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SCA/12867/2007 25/ 25 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 12867 of 2007
With
SPECIAL
CIVIL APPLICATION No. 10105 of 2007
For
Approval and Signature:
HONOURABLE
MR.JUSTICE D.H.WAGHELA
HONOURABLE
MR.JUSTICE K.A.PUJ
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To
be referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================================
JAYANT
SHANTILAL SANGHVI & 2 – Petitioner(s)
Versus
VADODARA
MUNICIPAL CORPORATION & 1 – Respondent(s)
=========================================================
Appearance
:
MR
SHALIN N MEHTA for Petitioners.
MR PRANAV G DESAI for
Respondents.
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE D.H.WAGHELA
and
HONOURABLE
MR.JUSTICE K.A.PUJ
Date
: 16/03/2011
COMMON
CAV JUDGMENT
(Per
: HONOURABLE MR.JUSTICE K.A.PUJ)
Since
common issue is involved in both these petitions, the same are heard
together and are being disposed of by this common judgment and
order.
Special
Civil Application No.10105 of 2007 is filed by the petitioner,
namely, Star Infrastructure requesting this Court to allow the
petitioner to rescind and repudiate its original contract with the
Corporation concerning the sale to it of Final Plot Nos.98 & 162
by holding that the Corporation has unilaterally altered the
original terms of the auction sale vide order dated 23.03.2007, and
that has resulted in a material variation of the original auction
terms. The petitioner has also prayed for the direction to the
Corporation to refund the Earnest Money Deposit (EMD) of a sum of
Rs.10 Lacs given by the petitioner on 07.02.2007 to the respondent
Corporation. The petitioner has further prayed for the direction
commanding the Corporation not to forfeit the EMD of a sum of Rs.10
Lacs deposited by the petitioner with the respondent Corporation.
The petitioner has further made alternative prayer for quashing and
setting aside the impugned condition requiring the petitioner to pay
premium of an amount equal to 20% of the sale price of the Final
Plot in case of a further sale, which is inserted / added by the
respondent Corporation after the auction held and conducted on
08.02.2007. Lastly, the petitioner has prayed for the declaration
from this Court that the auction of the respondent Corporation of
inserting / adding the impugned condition as being inconsistent and
incompatible with the provisions of the Indian Contract Act, 1872,
is violative of constitutional provisions like Articles 14, 19 &
21 of the Constitution of India and illegal and null and void.
Special
Civil Application No.12867 of 2007 is filed by Triveni Developers
making more or less similar prayers as that of the petitioner in
Special Civil Application No.10105 of 2007, in connection with the
Final Plot Nos.24, 142 & 143. Over and above the said prayers,
the petitioner has also prayed for the direction to the respondent
Corporation to refund 10% of the initial payment made for Final Plot
Nos.24, 142 and 143 aggregating to a sum of Rs.1,70,75,500/-.
In
Special Civil Application No.10105 of 2007, notice was issued by
this Court on 16.04.2007. On 12.06.2007, this Court passed order
directing the respondents not to forfeit the EMD. On 10.12.2007,
the petition was admitted and the stay granted against forfeiture of
the EMD was continued with a clarification that in the meantime, the
petitioner would make a representation to the respondents for refund
of the EMD within one week from the date of the said order and the
respondents would thereafter decide the representation by
31.01.2008. The Court has also made it clear that the petition was
now confining to the prayer for refund of the EMD and the petitioner
would not claim any right in respect of the land in question.
Similarly,
in Special Civil Application No.12867 of 2007, notice was issued on
10.05.2007 and ad-interim relief was granted in terms of paragraph 7
(E). It was ordered to be heard along with Special Civil
Application No.10105 of 2007. This petition is also admitted on
10.12.2007 and Court has passed detailed order directing the
respondent Corporation to refund the amount of Rs.1,70,75,500/- to
the petitioner within one week from the date of the said order and
with regard to the EMD of Rs.10 Lacs, the petitioner was directed to
make a representation to the respondent Corporation on the same line
as indicated in the order passed in Special Civil Application
No.10105 of 2007. The Court has also made it clear that the petition
was confining to the prayer for refund of EMD of Rs.10 Lacs and for
the interest on the amount of Rs.1,76,75,500/- for the period from
13.02.2007 till the date of refund.
