GANPATI SALT WORKS v. STATE — 1994 DIGILAW 92 (GUJ)

KARIA, J. ( 1 ) ). Both these petitions involve common questions of fact and law and as such both the petitions are being disposed of by the common judgment, with the consent and agreement of the learned Advocate for the petitioner and the learned Assistant Government Pleader appearing for the respondent-State. ( 2 ) ). In Special Civil Application No. 3424 of 1982, petitioner No. 2, Sarojben ganpatlal Agraval, is the proprietor of petitioner No. 1, Ganpati Salt Works. One Vala Jesang of village Padana, Taluka Anjar, District Kutch, on his application, was granted a lease in respect of plot No. 3, situated on the seashore of Padana village for manufacture, storage and sale of salt and its byeproducts by the second respondent. The said lease was granted initially for a period of five years from 1-8-1972 to 31-7-1977. An agreement to lease was executed by said Vala Jesang in favour of Government of Gujarat on 2-4-1973, a copy of which is at Annexure "a" to the petition. ( 3 ) ). In Special Civil Application No. 3425 of 1982, petitioner No. 2, Puran devisahay Agraval, is the proprietor of petitioner No. 1 Company, Durga Salt works, Padana Village, Taluka Anjar, Dist. Kutch. In that case, one Jiva Devayat zaru of village Padana, Taluka Anjar, District Kutch, was similarly granted a lease in respect of plot No. 2 on the sea-shore of Padana village for manufacture, storage and sale of salt and its bye-products. A lease agreement was entered by said Jiva Devayat in respect of the said lease commencing from 1-8-1972 to 31-7-1977, a copy of which is at Annexure a to the said petition. ( 4 ) ). It is not in dispute that both Vala Jesang and Jiva Devayat had no sufficient funds to carry on the business of manufacturing salt etc. and as such sought permission to take a partner who can invest fund for the said business. Accordingly, both these lessees were permitted to take financial partners, pursuant to the order at Annexure b to the petitions. Vala Jesang entered into a partnership with one Ganpatlal Devisahay Agraval and Jiva devayat entered into partnership with one Puranlal Devisahay of Gandhidham, for the business of manufacturing salt etc. for which the plots in question were leased. Accordingly, both these lessees were permitted to take financial partners, pursuant to the order at Annexure b to the petitions. Vala Jesang entered into a partnership with one Ganpatlal Devisahay Agraval and Jiva devayat entered into partnership with one Puranlal Devisahay of Gandhidham, for the business of manufacturing salt etc. for which the plots in question were leased. Both these persons were allowed to take partners for the purpose of finance only and on the terms and conditions set out in the order at Annexure b. The material terms on which the permission for inducting partner was granted are as under : (1) All the terms and conditions of the lease agreement dated 21-8-1972 at annexure a will be applicable to the new partner and the same may be binding to him. (2) The partnership shall be effective only for the period of lease. (3) In case the newly inducted partner resigns or retires for any reason in future and any new partner is inducted vice him, the office of the respondent No. 1 will be required to be informed about it and after getting necessary permission from the office of the respondent No. 1, only such new partner can be inducted. (4) If the lease agreement is terminated on account of breach of any of the conditions of the original lease agreement, the partner will not be entitled to continue the lease for the reason that the permission is only granted for the purpose of encouraging the business of manufacturing salt and was limited to the financial assistance that can be rendered by such newly inducted partner. (5) The share of the partnership will be to the extent of 50 per cent. (6) If any of the aforesaid conditions is violated or any term and condition of the original lease agreement is not abided by, then the lease can be terminated and no compensation shall be paid. ( 5 ) ). The petitioners have produced the copies of the partnership deed entered into by Vala Jesang with Ganpatlal Devisahay Agraval and by Jiva devayat with Shri Puranlal Devisahay, at Annexure c in both the petitions. It appears that by the order dated 26/10/1977, the lease of aforesaid both the plots Nos. 2 and 3 were renewed in favour of said Shri Jiva Devayat and Vala Jesang. It appears that by the order dated 26/10/1977, the lease of aforesaid both the plots Nos. 2 and 3 were renewed in favour of said Shri Jiva Devayat and Vala Jesang. It further appears that by a deed of dissolution of the said partnership at Annexure e to the petition, Jiva Devayat was made to retire as a partner with effect from 