Court under Article 226. Indeed, the High Court has not granted the said prayer.
17. Secondly, whether there has been a reduction in the statutory liability on account of a change in law within the meaning of sub-clause (4) of clause 70 of the contract is again not a matter to be agitated in the writ petition. That is again a matter relating to interpretation of a term of the contract and should be agitated before the arbitrator or the civil court, as the case may be. If any amount is wrongly withheld by the Government, the remedy of the respondent is to raise a dispute as provided by the contract or to approach the civil court, as the case may be according to law. Similarly, if the government says that any overpayment has been made to the respondent its remedy also is to the same.
18. Accordingly, it must be held that the writ petition filed by the respondent for the issuance of a writ of mandamus restraining the Government from deducting or withholding a particular sum, which according to the respondent is payable to it under the contract, was wholly misconceived and was not maintainable in law. (See the decision of this Court in Asstt. Excise Commr. v. Issac Peter, where the law on the subject has been discussed fully). The writ petition ought to have been dismissed on this ground alone.'
At this stage it would be useful to note the relevant observations of Supreme Court in Issac Peter (supra) to which reference was made by Supreme Court in the aforesaid case. Dealing with doctrine of fairness and reasonableness in the matter of contract to which state is a party, the court observed as under :-
'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? The purpose, as we can see, is that though the contract says that supply of additional quota is discretionary, it must be read as obligatory at least to the extent of previous year's supplies by applying the said doctrine. It is submitted that if this is not done, the licensees would suffer monetarily. The other purpose is to say that if the State is not able to so supply, it would be unreasonable on its part to demand the full amount due to it under the contract. In short, the duty to act fairly is sought to be imported into the contract to modify and alter its terms and to create an obligation upon the State which is not there in the contract. We must confees, we are not aware of any such doctrine of fairness or reasonableness. Nor could that learned counsel bring to our notice any decision laying down such a proposition. Doctrine of fairness or the 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 principle of natural justice ensure fair decision where the function 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 very the express terms of the contract between the parties. This is so, even if the contract is governed by statutory provisions, i.e. where it is a statutory contract or rather more so.....'
In NOIDA Entrepreneur Association Vs . U.P. Financial Corporation, reported in which is a brief judgment, Supreme Court held that writ petition agitating the grievance that the rates of interest and penal interest being charged by the UP Financial Corporation were higher than those laid down in the guidelines issued by the refinancing institution namely IDBI had been held to be not maintainable.
28. In a recent judgment, in the case of State of Himachal Pradesh Vs . Raja Mahendra Pal and others : [1999]2SCR323 , the Supreme Court reiterated the principle that writ petition was not maintainable.
29. Legal position which emerges from various judgments of the Apex Court dealing with different situations/aspects relating to the contract entered into by the State/public Authority with private parties, can be summarized as under:-
(i) At the stage of entering into contract, the State acts purely in its executive capacity and is bound by the obligations which dealings of the State with the individual citizens import into every transaction entered into in exercise of its constitutional power.
(ii) State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practice some discriminations. However, the discrimination involved should be at the very threshold or at the time of entering into the field of consideration of person with whom Govt. could contract at all. Writ petition would be maintainable to challenge such discriminatory action of the State at the time of entering into contract.
(iii) Even in cases where question is of choice or consideration of competing claims before entering into the field of contract, facts have to be investigated and found before the question of a violation of Article 14 could arise. If those facts are disputed and require assessment of evidence the correctness of which can only be tested satisfactorily by taking detailed evidence, Involving examination and cross-examination of witnesses, the case could not be conveniently or satisfactorily decided in proceedings under Article 226 of the Constitution. In such cases court can direct the aggrieved party to resort to alternate remedy of civil suit etc.
(iv) After the State has entered into the field of ordinary contract, the relations are no longer governed by the Constitutional provisions but by the legally valid contract which rights and obligations of the parties inter se. No question arises of violation of Art. 14 or of any other constitutional provision when the State or its agents. Purporting to act within this field, perform any act. In this sphere, they can only claim rights conferred upon them by contract and are bound by the terms of the contract only. If some breach of contract is alleged writ is not the remedy unless some statute steps in and confers some special statutory power or obligation on the State in the contractual field which is apart from contract.
(v) Writ jurisdiction of High Court under Article 226 was not intended to facilitate avoidance of obligation voluntarily incurred.
