State Industries Promotion Corporation of Tamil Nadu Limited Represented by Its Chairman and Managing Director Vs. Novatron Broad Band Private Ltd. Represented by Its Director M. Venkateswara Rao and - Court Judgment

Excerpt:
- t.n. estates (abolition & conversion into ryotwari) act, 1948 [act no. 26/1948]. sections 5(2) & 67; [a.p. shah, cj, mrs. prabha sridevan & p. jyothimani, jj] suo motu revisional powers held, on a bare reading of the provisions of section 5(2) of the act, it is clear that the power conferred on the director by section 5(2) to cancel or revise any of the orders, acts or proceedings of the settlement officer is very wide. in the first place, the director need not necessarily be moved by any party in that behalf, and the power could be exercised either on an application by an aggrieved person or suo motu. for example, if the director comes to know that contrary to the scheme of the act or due to misrepresentation or fraud played, a patta had been granted to a person under the relevant provisions of the act, then to set right that mistake, the director should be enabled to exercise his power so as to effectuate the scheme of the act and to implement the purpose behind the act. the fact that the rule making authority has prescribed procedure in exercise of the powers under section 67 for making an application to the director does not mean that the suo motu power which is explicit in section 5(2) of the act is in any way curtailed or taken away. therefore, the contention of the respondent that making an application is sine qua non for invoking the power under section 5(2) of the act is not tenable. -- t.n. estates (abolition & conversion into ryotwari) act, 1948. sections 5(2) & 67; suo motu revisional powers held, on a bare reading of the provisions of section 5(2) of the act, it is clear that the power conferred on the director by section 5(2) to cancel or revise any of the orders, acts or proceedings of the settlement officer is very wide. in the first place, the director need not necessarily be moved by any party in that behalf, and the power could be exercised either on an application by an aggrieved person or suo motu. for example, if the director comes to know that contrary to the scheme of the act or due to misrepresentation or fraud played, a patta had been granted to a person under the relevant provisions of the act, then to set right that mistake, the director should be enabled to exercise his power so as to effectuate the scheme of the act and to implement the purpose behind the act. the fact that the rule making authority has prescribed procedure in exercise of the powers under section 67 for making an application to the director does not mean that the suo motu power which is explicit in section 5(2) of the act is in any way curtailed or taken away. therefore, the contention of the respondent that making an application is sine qua non for invoking the power under section 5(2) of the act is not tenable. r. banumathi, j.1. this writ appeal arises out of the order in w.p. no. 26075/2007 dated 01.9.2008 quashing the cancellation of allotment to 1st respondent.2. first respondent is a company registered under the companies act dealing in all electronics, communications, wireless communications, electrical, information technology, cable communications etc. on the request made by the 1st respondent, state industries promotion corporation of tamil nadu limited [sipcot] allotted a plot bearing no. 2/d2 in the information technology park at siruseri. pursuant to the allotment order issued by the sipcot, 1st respondent executed a lease deed on 24.1.2002. the lease period is 99 years. in consideration of the said allotment, 1st respondent was required to pay a sum of rs. 7,00,000/- being 100% of the plot deposit and rs. 19,00,000/- towards development charges and 1st respondent paid the same.3. on 18.5.2006 at 4.00 p.m., possession of the plot was handed over to the 1st respondent. stating that 1st respondent did not come forward to take possession of the property and that there was violation of terms of lease, sipcot, by proceedings dated 17.7.2006 cancelled the allotment of the plot and also ordered for forfeiture of the initial deposit in accordance with the terms and conditions which was challenged in the writ petition.4. grievance of the appellant is that inspite of request, 1st respondent company had not taken over possession and failed to comply with the terms and conditions of the allotment order and lease deed and sipcot had no other option but to cancel the allotment to the 1st respondent.5. learned single judge held that in a concluded contract between state and private party, if there is violation of principles of natural justice, court has to necessarily entertain the writ petition. in so far as, arbitration clause, learned single judge held that the managing director of sipcot himself cancelled the allotment and the arbitration clause 36 has become unworkable. learned single judge further held that before cancellation of allotment, sufficient opportunity was not afforded to the 1st respondent and the impugned order was quashed on the ground of violation of principles of natural justice.6. even at the admission stage, with the consent of learned additional advocate general appearing for appellant and the learned counsel for 1st respondent, the matter was heard at length.7. mr. p.wilson, learned additional advocate general for appellant-sipcot has submitted that when parties are governed by contractual terms and when there is breach of terms of contract, there cannot be complaints of violation of principles of natural justice. it was further contended that when sipcot was acting in terms and conditions of the concluded contract between the parties, there was no exercise of statutory power and while so, the learned single judge erred in quashing the order of