2-5-1975, whereas Vala Jesang was so made to retire as partner on 15-7-1975. ( 6 ) ). By the show cause notices dated 29/08/1980, the said financial partners, namely, Ganpatlal Devisahay Agraval and Puranlal Devisahay were asked to show cause why the lease of the respective plots in their possession should not be terminated for breach of the lease agreement and also the terms and conditions on which they were allowed to be taken as financial partners, for the reason that they had made the original lease-holder retired from the partnership without permission of the respondent and have continued to be in possession of the respective plots which was illegal. It is averred in the petition that the show cause notices were replied to. However, no copy of such written statement to the show cause notice is produced by the either of the petitioners. In the course of hearing also, the learned advocate for the petitioners did not point out any such written statement to the said show cause notices. ( 7 ) ). By the order dated Ma 16/03/1981, the second respondent-Collector, district Kutch at Bhuj, rejected the request for renewal of both the said plots and ordered to confiscate the said plots for breach of the conditions of the lease Agreement A and also ordered to forfeit the deposit amount. The petitioners have challenged the validity and legality of the said order dated 16/03/1981. ( 8 ) ). Mr. S. R. Shah, learned Advocate appearing for the petitioners, submitted that the Government bad granted approval for taking partner in respect of the business of manufacturing salt, etc. Accordingly, both the lease-holders had taken partners and necessary partnership deed was executed for the purpose. Pursuant to the said partnership deed, according to Mr. Shah, the lease-hold right in respect of the plots in question had become the partnership property and on retirement of the lease-holder, it continued to be the partnership property. Accordingly, both the lease-holders had taken partners and necessary partnership deed was executed for the purpose. Pursuant to the said partnership deed, according to Mr. Shah, the lease-hold right in respect of the plots in question had become the partnership property and on retirement of the lease-holder, it continued to be the partnership property. The partnership firm was, therefore, entitled to be in possession and enjoyment of the said partnership property in accordance with Sec. 14 of the Indian Partnership Act, 1932. ( 9 ) ). On careful consideration of the materials on record, I do not find any merit in this submission of Mr. Shah. Under Clause 11 of the lease agreement entered into by the respondent and the lease-holder, the lessee could not assign, underlet or part with possession of the said land or interest vested in him without the written consent of the lessor. The said clause 11 reads as under :"11. Except with the written consent of the lessor previously obtained, the lessee/s shall not assign, underlet or part with the possession of the said land or interest vested in him/them provided that nothing therein contained shall prevent the lessee/s at any time from making any change in the management and partnership of the business carried on by him/them under the present lease after obtaining the previous approval of the authorised officer. " ( 10 ) ). From the aforesaid facts, it is clear that the newly inducted financial partners have made lease-holders to retire somewhere in the year 1975. Surprisingly, the deed of retirement of the partnership does not mention any date of such retirement. The lease was renewed in favour of both the leaseholders in the year 1977. If the lessees were no longer partners and were made to retire, no such lease could have been renewed in their favour and that fact of such retirement of the lessee was not brought to the notice of the respondent. There is also clear breach of the conditions of the order whereby the financial partners were permitted to be inducted in the partnership. As aforesaid, condition No. 4 of the said order permitting to have financial partner clearly recites that the said permission was in furtherance of business of the salt manufacture and for the purpose of rendering financial assistance by such newly inducted partner. As aforesaid, condition No. 4 of the said order permitting to have financial partner clearly recites that the said permission was in furtherance of business of the salt manufacture and for the purpose of rendering financial assistance by such newly inducted partner. The aforesaid condition of the said order also recites that in case of breach of any of the conditions of the lease agreement, the said permission for allowing the financial partner would be cancelled. In the facts of the case, there is clear breach of the conditions and the