(vi) Writ petition was not maintainable to avoid contractual obligation. Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification in not complying with the terms of contract which the parties had accepted with open eyes. It cannot ever be that a licensee can work out the license if he finds it profitable to do so: and he can challenge the conditions under which he agreed to take the license, if he finds it commercially inexpedient to conduct his business.
(vii) Ordinarily, where a breach of contract is complained of the party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed, or the party may sue for damages.
(viii) Writ can be issued where there is executive action unsupported by law or even in respect of a corporation there is denial of equality before law or equal protection of law or if can be shown that action of the public authorities was without giving any hearing and violation of principles of natural justice after holding that action could not have been taken without observing principles of natural justice.
(ix) If the contract between private party and the State/instrumentality and/or agency of State is under the realm of a private law and there is no element of public law, the normal course for the aggrieved party, is to invoke the remedies provided under ordinary civil law rather than approaching the High Court under Article 226 of the Constitutional of India and invoking its extraordinary jurisdiction.
(x) the distinction between public law and private law element in the contract with State is getting blurred. However, it has not been totally obliterated and where the matter falls purely in private field of contract. Apex court is still maintaining that writ petition is not maintainable. Dichotomy between public law and private law, rights and remedies would depend on the factual matrix of each case and the distinction between public law remedies and private law, field cannot be demarcated with precision. In fact, each case has to be examined, on its facts whether the contractual relations between the parties bear insignia of public element. Once on the facts of a particular case it is found that nature of the activity or controversy involves public law element, then the matter can be examined by the High Court in writ petitions under Article 226 of the Constitution of India to see whether action of the State and/or instrumentality or agency of the State is fair, just and equitable or that relevant factors are taken into consideration and irrelevant factors have not gone into the decision making process or that the decision is not arbitrary.
(xi) Mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirements of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness.
(xii) The scope of judicial review in respect of disputes falling within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes.
30. Viewing the present matter from the aforesaid angle and in the light of various decisions of Supreme Court noticed above. I am constrained to hold that the present writ petition is not maintainable and the petitioners have not chosen appropriate remedy. It is difficult to comprehend that and public law element is involved in the present case. The petitioners had entered into agreement dated 14.7.82 with the respondent because of which petitioners could get prime land for the construction of a 5 star hotel. This was the result of the bid submitted by the petitioners with the objective of excluding other competitors who were lying for the same project. Consciously, the petitioners offered particular license fee which was accepted by the respondent. On the basis of this license fee offered by the petitioners, petitioners could bag the contract to the exclusion of other competitors and thus got definite advantages because of its lucrative offer to NDMC. After all, what is the nature of contract entered into between the parties Land in question which belongs to NDMC was put to auction on license basis for the purpose of construction of a hotel. The petitioner after it was successful bidder took the said land on certain terms stated in the agreement entered into between the parties and started commercial venture of running the Hotel after contracting the same. This is a business proposition of the petitioner and purely a commercial venture. Petitioner has undertaken this commercial activity with the objective of earning profits. There cannot be any public interest involved in such activity which is purely a matter of personal interest of the petitioner. Ultimately, whether the commercial venture of the petitioner turns cut to be viable or not or the petitioner realises that the decision it took in offering terms to NDMC was not a sound business proposition, is a different matter altogether. In no case it changes the character of venture which is the private venture of the petitioner or brings into action public law element. No public interest is involved either. The law which deals with transactions between NDMC and petitioner is also the law of contract only and there is no element of public law involved. Such a contract is not governed by any statutory or constitutional provisions. It is the terms and conditions of the license which govern the relationship between the parties. Merely because 1200 employees are employed by the petitioner or financial institutions have given financial help etc. cannot be the factors on the basis of which one can draw the conclusion that matter falls under the realm of public law and affects public interest. If such factors are taken as relevant consideration for determining the nature of projects or businesses, every private enterprise undertaken by private persons with the purpose of earning profits and personal gains would be treated as one of public interest and/or coming under the realm of public law. Since I am taking the view that writ is not maintainable it would not be proper for me to comment upon merits of the case. However, even if it is presumed that the amount as demanded by NDMC is payable and on petitioner's failure to pay the amount NDMC would be taking the possession of the Hotel, the Hotel could still continue to run and only administration/ownership would change. How the employees are to be treated or for that matter financial institutions are to be secured can always be taken care of. These things can be worked out in such an eventuality, if at all, in the appropriate proceedings. These observations are made only in answer to the argument of the petitioner that these aspects are not determinative to bring in the elements of public law. Contract having been entered into on certain terms, thereafter whether there should be any no vocation and/or any revision in the license fee is a mater which has to be mutually agreed between both the parties. The subsequent developments which have taken place and on the basis of which the petitioner is trying to enforce any particular obligation of the respondent is again a matter in the realm of contract. It is in private law field and no public law element is involved. Merely because license fee is affecting viability of the project or there are financial institutions involved who have funded the project or the employees who are working with the petitioners in the Hotel would not cloth the project with public element. This case is in fact, more akin to the judgments of the Supreme Court in the cases of -
M/s. Radha Kishan : [1977]3SCR249
Jage Ram : [1980]3SCR746 ,
Har Shanker (1975) 1 SCC 37,
Bishwanath Tea Co. : [1981]3SCR662 ,
MP Shah Charitable Trust : [1994]3SCR163 etc.