cancellation of allotment. submitting that judicial review is not available in cases of concluded contracts, learned additional advocate general placed reliance upon : (1994) 3 scc 552 state of gujarat and ors. v. meghji pethraj shah charitable trust and ors.; : (1977) 3 scc 457 radhakrishna agarwal and ors. v. state of bihar and ors. and : (2000) 6 scc 293 kerala state electricity board and anr. v. kurien e.kalathil and ors..8. onbehalf of 1st respondent mr. s. silambanan, learned senior counsel submitted that possession was given to the 1st respondent only on 18.5.2006 and after handing over possession, reasonable time ought to have been given to the 1st respondent for construction. it was further submitted that having handed over possession on 18.5.2006 without giving any reasonable time, cancellation of allotment on 17.7.2006 is arbitrary exercise of power. it was further argued that since there was arbitrary exercise of power, writ petition was well maintainable. in support of his contention, learned senior counsel placed reliance upon : (1998) 8 scc 1 whirpool corporation v. registrar of trade marks, mumbai and ors.; : (2003) 2 scc 107 harbanslal sahnia and anr. v. indian oil corporation limited and ors.; : (2004) 3 scc 553 abl international limited and anr. v. export credit guarantee corporation of india limited and ors.; : air 2007 sc 1529 sunil pannalal banthia and ors. v. city and industrial development corporation of maharashtra limited and anr. and 2007 60 supreme 172 m.p. state agro industries development corporation limited and anr. v. jahan khan.9. first respondent was allotted 2 acres of industrial plot on 22.1.2002. as per the allotment order, the activities are to be done in the phased manner wherein the allottee should execute lease deed in 90 days from the date of allotment, to take possession of the plot within 105 days from the date of allotment, to commence construction within 6 months from the date of the allotment order, complete construction within 24 months from the date of allotment order and to commence commercial production within 30 months from the date of the allotment order.10. stand of sipcot is that it had requested the 1st respondent to comply the terms and conditions of the allotment by letter dated 27.5.2005 for which 1st respondent informed the appellant that construction would be started by december 2005 by letter dated 19.7.2005. since no activity was started, again notice dated 20.1.2006 was sent to the 1st respondent to comply the terms and conditions within 15 days for which 1st respondent has sent a reply dated 23.2.2006 that by april 2006 they would start the construction work and complete by december 2006.11. learned single judge observed that no show cause notice was issued prior to cancellation of allotment and there was violation of principles of natural justice. learned additional advocate general produced the show cause notice dated 19.6.2009 sent by rpad to the 1st respondent which contains despatch seal and finds reference in the impugned order. under section 114 of indian evidence act and section 27 of general clauses act, there would be presumption that a correctly addressed letter was delivered to the addressee. therefore, it cannot be said that there was violation of principles of natural justice. however, as discussed infra, the impugned order suffers from unreasonableness.12. interplay between writ jurisdiction and contractual disputes has given rise to a plethora of decisions by the supreme court. see dwarkadas marfatia and sons v. board of trustees, port of bombay : (1989) 3 scc 293 and mahabir auto stores v. indian oil corporation : (1990) 3 scc 752.13. taking us through various letters by sipcot, learned additional advocate general submitted that inspite of several opportunities, 1st respondent did not commence the construction work and the production. it was further argued that the main purpose of the allotment of plot to the 1st respondent was to promote employment opportunities in the state and by delaying implementation of the project, 1st respondent has violated the terms and conditions of the allotment. the allottee / 1st respondent paid the annual maintenance charges for the common amenities and facilities like roads. by proceedings dated 28.4.2006, sipcot has directed the 1st respondent to pay the provisional maintenance charge for the year 2005-2006 at rs. 3626/- which was paid by the 1st respondent. inspite of alleged initial latches on the part of the 1st respondent, admittedly possession of the plot was handed over to the 1st respondent on 18.5.2006. 14. after taking over possession, by the letter dated 25.5.2006, 1st respondent informed the sipcot that due to unavoidable reasons, they could not commence the construction activities during april 2006 and however informing that they would start implementation of their project by july 2006. it was at that stage, show cause notice was issued on 19.6.2006 calling upon the 1st respondent to show cause why allotment should not be cancelled and the plot resumed under tnppe act. thereafter, by the proceedings dated 17.7.2006, allotment was cancelled for violation of allotment clause 3 (vii) & 3 (viii) and lease deed clause no. 18 the allottee shall commence construction of buildings within six months and completed within 24 months from the date of allotment order.15. the main contention of the appellant/sipcot is that in cases of concluded contract, sipcot was acting in its executive capacity in the contractual field on the allegations of breach of contract and while so, the writ petition filed under article 226 of constitution is not maintainable. in support of his contention, learned additional advocate general placed reliance upon : (1989) 2 scc 116 [bareilly development authority and another]. in the said case the bareilly development authority undertook construction of dwelling