respondent was, therefore, entitled to terminate the lease in respect of the plots in question. ( 11 ) ). Section 14 of the Indian Partnership Act, 1932 reads as under :"14. Property of the firm:- Subject to contract between the partners, the property of the firm includes all property and rights and interest in property originally brought into the stock of the firm, or acquired, by the purchase or otherwise, by or for the firm, or for the purposes and in course of the business of the firm, and includes also the goodwill of the business. Unless the contrary intention appears, property and rights and interest in property acquired with money belonging to the firm are deemed to have been acquired for the firm,"the aforesaid provisions of Sec. 14 of the Act provides that subject to contract between the parties, the property of the firm includes all property and rights and interest in property originally brought into the stock of the firm, or acquired by the purchase or otherwise, by or for the firm, or for the purposes and in course of the business of the firm, and includes also the goodwill of the business. In the present case, the partners at the time of the entering of the partnership knew well that the lease in respect of the plot in question was subject to certain conditions of the lease agreement and the order by which the financial partner was allowed to be inducted in the partnership. The plot did not exclusively belong to the lessee. The fact of the retirement of the lessee from the partnership and disposal of the said plot was not brought to the notice of the lessor. Therefore, the continuing partner cannot have batter right than the right of the lessee. Therefore, submission of Mr. The plot did not exclusively belong to the lessee. The fact of the retirement of the lessee from the partnership and disposal of the said plot was not brought to the notice of the lessor. Therefore, the continuing partner cannot have batter right than the right of the lessee. Therefore, submission of Mr. Shah that the plot in question had become the partnership property on execution of the dissolution deed of the partnership retiring the lessee cannot be accepted. Mr. Shah, in support of his submission relied upon the case of Addanki Narayanappa and Anr. v. Bhaskara Krishnappa (Dead ). reported in AIR 1966 SC 1300 . It is held by the Supreme Court in the said case that the provisions of Secs. 14, 15, 29, 32, 37, 38 and 48 make it clear that whatever may be the character of the property which is brought in by the partners when the partnership is formed or which may be acquired in the course of the business of the partnership it becomes the property of the firm and what a partner is entitled to is his share of profits. In the case before the Supreme Court, the question that arose was whether the interest of a partner in partnership assets, comprising of movable as well as immovable property should be treated as movable or immovable property for the purposes of Sec. 17 (1) of the Registration Act, 1908. The question arose in this way. Members of two joint Hindu families - one Addanki family and the other Bhaskara family - entered into a partnership for the purpose of carrying on business of hulling rice, decorticating groundnuts, etc. Each family bad half share in that business. The capital of the partnership consisted, among other things, of some lands belonging to the families. During the course of the business of the partnership somemore lands were acquired by the partnership. The plaintiffs who were two members of the Addanki family instituted a suit in the Court of Subordinate Judge, Chittoor, on 4/03/1949 for a declaration that the suit properties belong to the plaintiffs and defendants 10 to 14 and defendants 1 to 9 equally. During the course of the business of the partnership somemore lands were acquired by the partnership. The plaintiffs who were two members of the Addanki family instituted a suit in the Court of Subordinate Judge, Chittoor, on 4/03/1949 for a declaration that the suit properties belong to the plaintiffs and defendants 10 to 14 and defendants 1 to 9 equally. In these facts of the case, the supreme Court interpreted the provisions of Sec. 14 of the partnership Act holding that the whole concept of partnership is to embark upon a joint venture and for that purpose to bring in as capital money or even property including immovable property. Once that is done, whatever is brought in would cease to be the exclusive property of the person who brought it in. It would be the trading asset of the partnership in w hich all the partners would have interest in proportion to their share in the joint venture of the business of partnership. The person who brought it in would, therefore, not be able to claim or exercise any exclusive right