Wherein it was specifically held that writ petition was not maintainable. The judgments cited by the petitioners are not applicable in the present case. After examining the facts of this case, one can come to the conclusion that the act of the respondent do not be insignia of public element. In fact, the cases in which Supreme Court interfered in writ jurisdiction were the cases where the action of the State was shockingly arbitrary and unfair. Such action could be dubbed as coming within the sweep of 'element of good governance' and the public law element was writ large. In the case of LIC (supra) the validity of clause of particular policy was involved which had the impact of affecting public at large and if particular segment of public was excluded from taking out insurance policies because of the said clause from L.I.C. which was the monopolitistic institution. Similar was the situation in Shri Lekha Vidhyarthy case wherein the action of the respondents smacked of arbitrariness by terminating the appointment of all the Government counsel in the entire State of U.P. in one stroke. It may be remembered that even in this case, Court also proceeded to hold that public law element was present and the matter could not be viewed as purely contractual.
31. The contentions of the petitioner that the ambit of the present petition was not purely contractual and involves element of public law by relying upon the so called promise allegedly held out by NDMC and on that basis making attempt to attract the principle of promissory estoppel and legitimate expectation are also without any merit. claim of the petitioners in this respect, is that against order dated 16.10.90 of Wadhwa J, petitioner had filed appeal. However, in view of supplementary agreement of 1991, the petitioner withdrew appeal as well as its claims and also paid the amount as per this agreement and supplementary agreement of 1995 and 1998. All this was done because the respondents held out the promise to consider the representation of the petitioner and come to a reasonable decision/conclusion about the license fee. However, one cannot ignore harsh reality which the petitioner was facing at that time. Order dated 16.10.90 was passed denying any interim relief/injunction to the petitioner. There was demand of Rs.18 Crores against the petitioner on the basis of which NDMC had proceeded to take action against the petitioner. thereforee, petitioner thought it proper to settle the matter and agreed to pay amount in the manner provided in the supplementary agreement dated 11.3.1991. Clause 7 of this Agreement on which strong reliance has been placed by the petitioner only talks of representation which can be made by the petitioner. It is not stated as to what kind of representation was permissible. The expression which is used in clause 7 is allowing the petitioner to make representation 'in respect of license fee'. Whether it related to revision in the license fee as claimed by the petitioner or it related to license fee to be paid in installments as claimed by the respondents is not clearly spelt out. There is no specific reference in the recital or operative parts of the agreement about the alleged grievance of the petitioner that the license fee was excessive or unviable or it wanted it to be reduced. Even if it is presumed that representation in respect of the license fee as mentioned in para 7 of the supplementary agreement dated 11.3.91 refers to the revision in license fee, what is stipulated in this para is that on making such representation by the petitioner it will be examined by NDMC on merits. Thus respondents had only agreed to consider the same and there is no promise that it would necessarily be reduced. On the contrary clause 9 of the same agreement specifically keeps in tact the terms and conditions of the earlier agreement including main agreement dated 14.7.1982 which stipulated the license fee payable by the petitioner. thereforee, there are disputes regarding existing nature and scope of clause 7 and one cannot spell from Clause 7 about any definite nature of representation. It there fore, become a disputed question, However, there is also a dispute about the consideration of such representation. Whereas the petitioner contends that there is no consideration of his representation, respondent NDMC maintains that NDMC has considered but could not accept the request of the petitioner. Further merely because petitioners have made payment or have paid a sum of Rs. 47 Crores after supplementary agreement dated 11.3.91 was entered into, does not advance the case of the petitioner on this account. Petitioner, was bound to make this payment even other wise. The minimum guaranteed payment of Rs. 2.68 Crores per annum was to be made by the petitioner in any case. Petitioner has further agreed that license fee payable would be 23% of the annual sales. The case of the petitioner is that the rate of 23% is unviable and petitioner wants it to be reduced and thereforee, made representation that Committee be set up by the respondents to go into this question. Thus even as per petitioner, it is not only the sum of Rs.2.68 Crores but some percentage of the annual sales which is payable by it to the NDMC. The expectation of the petitioner is that it should be less than 23%. It is not the case of the petitioner that nothing is payable on this account and only Rs.2.68 Crores is payable. thereforee, by making payment of Rs.47 Crores petitioner has not done any favor to the respondents. The agreement was entered in the year 1982 and the payment made represents the period of 16 to 17 years.
