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2020 DIGILAW 113 (JK)

Sheikh Feroz Ahmad v. Union Territory of J&K

2020-02-26

DHIRAJ SINGH THAKUR

body2020
ORDER Dhiraj Singh Thakur, J. 1. The petitioner challenges notice dated 25th of January, 2020, issued by Director Land Management, Srinagar Development Authority. The notice informs the petitioner that he had failed to deposit the outstanding amount on account of premium, rentals and interest in regard to the Restaurant/Mezzanine which was allotted to the petitioner in Sangarmall City Centre in the year 2011. 2. Briefly stated the material facts are as under: (i) The petitioner's bid was found to be the highest in regard to the allotment of Restaurant space in Sangarmall City Centre in the year 2011. The petitioner was required to deposit 50% of the total premium of Rs. 3,22,46,650/- within 15 days from the issuance of letter of intent and the remaining 50% within 30 days thereafter. (ii) Whereas 50% amount was deposited by the petitioner amounting to Rs. 1,50,00,000/- as premium, the balance petitioner failed to deposit. In this regard, a notice was issued by Director, Land Management, Srinagar Development Authority, dated 12th of October, 2011, asking the petitioner to deposit the balance amount. This was followed by another communication dated 9th of January, 2012. (iii) The petitioner appears to have responded to communication dated 9th of January, 2012, by seeking monthly instalments in regard to the balance payment. (iv) Vide communication dated 17th of July, 2012, Deputy Director, Land Management, Srinagar Development Authority, requested the petitioner to deposit the balance amount within 15 days failing which he was informed that the space would be re-auctioned and earnest money forfeited. (v) To cut long story short, the balance amount has not been deposited by the petitioner till date on which the respondents are now claiming interest as well. The petitioner also appears to have defaulted on the payment of rentals. 3. In the earlier round of litigation, the petitioner filed OWP No. 942/2016, in which he challenged notices dated 17th of April, 2014 and 28th of April, 2016, asking the petitioner to deposit the balance payment. A Co-ordinate Bench of this Court, vide order dated 3rd of June, 2016, directed that the notice dated 28th of April, 2016 be kept in abeyance. 4. During the pendency of OWP No. 942/2016, the impugned notice has been issued by the respondents requiring the petitioner to liquidate the outstanding amount failing which petitioner stands informed that the property would be subjected to re-auction. 5. 4. During the pendency of OWP No. 942/2016, the impugned notice has been issued by the respondents requiring the petitioner to liquidate the outstanding amount failing which petitioner stands informed that the property would be subjected to re-auction. 5. Since the issues involved in both the petitions are common, the record of OWP No. 942/2016 was also called and, accordingly, both the petitions are taken up for final disposal at this stage. 6. Admittedly, the petitioner has failed to deposit the balance amount which was required to be deposited in regard to the premises in question. The petitioner had submitted a bid for a total amount of Rs. 3,22,46,650/-. He deposited an amount of Rs. 1,50,00,000/- as premium. Rest of the amount, the petitioner has failed to deposit since 2011 and continues to run his business for the last nine years. 7. The notice impugned was sought to be questioned, primarily, on the ground that firstly certain infrastructural provisions had not been provided to the petitioner, secondly that the interest being demanded from the petitioner was not at all chargeable and, therefore, cannot be demanded from him and thirdly that on account of floods in the year 2014, business of the petitioner had suffered, which prevented him from depositing the amount claimed. 8. During the course of arguments, an offer was made to the petitioner whether he was prepared to deposit the balance amount of Rs. 1,50,00,000/-. However, learned counsel for the petitioner expressed his inability to pay the same citing financial difficulties. 9. The scope of interference by the Courts in writ jurisdiction in regard to concluded contracts is no longer res Integra. In "M/s. Radhakrishna Agarwal and Ors. vs. State of Bihar & Ors.," : (1977) 3 SCC 457 , the Apex Court held as under:- "10. It is thus clear that the Erusian Equipment & Chemicals Ltd.'s case (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 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 powers. At this stage, no doubt, 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 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 Article 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 obligation on the State in the contractual field which is apart from contract." 10. Subsequently, in "Verigamto Naveen vs. Govt., of A.P. & Ors.," (2001) 8 SCC 344 , the Apex Court held that if the breach of contract involved breach of statutory obligation when the order complained of was made in exercise of statutory power by a statutory authority, though cause of action even when arising out of contract, brought it within the sphere of public law. It was held in paragraph 21 as under:- "21.......In cases where the decision making authority exceeded its statutory power or committed breach of rules or principles of natural justice in exercise of such power or its decision is perverse or passed an irrational order, this Court has interceded even after the contract was entered into between the parties and the Government and its agencies. We may advert to three decisions of this Court in M/s. Dwarkadas Marfatia & Sons vs. Board of Trustees of the Port of Bombay; Mahabir Auto Stores & Ors. vs. Indian Oil Corporation & Ors.; and Srilekha Vidyarthi vs. State of U.P.. Where the breach of contract involves breach of statutory obligation when the order complained of was made in exercise of statutory power by a statutory authority, though cause of action arises out of or pertains to contract, brings within the sphere of public law because the power exercised is apart from contract." 