Pursuant
to the aforesaid order, the petitioners made representation on
17.12.2007 which came to be rejected by the respondent Corporation
on 21.02.2008. Both the petitions have thereafter come up for
hearing on 19.01.2011 and after hearing the parties to some extent,
the Court has passed a common order on that day observing therein
that in order to take last chance for an amicable and reasonable
settlement, the petitioners have agreed to make, within two days, a
concise and precise representation clearly stating their claim and
the amounts proposed to be waived in consideration of immediate
payment and end of the litigation; and it is agreed on behalf of the
respondent that such representation shall be duly considered and
decided in writing by the Commissioner of respondent- Corporation
within a period of ten days of receipt of the representation,
without being influenced by the earlier decision and proceedings.
Pursuant
to the said order, the petitioners again made representation on
21.01.2011 which came to be rejected by the Commissioner vide his
order dated 08.02.2011 which is placed on record by the respondent
Corporation along with affidavit filed on 10.02.2011.
In
the above background of the matter, both these petitions are heard
at length. Mr. Shalin Mehta, learned advocate appearing for the
petitioners in both these petitions has made the following
submissions for their prayer of refund of EMD with interest @ 9%
p.a. from 08.02.2007 till the date of payment. Mr.Mehta has,
however, waived on instruction, the claim regarding interest on
Rs.1,70,75,500/- for the period from 13.2.2007 to 21.2.2008.
A
material alteration in terms and conditions of the auction sale
cannot be done without consent of the bidder. In the present case,
the respondent Corporation has imposed additional conditions over
and above the original terms and conditions of the auction sale by
order dated 23.03.2007 without consent of the petitioners.
20%
premium condition never existed before the auction sale held on
08.02.2007. it also did not find any mention in the original terms
and conditions of the auction sale supplied to the petitioner. A
condition that did not exist at the time the auction sale was held
cannot be incorporated subsequently without notice to the bidder.
In other words, such imposition of a new condition cannot be
unilateral. Otherwise, it would be contrary to the basic notions of
fair play and good faith. The respondent Corporation has
unilaterally incorporated the 20% premium condition to form a part
of the original terms and conditions of the auction sale by order
dated 23.03.2007. This is absolutely contrary to all notions of
fair play and good faith.
Under
Section 7 of the Indian Contract Act, 1872, acceptance of an offer
must be absolute and unqualified. A conditional acceptance is no
acceptance at all. The petitioners’ offer of price for the plots
was governed by the original terms and conditions of the auction
sale. This offer of the petitioners was required to be accepted or
rejected by the respondent Corporation under the same terms and
conditions of the auction sale. However, the respondent
Corporation’s acceptance by order dated 23.03.2007 is a conditional
acceptance in as much as totally new condition which does not form
part of the original terms and conditions of the auction sale, was
inserted. This makes the respondent Corporation’s acceptance
conditional acceptance and, therefore, no acceptance under Section 7
of the Indian Contract Act, 1872. In support of this submission,
reliance is placed on the decision of the Orissa High Court in the
case of Vishwa Industrial Co. Limited V/s. Mahanandi Coal Fields
Limited and others, AIR 2007 Orissa 71.
Unilateral
variation by Vadodara Municipal Corporation of the original terms
and conditions of the auction sale is arbitrary and capricious and
violative of Article 14 of the Constitution of India. If the
petitioner had been informed in advance of the 20% premium
condition, he would have never made any bid. The 20% premium
condition is a fundamental variation as it creates additional
liabilities and obligations on the petitioners. Under Section 108
(j) of the Transfer of Property Act, 1882, a right of further
transfer to a sub-lessee in absence of a written contract to the
contrary is recognized. Thus, under the terms and conditions of the
auction sale, the petitioner had a right under Section 108 (j) to
effect a further transfer without any condition of qualification.
However, the 20% premium condition imposed unilaterally by the
respondent Corporation takes away or appropriates the petitioners’
statutory right under Section 108 (j) to effect a further transfer
of the property without any condition or qualification. Severe
prejudice is caused to the petitioners.
The
petitioners are entitled to withdraw its offer as the 20% premium
condition imposed unilaterally by the respondent Corporation amounts
to a counter offer, and which counter offer, is not accepted by the
petitioners.