32. As far as the contention of the petitioner to the effect that Chair person had assured the petitioner that a Committee would be constituted to consider its representation. Respondent/NDMC has specifically denied the same in its counter affidavit. It had been submitted that Chair person could not agree to such suggestion which could amount to re-writing the contract and the letters written by the petitioner on which the petitioner had relied, are self-serving in nature. Thus, whether there was such promise and assurance or not itself is a matter of dispute. Unless these disputed questions are resolved and some definite findings arrived at, no conclusion can be drawn that the action of the respondent/NDMC is arbitrary or malafide or that NDMC is acting in an unfair manner. All these questions can, thereforee, be very well decided in suit and/or arbitration proceedings. After all in holding that writ is not maintainable. Petitioner does not become remediless and he can still agitate all these questions in appropriate forum.
33. There is also an arbitration clause in the License Agreement entered into between the parties. Thus following the ratio of the judgment in the cases of (i) Escotel Mobile Communication Ltd. v. UOI reported in 1997 (2) Arb LR 32: (ii) Bareilly Development Authority and another Appellant Vs . Ajay Pal Singh and others. Respondents, : [1989]1SCR743 , writ is not maintainable even on this ground. In fact, on the earlier occasion petitioner had invoked this very arbitration clause and filed a petition under Sec. 20 of the Indian Arbitration Act. 1940.
34. Moreover, what is impugned is the Show Cause Notice. No final decision has so far been taken pursuant to the said Show cause notice. Normally courts do not entertain petition at this stage (See : [1983]142ITR663(SC) ) . Cumulative effect of all these aspects compels me to take view that the present writ petition is not maintainable and appropriate remedy for the petitioners is to file suit and/or arbitration proceedings invoking arbitration clause in the agreement.
35. Before concluding, I may refer to refer to a recent judgment dated 29.2.2000 of Division Bench of this court in Civil Writ No. 4567/97 Association of Victims of Uphaar Tragedy v. Union of India and others. In the said case. Division Bench has held writ petition to be maintainable and counsel for the petitioner had submitted a copy of the judgment obviously with the purpose to support his contention that writ is maintainable. However, the said judgment has no bearing on the present case. The said case arose out of an ugly and unfortunate incident which took place in Uphaar Theatre in the evening of 13th June, 1997. The fire took place in which number of people were killed and/or injured. Writ petition was filed by those who were injured or the relatives of those who were injured or killed in the fire seeking adequate compensation for the victims and punitive damages against the Respondents for showing callous disregard to their statutory obligations and to the fundamental and indefeasible rights guaranteed under Article 21 of the Constitution of India of the paying public in failing to provide safe premises, free from hazards that could reasonably be foreseen. In such a petition filed by these petitioners, question of maintainability of the petition was taken up as preliminary question and decided by the aforesaid judgment holding that petition was maintainable. The court took note of various judgments dealing with the maintainability of the writ petition filed, seeking compensation by those who became victims of the high-handedness of the Government/Governmental authorities. All these cases had the shade of Article 21 of the Constitution of India dealing with life and liberty of the victims. It was noticed that the law has been evolved whereby the claim in public law for compensation in contravention of human right and fundamental freedom, the protection of which is guaranteed in the Constitution, had become the acknowledge remedy, S.N. variava, C.J. speaking for the Bench after dealing with the contention of counsels for both sides observed in para 93 of the judgment as under:-