over any property which he has brought in, much less any other partnership property. Thus, the ratio called upon on behalf of the petitioners cannot be made applicable in the facts and circumstances of the present case, inasmuch as the plots in question did not belong to the lessee exclusively and the lease-hold rights in respect of the said plots were subject to the terms and conditions of the order allowing the financial partners to be inducted in. Conversely to the facts of the case before the Supreme Court, in the instant case, the lessee did not claim any right in the plots in question, nor it continued to be a trading asset of the partnership any longer. In the facts of the case, therefore, in my opinion, the case relied upon by Mr, Shah would not be applicable to the present case. ( 12 ) ). In the case of Ved Gupta v. M/s. Apsara Theatres, Jammu and Anr. , reported in 1983 (4) SCC 323 , the Supreme Court held that the licence issued to a partner of a firm in the personal and individual capacity and not as representing the firm would not be a partnership property. ( 12 ) ). In the case of Ved Gupta v. M/s. Apsara Theatres, Jammu and Anr. , reported in 1983 (4) SCC 323 , the Supreme Court held that the licence issued to a partner of a firm in the personal and individual capacity and not as representing the firm would not be a partnership property. In that case, the licence was granted to a sole licensee and the firm of which he was a partner did not automatically acquire interest in the licence on the basis of the stipulation in the partnership deed that licensed premises including the cinematograph used therein belonged to the partnership. The licence did not render privileged the building and the cinematograph used therein. The Supreme Court further held that it is wrong to contend that the licence was a grant for the premises and constituted an interest attached to the premises. It is improper to draw analogy with licence in the realm of real property law for, the licence granted under the Act is almost in all respects a completely different concept. Section 6-F of the Cinematograph act shows that the holder of the licence may be a person different from the owner or manager or partner of the cinematograph. ( 13 ) ). Applying the ratio laid down in the case of Ved Gupta (supra), it cannot be concluded that the leasehold right in respect of the plots in question would be the partnership properties, within the meaning of Sec. 14 of the Partnership Act. In the facts of (he case, the financial partner permitted to be inducted in the partnership was with a limited purpose of rendering financial assistance to the business of manufacturing salt etc. , and that permission was subject to the terms set out in the order permitting induction of such financial partner. I, therefore, find no merit in the submission of mr. Shah. ( 14 ) ). Mr. Shah next submitted that since even after the lessee had retired from the partnership firm as a partner, the Government had accepted the rent and royalty till 1982 and therefore, there is clear promissory estoppel and acquiescence against the Government and it cannot object to the renewal or continuation of the lease in favour of the petitioner who has become the sole proprietor with all rights with regard to the property of the firm. The financial partner had not brought the fact of retirement of the lessee from the partnership to the notice of the Government. The lessee, though retired as a partner somewhere in 1975, the renewal was applied and obtained in favour of the lessee as per the orders dated 26/10/1977. Thus, the financial partner withheld the material information and as such in this peculiar facts and circumstances of the case, doctrine of promissory estoppel and acquiescence cannot be made applicable. In affidavit-in-reply filed on behalf of the respondent, it is contended that the lease was got renewed under a false statement of the lessee. The lessee was not permitted to take the partner for any kind in the firm except for the purpose of finance. It is further stated in the affidavitin- reply that a pre-plan has been arranged with a mastermind to by-pass the terms and conditions and to hand over the possession of the land in question to the third party. The petitioners have thus played a fraud with the respondent and as such there cannot be any application of the doctrine of promissory estoppel and acquiescence in the facts of the case. I. therefore, see no substance in the submission of Mr. Shah. ( 15 ) ). Mr. Shah, in support of his plea of promissory estoppel, relied on the case of M/s. Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar pradesh and Ors. , AIR 1979 SC 621 , wherein the Supreme Court has held that the true principle of promissory estoppel seems to be that where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or effect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties and this would be so irrespective of whether there is any pre-existing relationship between the parties or not. It is further held that the doctrine of promissory estoppel need not be inhibited by the same limitation as estoppel in the strict sense of the term. It is an equitable principle evolved by the Courts for doing justice and there is no reason why it should be given only a limited application by way of defence. The principle laid down in the case of M/s. Motilal Padampat Sugar Mills Co. (supra) will not be applicable to the facts and circumstances of the present case, for the reason that there is no promise whatsoever by the respondent to the petitioners. The petitioners have not acted upon any promise which is intended to create legal relationship between the Government and the petitioners. The order allowing the lessee to induct a partner for the purpose of finance only and that too on the terms and conditions set out in the order, will not amount to any promise to the petitioners. There is no equity in favour of the petitioners. On the contrary, as contended in the affidavit-in-reply on behalf of the government, the petitioners have tried to play fraud with the government by grabbing the plots in question and withholding the material facts and information from the Government about the retirement of the lessee at the time of renewal in the year 1977. In the facts of the case, it cannot be said that the Government by issuance of the order permitting the lessee to have financial partner, promised the petitioner whereby it was intended to create legal relationship or effect legal relationship to arise in the future. The permission to take financial partner was subject to the terms and conditions, as aforesaid. The petitioners committed clear breach of those conditions. Thus, there being no promise to the petitioners, the doctrine of promissory estoppel or acquiescence cannot be applicable in the facts of the case. ( 16 ) ). Mr. Shah then submitted that the Government cannot unilaterally, like a private landlord, determine the breach of the contract, unless it is for the public purpose. la support of this submission, Mr. Shah relied upon the case of M/s. Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of bombay, AIR 1989 SC 1642 . That case before the Supreme Court was under the provisions of the Bombay Rents, Hotel and Lodging House Rates Control act (57 of 1947 ). la support of this submission, Mr. Shah relied upon the case of M/s. Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of bombay, AIR 1989 SC 1642 . That case before the Supreme Court was under the provisions of the Bombay Rents, Hotel and Lodging House Rates Control act (57 of 1947 ). It is laid down by the Supreme Court that when the state, the local bodies and public authorities which are "state" within the meaning of Art. 12 are exempted from the purview of Rent Control legislation, the basis of exemption is that such bodies would not be actuated by any profit-making motive so as to unduly enhance the rents or eject the tenants from their respective properties as private landlords are or are likely to be. They would not act for their own purpose as private landlords, but must act for public purpose. It, therefore, follows that the public authorities which enjoy this benefit without being hidebound by the requirements of the Rent Act must act for public benefit. ( 17 ) ). On careful scrutiny of the principles laid down in the aforesaid case of M/s. Dwarkadas Marfalia and Sons (supra), I am afraid, the ratio laid down therein would be applicable to the facts and circumstances of the present case. In this case, the respondent, after giving show cause notice to the lessee, has determined the breach of the lease agreement. The action of the respondent, therefore, cannot be said to be unilateral, nor it can be said that the respondent acted as a private landlord, inasmuch as the petitioners have tried to dupe the lessees by taking advantage of their illiteracy and ignorance. In the facts of the case, it is abundantly clear that the financial partner committed breach of the terms on which he was allowed to be a partner of the lessee. Therefore, there is no question of any public purpose in the facts of the case. In this view of the matter, I see no merits in the contention of Mr. Shah and, therefore, the same is rejected. ( 18 ) ). Mr. Therefore, there is no question of any public purpose in the facts of the case. In this view of the matter, I see no merits in the contention of Mr. Shah and, therefore, the same is rejected. ( 18 ) ). Mr. Shah then submitted that till filing of the petition, the respondent had recovered rent and royalty