The
respondent Corporation’s contention that 20% premium condition is
binding on the petitioners as the same was made known to the bidders
orally on the day of the auction, is not required to be taken into
consideration, for the simple reason that once the contractual terms
are reduced in writing, no oral evidence can be adduced to prove
that a term that is not reduced to writing did form a part of the
contract. The respondent Corporation is, therefore, wrong in
contending that since the 20% premium condition was made known
orally to the bidders at the time of auction, it now forms part of
the original terms and conditions of the auction sale.
The
respondent Corporation is an agency and instrumentality of the
State. It is bound by Part-III of the Constitution of India.
Fairness and reasonableness must pervade all actions that the
respondent corporation takes. The conduct of the respondent
Corporation of forcing 20% premium condition upon the innocent
bidders without a proper, full and fair disclosure strikes at
fairness and reasonableness.
In
support of the above submissions, Mr. Mehta relied on the decision
of the Apex Court in the case of Polymat India (P) Limited and
another V/s. National Insurance Company Limited and others, (2005) 9
SCC 174 wherein it is held that when terms of contract have been
reduced to writing, it cannot be changed without mutual agreements
of both the parties.
He
further relied on the decision of the Apex Court in the case of
Delhi Development Authority and another V/s. Joint Action
Committee, Allottee of SFS Flats and others, (2008) 2 SCC 672
wherein it is held that a party to the contract cannot at a later
stage, while a contract was being performed, impose terms and
conditions which were not part of the offer and which were based
upon unilateral issuance of office orders, but not communicated to
the other party to the contract and which were not even a subject
matter of the public notice. Moreover, when a contract has been
worked out a fresh liability cannot be thrust upon a contracting
party. Any such act is impermissible in the eye of law.
He
further relied on the decision of the Patna High Court in the case
of M/s. Scorpian Express Private Limited V/s. Union of India and
others, AIR 2009 PATNA 106 wherein it is held that unilateral
action of one contracting party to the prejudice of other party is
not only dehors contractual obligation, but is also contrary to the
specific provision of contract itself. Such action was held to be
arbitrary and violative of Article 14 of the Constitution of India.
Lastly,
Mr. Mehta relied on the decision of the Apex Court in the case of
Syed Israr Masood v/s. State of Madhya Pradesh, AIR 1981 SC 2010
wherein it is held that when the State Government has
substantially altered the contract, it was open to the plaintiff to
repudiate the contract and claim a refund of the first installment
of sale price.
Based
on the above facts and circumstances of the case and the decided
case law on the subject, Mr. Mehta has strongly urged that the
respondent Corporation be directed to refund the EMD with interest @
9% p.a. forthwith.
Mr.
Pranav G. Desai, learned advocate appearing for the respondent
Corporation, on the other hand and while opposing the petitions, has
submitted that there is no change of condition as alleged by the
petitioners. The respondent Corporation has not inserted any new
condition in the auction terms. From the averments and documents
furnished by the petitioners along with the petitions, it is very
clear that the condition was already there much prior to the auction
by resolution passed by the Standing Committee of the respondent
Corporation. He further submitted that the petitioners were aware
about this condition at the time of auction which was conveyed to
all the participants for all the plots as can be seen from the
affidavit filed on behalf of the respondent Corporation as well as
the reasoned order passed by the Commissioner of the respondent
Corporation along with the affidavit filed on 10.02.2011. He
further submitted that the auction is held on 08.02.2007 and prior
to the auction, public advertisement as well as the newspaper report
was given in the leading vernacular newspaper in the city of
Vadodara dated 17.01.2007 regarding condition of 20% premium in the
event of sub-lease of the property. The auction was held on
08.02.2007. Information was given much prior to the date of auction
and the petitioners wrote letters on 13.02.2007 i.e. within 5 days
from the date of auction. The petitioners’ correspondence referred
to in the petitions are vague and uncertain about the exact date on
which the alleged information came to the knowledge of the
petitioners. He further submitted that the petitioners were aware
about the newspaper information of 17.01.2007 as well as about the
said condition. There was a newspaper report of the same date of
17.01.2007 which clearly indicates the said condition. Thus, it can
certainly be proved that the petitioners were aware about the said
condition even prior to the date of publication as well as from the
date of public auction. He has, therefore, submitted that the
decision of the respondent Corporation produced on the record of
this Court is just, legal, proper and in public interest and for
non-payment of the auction bid price and/or failure to fulfill the
terms and conditions of the auction terms, the respondent
Corporation is justified in forfeiting the EMD and the same is in
consonance with the terms and conditions of the auction. He further
submitted that the condition to levy 20% non-refundable premium in
the case of further sub-lease is in public interest and the
respondent Corporation is justified in forfeiting the amount of EMD.