11. Where the breach of contract involves breach of statutory obligation when the order complained of was made in exercise of statutory power by a statutory authority, though cause of action arises out of or pertains to contract, brings within the sphere of public law because the power exercised is apart from contract." 11. In "Kumari Shrilekha Vidyarthi and others vs. State of U.P. and others" (1991) 1 SCC 212 , it was held:- "20. .................. 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 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 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. 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 "Directives 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 Article 14--non-arbitrariness which is basic to rule of law from State actions in contractual field when all actions of the State are meant for public good and expected to be fair and just? This being the philosophy of the Constitution, can it be said that it contemplates exclusion of Article 14--non-arbitrariness which is basic to rule of law from State actions in contractual field when all actions of the State are meant for 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 Article 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 trend is also to examine the unreasonableness of a term in such contracts where the bargaining power is unequal so that these are not negotiated contracts but standard form contracts between unequals." 12. In paragraph 22, the Court further proceeded to hold:- "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 minimal requirements of public law obligations and impress with this character the contracts made by the State or its instrumentality. It is a different matter that the scope of judicial review in respect of disputes failing 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 fails within the domain of contractual obligations would not relieve the State of its obligation to comply with the basic requirements of Article 14. 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 fails 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. 13. The issue was also considered at length in ABL International and after noticing the various judgments on the point, the following legal principles were crystallized regarding maintainability of the writ petition:- a. In an appropriate case, a writ petition as against the State or an instrumentality of the State arising out of the contractual obligations is maintainable. b. Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases, as a matter of rule. c. A writ petition involving the consequential benefit of monetary claims is also maintainable. 14. The Court further proceeded to hold that in entertaining the writs under Article 226, the Court has the discretion to entertain or not to entertain the petition and with reference to "Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai & Ors.," 1998 (8) SCC 1 , it was held that the Court has imposed upon itself certain restrictions in the exercise of this power. It was further held that the prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the writ jurisdiction. 15. On the issue of the right to issue prerogative writ to the exclusion of other available remedies, reliance was placed upon "State of U.P. & Ors. 15. On the issue of the right to issue prerogative writ to the exclusion of other available remedies, reliance was placed upon "State of U.P. & Ors. vs. Bridge & Roof Company (India) Ltd." (1996) 6 SCC 22 , the Court held:- "16.........The contract in question contains a clause providing inter alia for settlement of disputes by reference to arbitration [Clause 67 of the Contract]. The Arbitrators can decide both questions of fact as well as questions of law. When the contract itself provides for a mode of settlement of disputes arising from the contract, there is no reason why the parties should not follow and adopt that remedy and invoke the extra-ordinary jurisdiction of the High Court under Article 226..........." 16. In "Joshi Technologies International Inc. vs. Union of India & Ors." 2015 (7) SCC 728 , the Apex Court on a detailed conspectus of the ratio of the judgment rendered from the said Court from time to time crystallized the legal position in regard to exercise of writ jurisdiction in paragraph Nos. 68 & 69. It was held thus:- "68. The position thus summarized in the aforesaid principles has to be understood in the context of discussion that preceded which we have pointed out above. As per this, no doubt, there is no absolute bar to the maintainability of the writ petition even in contractual matters or where there are disputed questions of fact or even when monetary claim is raised. At the same time, discretion lies with the High Court which under certain circumstances, can refuse to exercise. It also follows that under the following circumstances, 'normally', the Court would not exercise such a discretion: (a) the Court may not examine the issue unless the action has some public law character attached to it. (b) Whenever a particular mode of settlement of dispute is provided in the contract, the High Court would refuse to exercise its discretion under Article 226 of the Constitution and relegate the party to the said made of settlement, particularly when settlement of disputes is to be resorted to through the means of arbitration. (c) If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination. (d) Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances. 69. (c) If there are very serious disputed questions of fact which are of complex nature and require oral evidence for their determination. (d) Money claims per se particularly arising out of contractual obligations are normally not to be entertained except in exceptional circumstances. 