units for people belonging to different income groups and offered to registering the names of intending applicants, subsequently notices were sent intimating the revised cost of houses/flats and the monthly instalment rates which were almost double of the cost and rate of instalments initially stated in the general information table which was challenged in the writ petition. observing that applicants desirous of purchasing dwelling houses/flats having entered into contract with bareilly development authority, 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 and they can only claim rights conferred upon them by the contract, the supreme court held as under: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 (19770 3 scc 457; premji bhai parmar v. delhi development authority : (1980) 2 scc 129 and dfo v. biswanath tea company ltd. : (1981) 3 scc 238.23. in view of the authoritative judicial pronouncements of this court in the series of cases dealing with the scope of interference of a high court while exercising its writ jurisdiction under article 226 of the constitution of india in cases of non-statutory concluded contracts like the one in hand, we are constrained to hold that the high court in the present case has gone wrong in its finding that there is arbitrariness and unreasonableness on the part of the appellants herein in increasing the cost of the houses/flats and the rate of monthly instalments and giving directions in the writ petitions as prayed for.16. observing that contractual or commercial activities of a statutory body need not necessarily raise issues of public law and disputes arising from such activities must be settled according to the principles of law of contract, in : (2000) 6 scc 293 kerala state electricity board and anr. v. kurien e.kalathil and ors. the supreme court held as under:10. we find that there is a merit in the first contention of mr. raval. learned counsel has rightly questioned the maintainability of the writ petition. the interpretation and implementation of a clause in a contract cannot be the subject-matter of a writ petition. whether the contract envisages actual payment or not is a question of construction of contract. if a term of a contract is violated, ordinarily the remedy is not the writ petition under article 226. we are also unable to agree with the observations of the high court that the contractor was seeking enforcement of a statutory contract. a contract would not become statutory simply because it is for construction of a public utility and it has been awarded by a statutory body. we are also unable to agree with the observation of the high court that since the obligations imposed by the contract on the contracting parties come within the purview of the contract act, that would not make the contract statutory. clearly, the high court fell into an error in coming to the conclusion that the contract in question was statutory in nature.17. in a catena of decisions, supreme court held that after the contract between the parties is concluded, the rights of the parties flow from mere terms of the contract entered into by the authorities of the state and the party to such contract cannot invoke writ jurisdiction of the high court under article 226 of the constitution for the enforcement of contractual rights and obligations. there is no question of infraction of any rules or statutes. courts have always called upon such petitioners to seek their remedy in a civil court since it is apparent that in such cases there cannot be adjudication without evidence on the point.18. we are conscious of the well settled position that breach of contract cannot be remedied by the court in exercise of its power under article 226 of constitution. this, however does not mean that once the contract has been entered into between the parties, petition under article 226 of constitution is not maintainable at law. as already noted earlier, every action of the state or its instrumentality is subject to rule of law and must be informed by non-arbitrariness and reasons.19. in a similar case in : air 2009 sc 218 m.d., h.s.i.d.c. and ors. v. hari om enterprises and anr., an industrial plot was allotted to allottee and time for putting up building and starting industrial production was stipulated in the letter of allotment. in the said case, there was delay in handing over actual possession to the allottee and sanctioning the plan and there was delay in proceeding with the construction. observing that resumption of plot by the corporation for breach of time schedule fixed for construction is arbitrary, the supreme court held as follows:37. the particulars contemplated in the letter of allotment as also the letter of offer of possession and the procedures laid down therefor were required to be scrupulously complied with. the letter of allotment as also the letter of offer of possession must be read conjointly. the very fact that not only the amount specified therein was required to be paid in instalments but also with interest at the rate of 18% per annum, was required to be borne in mind. thus, in a case where the allottee had complied with the terms of allotment in the matter of payment of instalments, the same would be a relevant factor for exercising the enabling clause of resumption by a 'state'. not only that, a further opportunity was required to be given to the allottee even if there was some default on its part inasmuch as the appellant itself provides for levy of penalty. the power of resumption, thus, must be resorted to only in a case where despite grant of the opportunities contemplated in terms of the letter of intent were violated.20. in : (1990) 3 scc 752 mahabir auto stores v. indian oil corporation, the petitioner firm was carrying on business of sale and distribution of lubricants since 18 years. the respondent-corporation, however, suddenly and abruptly stopped supply of materials to the firm. before taking the impugned action no notice was issued to the petitioner, no explanation was sought and no opportunity of hearing was afforded. the said action was challenged by the petitioner firm by filing a petition in the high court of delhi under article 226 of constitution but it was dismissed. the petitioner approached the supreme court. allowing the appeal and setting aside the order of the high court, the supreme court observed as under:every action of the state executive authority must be subject to rule of law and must be informed by reason. so whatever by the activity of the public authority, in such monopoly or semi-monopoly 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. ..... 