He further submitted that the petitioners’ claim for refund of EMD
along with interest is not tenable in law. Even as per the interim
order, the petitions were kept pending only for consideration of
refund of EMD and nothing is indicated in the said order to consider
the issue regarding interest on the EMD. The relief prayed for by
the petitioners in these two petitions is also in respect of the
refund of the EMD and there is no prayer with regard to claim of any
interest amount.
Mr.
Desai further submitted that 20% premium in case of sub-lease cannot
be made ground for non-payment of tender amount as per the tender
terms and conditions. The petitioners cannot take shelter of the
same for the purpose of non-payment of the agreed tender price as
per the tender terms and conditions. If the petitioners could
convince and establish their case concerning the said condition, the
same can be agitated so far as execution of sale deed in pursuance
of full payment of tender amount is concerned, but shelter of the
same cannot be taken for the purpose of non-fulfillment of the terms
and conditions of the tender and, therefore, the respondent
Corporation is justified in not refunding the EMD. He has,
therefore, submitted that the action of the respondent Corporation
is just, legal and proper and in public interest and the petitioners
are not entitled to the relief of refund of EMD as well as the
interest on such EMD, in view of the fact that the condition was not
introduced subsequently and it was well within the knowledge of the
petitioners. The said condition was widely published. It was
imposed much prior to the auction date and the petitioners were
aware about this condition which is made abundantly clear while
perusing the documents furnished along with the petitions. He has,
therefore, submitted that both the petitions deserve to be
dismissed.
Having
heard learned counsel appearing for the parties and having
considered their rival submissions in light of the facts and
circumstances of the case and terms and conditions of the tender –
original as well as revised, the Court is of the view that the
respondent Corporation is not justified in withholding the amount of
earnest money deposited by the petitioners and the said amount is
liable to be refunded with interest. At the out set, the Court makes
it clear that the amount of Rs.1,70,75,500/- paid by the petitioner
of Special Civil Application No.12867 of 2007 being first
installment is already refunded to the petitioner pursuant to an
interim order passed by this Court on 10.12.2007. Mr.Shalin Mehta,
learned advocate appearing for the petitioner has waived the claim
of interest on this amount and hence the Court is not concerned with
this point. The Court is, therefore, concerned only with the refund
of EMD with or without interest and, if any interest is to be
awarded, at what rate. It is borne out from the fact that only after
accepting the tender of the petitioners they were communicated that
any further sale of final plots by them would invite payment of
premium of an amount equivalent to 20% of sale value of the
respective plot. Such a condition did not form part of public
advertisement which was issued by the respondent Corporation on
13.1.2007, published in the vernacular newspaper known as “Gujarat
Samachar” on 14.1.2007. Such a condition also did not form
part of the 21 terms and conditions of the auction sale. It is the
case of the petitioners that they were never made aware of this
condition of payment of premium equivalent to an amount of 20% of
the sale value of the plot in case of a further sale, till the
auction was held, conducted and concluded by the respondent
Corporation. As against this the case of the respondent Corporation
is that, the auction in question was for lease of the concerned
final plot for a period of 99 years and not for sale of the plots or
sale of the plots on lease basis. The condition No.16(a) inserted
vide order dated 23.3.2007 requires the petitioners to pay premium
of an amount equivalent to 20% of the amount of bid of the
petitioners, in case they decide to sub-lease the said final plots.
It is also the case of the respondent that neither the said
condition amounts to materially altering the original terms given to
the bidders prior to the auction, nor does it amount to novation as
alleged by the petitioners. According to the respondent Corporation
this condition would only come into existence in contingency, if the
petitioners were to sub-lease the property at a later stage. It is
also their case that it is not after the auction, but was prior to
auction that the concerned officers of the Corporation had informed
all the bidders regarding such a condition. The stand of the
respondent Corporation is that in past when the Corporation had
conducted auctions to lease out plots, very few parties participated
because of the reason that the Corporation did not permit the
successful bidders to further lease the said plots. The Corporation,
vide a proposal dated 14.11.2006 by the Municipal Commissioner to
the Secretary of the Corporation had, inter alia,
proposed to permit lease-holder to further sub-lease the property on
payment of premium amounting to 20% of the value deposited by the
party with the Corporation.