69. Further legal position which emerges from various judgments of this Court dealing with different situations/aspects relating to the contracts entered into by the State/public Authority with private parties, can be summarized as under: (i) At the stage of entering into a contract, the State acts purely in its executive capacity and is bound by the obligations of fairness. (ii) State in its executive capacity, even in the contractual field, is under obligation to act fairly and cannot practice some discriminations. (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) Writ jurisdiction of High Court under Article 226 was not intended to facilitate avoidance of obligation voluntarily incurred. (v) 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. (vi) 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. Otherwise, the party may sue for damages. (vi) 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. Otherwise, the party may sue for damages. (vii) 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. (viii) 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. (ix) 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. This Court has maintained the position 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. (x) 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. (xi) 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." 17. The present contract was a concluded contract, inasmuch as the petitioner was declared as a highest bidder in regard to the premises in question, in regard to which the petitioner has even paid 50% of premium amount amounting to Rs. 1,50,00,000/-. Any dispute which arises thereafter is not amenable to the writ jurisdiction unless the decision, as in the present case to take back the possession and re-auction the property, is found to be perverse. Admittedly, the petitioner has shown his inability to pay the balance amount and, therefore, the decision to take back the possession and re-auction the property cannot be said to be in any manner perverse or arbitrary which would warrant interference of this Court in its extraordinary writ jurisdiction. 18. The impugned notice has been passed as a part of the commercial transaction between the petitioner and the respondent Srinagar Development Authority, in which, in my opinion, no interference is warranted at all. The Srinagar Development Authority to have taken effective steps to take back the possession of the premises from the petitioner and subject it to re-auction with a view to get highest amount which could be used for the public benefit. Reference in this regard can be made to the judgment in Ram & Shyam Co. v. State of Haryana, (1985) 3 SCC 267 , wherein paragraph 12, the Apex Court held as under: "12. Let us put into focus the clearly demarcated approach that distinguishes the use and disposal of private property and socialist property. Owner of private property may deal with it in any manner he likes without causing injury to anyone else. v. State of Haryana, (1985) 3 SCC 267 , wherein paragraph 12, the Apex Court held as under: "12. Let us put into focus the clearly demarcated approach that distinguishes the use and disposal of private property and socialist property. Owner of private property may deal with it in any manner he likes without causing injury to anyone else. But the socialist or if that word is jarring to some, the community or further the public property has to be dealt with for public purpose and in public interest. The marked difference lies in this that while the owner of private property may have a number of considerations which may permit him to dispose of his property for a song. On the other hand, disposal of public property partakes the character of a trust in that in its disposal there should be nothing hanky panky and that it must be done at the best price so that larger revenue coming into the coffers of the State administration would serve public purpose viz. the welfare State may be able to expand its beneficent activities by the availability of larger funds. This is subject to one important limitation that socialist property may be disposed at a price lower than the market price or even for a token price to achieve some defined constitutionally recognised public purpose, one such being to achieve the goals set out in Part IV of the Constitution. But where disposal is for augmentation of revenue and nothing else, the State is under an obligation to secure the best market price available in a market economy An owner of private property need not auction it nor is he bound to dispose it off at a current market price. Factors such as personal attachment, or affinity kinship, empathy, religious sentiment or limiting the choice to whom he may be willing to sell, may permit him to sell the property at a song and without demur. A welfare State as the owner of the public property has no such freedom while disposing of the public property. A welfare State exists for the largest good of the largest number more so when it proclaims to be a socialist State dedicated to eradication of poverty. A welfare State as the owner of the public property has no such freedom while disposing of the public property. A welfare State exists for the largest good of the largest number more so when it proclaims to be a socialist State dedicated to eradication of poverty. All its attempt must be to obtain the best available price while disposing of its property because the greater the revenue, the welfare activities will get a fillip and shot in the arm. Financial constraint may weaken the tempo of activities. Such an approach serves the larger public purpose of expanding welfare activities primarily for which the Constitution envisages the setting up of a welfare State...." 19. In the present case, the Srinagar Development Authority ought to have taken effective steps to get the interim order passed Court in OWP No. 942/2016 vacated. It is sad to see that the Srinagar Development Authority had even failed to file an appropriate reply, much less to seek vacation of the interim order passed by a Co-ordinate Bench of this Court. 20. Be that as it may, both the petitions are found to be without merit and are, accordingly, dismissed along with connected CMs/IAs. Interim direction dated 3rd June, 2016, passed in OWP No. 942/2016, shall cease to be in operation. It would be open to the Srinagar Development Authority to take back possession of the premises in question from the petitioner and subject it to re-auction.