and renewed the lease even after the retirement of the lessee and, therefore, the Government by its conduct had acquiesced in the petitioners continuing as lease-holders, and therefore, under the provisions of the lease-deed, right of renewal had accrued in favour of the petitioners and the Government was bound to renew the lease in favour of the petitioners. I find this contention fallacious. If the Government accepted any rent or royalty, the fact of retiring the lessee from the partnership deed was not known to the Government and thereby a breach of the terms of the lease agreement was committed. As soon as it was brought to the notice of the respondent that the petitioners have tried to step into the shoes of the lessees for the purpose of renewal of the leases of the plots, show-cause notices for committing breach of the lease agreement and terms of the order permitting financial partner to be inducted was served on the parties. Therefore, in the facts of the case, it cannot be said that by the conduct or otherwise, the respondent acquiesced in the petitioners continuing as the lease-holders. It cannot also be concluded that right has accrued in favour of the financial partner even in regard to the terms and conditions of the lease-agreement. In para 17 of the affidavit-in-reply, it is contended on behalf of the respondent that in order to verify the facts regarding the plots, the original partner (lessee) was called upon by the concerned officer with the original lease agreement and that the original partner had produced the original lease agreement and that the lessee had handed over the lease agreement to the financial partner, who made a false statement that the original lease agreement was not traceable. Thus, the financial partner had misrepresented and played a fraud. In this view of the matter, no right can be said to have been accrued in favour of the petitioner for continuing in possession of the plots in question. ( 19 ) ). Mr. Thus, the financial partner had misrepresented and played a fraud. In this view of the matter, no right can be said to have been accrued in favour of the petitioner for continuing in possession of the plots in question. ( 19 ) ). Mr. Shah lastly submitted that on principles of equity and on principles of legitimate expectation, the respondent cannot summarily evict the petitioner from the land without resorting to due process of law or payment of compensation. When the financial partner has tried to play a fraud and misrepresented to the respondents, the submission with respect to equity cannot be accepted. The respondents had served a show cause notice and thereafter the impugned order was passed. As aforesaid, the clear breach of the terms and conditions of the lease deed as well as the order allowing the financial partner has been committed and as such there cannot be any question of payment of compensation to the person in possession of the plot in question. ( 20 ) ). It may be noted that Sarojben Ganpatlal Agraval has filed Special civil Application No. 3424 of 1982 as proprietor of Ganpati Salt Works. She was never a financial partner with the original lessee, namely, Vala jesang of village Padana. The partnership that was entered into with regard to manufacturing salt in plot No. 3 was with one Ganpatlal Devisahay agraval. Similarly, in Special Civil Application No. 3425 of 1982, Puran dsvisahay Agraval as a proprietor of Durga Salt Works, was never a partner with the original lessee, Jiva Devayat Zaru of Plot No. 2, inasmuch as one puranlal Devisahay was the financial partner for the said salt manufacturing business. Therefore, both the petitioners, who were not accepted as financial partners of the original lessee cannot have any legal right or equity to claim the renewal in respect of the plots in question. . ( 21 ) ). In view of the above matter, the petitions are liable to be rejected. ( 22 ) ). In the result, both the petitions are rejected. Rule discharged with costs, in each of the petitions. ( 23 ) ). At this stage, Mr. . ( 21 ) ). In view of the above matter, the petitions are liable to be rejected. ( 22 ) ). In the result, both the petitions are rejected. Rule discharged with costs, in each of the petitions. ( 23 ) ). At this stage, Mr. S. R Shah, learned Counsel for the petitioners, requests that the status quo in respect of the plots in question be ordered to be maintained for a further period of four weeks, as status quo was granted and is operating since 1982. Mrs. Shaikh, learned Assistant government Pleader, vehemently objects for grant of any further status quo with respect to the plots in question, as the case is of fraud and misrepresentation. However, in the fact of the case, status quo is ordered to be continued for a further period of two weeks from today. .