This proposal came to be adopted by way of Resolution dated
23.11.2006 by the Standing Committee of the respondent Corporation,
whereby it was decided to permit the lease-holder to sub-lease the
property on payment of premium equivalent to 20% of the amount
deposited with the Corporation. The said Resolution by the Standing
Committee of the respondent Corporation came to be approved by the
general body of the respondent Corporation vide Resolution dated
2.1.2007. The said change brought about had also been reported in
vernacular various newspapers. It is also the stand of the
respondent Corporation that the petitioners could not claim to have
been taken by surprise nor could they claim that such a condition is
alien to the whole process.
The
above contentions of the respondent Corporation were taken into
consideration even while passing interim order on 10.12.2007 and
the Court observed that even as per Municipal Corporation, though
the Resolution was passed for imposing 20% premium upon
sub-lease of the land in question as far back on 23.11.2006 by the
Standing Committee, the same was neither incorporated in the terms
and conditions of the public auction issued in February, 2007 nor
was it contained in any written communication and hence the Court
has granted interim relief to the extent of paying back the amount
of the first installment to the petitioner. This observation holds
good even for the purpose of refunding the EMD to the petitioners.
There is nothing on record which establishes that prior to the order
dated 23.3.2007 the petitioners were ever informed in writing about
the payment of premium of amount equivalent to 20% of the amount of
bid in case the petitioners decide to sub-lease the final plots. The
change effected subsequent to the acceptance of the tender would
therefore certainly entitle the petitioners to repudiate the
contract.
The
Courts have taken the view in similar such circumstances that where
the terms of contract have been reduced to writing, it cannot be
changed without mutual agreement of both the parties. In Delhi
Development Authority and another V/s. Joint Action
Committee (Supra) the
Apex Court took the view that a party to the contract cannot at a
later stage, while contract was being performed, impose terms and
conditions which were not part of the offer. In M/s.
Scorpian Express Private Limited V/s. Union of India (Supra)
the Patna High Court took the view that unilateral action of one
contracting party to the prejudice of other party is not only dehors
contractual obligation, but is also contrary to the specific
provision of contract itself. In Syed
Israr Masood v/s. State of Madhya Pradesh (Supra)
the Apex Court took the view that when the State Government has
substantially altered the contract, it was open to the plaintiff to
repudiate the contract and claim refund of the first installment of
sale price.
In
Shah
and Patel Construction Co. Vs. Baroda Municipal Corporation, 2009(1)
GLH 663,
this Court took the view that the Municipal Commissioner while
permitting change of conditions of auction had changed the basic
condition of auction without putting other interested persons to
notice and without prior approval of General Body. The Court,
therefore, held that
the action of the Municipal Commissioner is dehors the powers and is
bad in law.
Considering
the above facts and circumstances of the case and the legal
position, the Court is of the view that the petitioners are entitled
to get the refund of their EMD of Rs.10 lacs with interest at the
rate of 7.5% per annum from the date of withdrawal of their offer
till the date of payment. The respondent Corporation is, therefore,
directed to grant the refund of Rs.10 lacs being amount of EMD with
interest at the rate of 7.5% per annum as against their claim of
interest @ 9% per annum to each of the petitioners within one month
from the date of receipt of the writ or from the date of receipt of
certified copy of this order, whichever is earlier, failing which
the Corporation would be liable to pay interest at the rate of 9%
p.a. for the subsequent period. The Court has awarded interest to
the petitioners, keeping in mind the fact that the amount is lying
with the respondent Corporation for more than four years, on which
the Corporation, must have earned interest or it might have borrowed
less amount to that extent. Even otherwise, some of the plots in
relation to which the petitioners have repudiated the contract, were
reauctioned and the Corporation is stated to have received much
higher amount. Thus, the Corporation has not suffered any monetory
loss.
With
these directions and observations, both these petitions are allowed
and rule is made absolute to the aforesaid extent without any order
as to costs.
(D. H. WAGHELA, J.)
(K. A. PUJ, J.)
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