'We have heard parties at length and considered all the submission, the cases relied upon by Mr.Desai and Dr.Dhawan undoubtedly show that the law is that, ordinarily, if disputed questions of fact arise. Courts would not interfere in writ jurisdiction. Also at one stage State did enjoy an immunity. However, law has developed with the times. None of the cases, relied upon by Mr.Desai, Dr.Dhawan, and/or Mr.Rawal have dealt with or considered the law as it has evolved. Now the law is that in cases where question of life and liberty arise, merely because some disputed questions of fact are sought to be raised, Court would not be justified in requiring the party to seek relief by way of lengthy, dilatory and expensive process of a civil suit. As seen by the various authorities cited by Mr.Tulsi Court is not powerless in such cases. As has been set out by the Supreme Court in Century spinning & 's case the High Court may, in exercise of its discretion decline to exercise its extraordinary jurisdiction under Art. 226 of the Constitution. But the discretion is judicial. Thus if the petitioner makes a claim which is frivolous, vexatious, or prima facie unjust or which may not appropriately be true in a petition invoking extraordinary jurisdiction, the court may decline to entertain the petition. But a party claiming to be aggrieved by the action of a public body or authority on the plea that the action is unlawful, high-handed, arbitrary or unjust is entitled to a hearing of its petition on the merits. 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 expensive process by a Civil Suit against a public body. In Bandhus Mukti's case the Supreme Court held that Court can appoint responsible persons as commissioner and ascertain facts for itself. The Supreme Court held that once the Report of the Commissioners is received it would be supplied to the parties so that if they dispute any fact or data they may do so by filling an Affidavit. The Supreme Court held that Court could then consider the Report and the Affidavits and that it would then be for the Court to decide what weight is to be attached to facts and data stated in the Report of the Commissioner. As set out in Bandhua Mukti's case it would not be correct to say that the report of a Court appointed Commissioner had no evidentiary value since statements in it were not tested by cross-examination. This case shows that Courts have power to appoint Commissioner whose Reports will furnish prima facie evidence on the basis of which the Writ Court can act. The Supreme Court also appointed Commissioners and ascertained facts for itself for itself amongst others in Bhola Nath Tripathi's case and M.C. Mehta's case. In this last mentioned case Supreme Court has gone to the extent of laying down that Courts are free to devise any procedure appropriate for that particular purpose.'
The facts of the said case and the circumstances in which the afore said observations were made by the court have no parallel with the instant case. In fact, the court had, in that case considered all together different aspect of the matter namely the question of life and liberty and in this context it was observed that merely because some disputed questions of facts are sought to be raised, court could not be justified in requiring the party to seek relief by way of lengthy, dilatory and expensive process of a civil suit. It was in this context the court observed that a party claiming to be aggrieved by the action of a public body or authority on the plea that the action is unlawful, highhanded, arbitrary or unjust is entitled to a hearing of its petition on the merits. These observations are to be read in the context in which they are made. In the same very para, extracted above court has taken note of Supreme Court judgment in Century Spinning & . case where Supreme Court held that High Court may in exercise of its discretion decline to exercise its extra-ordinary jurisdiction under Article 226 of the Constitution, of course, discretion has to be judicious. Thus the Division Bench in the aforesaid case was dealing with entirely different situation and treading all together different path. There cannot be any fusion of the principles laid down in the said case with the instant case. Here, we are dealing with the maintainability of the writ petition and contractual obligations under the realm of contract in a private field without any insignia of public element. The case law which has developed in this field and taken note of in this judgment has no co-relation with the situation prevailing in the case of Uphaar tragedy and the case law dealt with in the aforesaid judgment of the Division Bench. thereforee, this case is of no assistance to the petitioner.
36. Since I am not entertaining this petition and holding that the appropriate remedy is elsewhere I have tried to confine my discussion on this aspects only as any such observation discussing the mater in further detail may effect either party. This writ petition is accordingly dismissed as not maintainable. Although not necessary, but I still make it clear that the observations made by me are not to be construed as observations made on the merits of the dispute between the parties. Writ petition is accordingly dismissed. No order as to costs.