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 non-discrimination in the type of the transaction and nature of the dealing as in the present case.21. the state government by a circular terminated appointment of all government counsel and when the validity of the said circular was questioned by filing a petition, it was contended by the state government that at the most there was a breach of contract which was not subject to the writ jurisdiction of the court. negating the contention, in : (1991) 1 scc 212 shrilekha vidyarthi v. state of u.p., the supreme court held as follows:applicability of article 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 excessive 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 article 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 article 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 article 14 and contractual obligations are alien concepts, which cannot co-exist.22. the ratio of the supreme court in shrilekha vidyarthi's case lays down correct law on the point, wherein after considering all leading decision, the supreme court held as under:even assuming that it is necessary to import the concept of presence of some public element in a state action to attract article 14 and permit judicial review, we have no hesitation in saying that the ultimate impact of all actions of the state or a public body being undoubtedly on public interest, the requisite public element for this purpose is present also in contractual matters. we therefore, find it difficult and unrealistic to exclude the state actions in contractual matters, after the contract has been made, from the purview of judicial review to test its validity on the anvil of article 14.23. when the cancellation of allotment suffers from unreasonableness, certainly exercise of jurisdiction under article 226 of constitution is not daunted. in (2004) 3 scc 553 abl international limited v. export credit guarantee corporation of india limited, the supreme court held that once the state or an instrumentality of state enters into a contract, it is under an obligation to act fairly, justly and reasonably in consonance with article 14 of the constitution. contractual rights and obligations, in appropriate cases, therefore, can be enforced by a writ court by issuing suitable directions to set right an arbitrary action of such authority.24. although ordinarily a superior court in exercise of its writ jurisdiction would not interferes the terms of a contract qua contract, it is trite that when an action of the state is arbitrary or discriminatory and thus violative of article 14 of constitution a writ petition would be maintainable see abl international ltd. v. export credit guarantee corpn. of india ltd. : (2004) 3 scc 553.25. as the state is under obligation to act justly, fairly and reasonably, every action of public authority can be tested on the touchstone of article 14 of the constitution. as a matter of principle, therefore, it cannot be laid down that, in no case, a writ petition can be instituted for the enforcement of contractual rights and liabilities. whether or not a writ petition is maintainable depends upon the facts and circumstances of the case, the nature of action, the nature of injury, infringement of right, issues involved, relief sought and other relevant considerations.26. even though, there was violation of clauses 16, 18 and 19 and inspite of sending letters to the 1st respondent on 27.5.2005 and 20.1.2006, sipcot has not chosen to proceed to cancel the allotment. but as pointed out earlier, by proceedings dated 28.4.2006 siptcot has called upon the 1st respondent to pay the annual maintenance charges. thereafter, on 18.5.2006 possession was handed over to the 1st respondent by the sipcot.27. having handed over possession on 18.5.2006, without any demur, sipcot ought to have given reasonable time to the 1st respondent to put up constructions. but on the other hand, within one month after handing over possession i.e. on 19.6.2006, sipcot has issued show cause notice calling upon the 1st respondent to show cause why the allotment should not be cancelled. thereafter, by the impugned proceedings dated 17.7.2006, allotment was cancelled.28. we are of the considered view that the impugned proceedings and the cancellation of allotment is a clear case of unreasonableness. it is one thing to say that sipcot would not hand over possession on the ground of violation of terms and conditions of allotment. but on the other hand, without any objection or reservation, sipcot has handed over possession to the 1st respondent on 18.5.2006. having chosen to hand over possession on 18.5.2006, sipcot ought to have afforded reasonable opportunity to the 1st respondent to proceed with the constructions.29. in the facts and circumstances of the case, the learned single judge was right in examining the cancellation of allotment on the parameters of reasonableness and the same cannot be said to be an erroneous exercise of jurisdiction in contractual matters. 30. in the result, this writ appeal is dismissed. no costs. consequently, the connected m.ps. are closed.