JUDGMENT
Vijender Jain, J.
1. Aggrieved by the judgment delivered on May 14, 1981, this appeal is preferred by the appellants against Food Corporation of India (FCI). It was alleged in the plaint that at the representation of FCI appellants constructed godown at Hapur, it was pleaded that FCI assured that it would occupy the said store for a period of five years and by acting upon this representation, the plaintiffs/appellants constructed their godown at Hapur for use and occupation by the FCI on payment of compensation/rent at the rate of Rs.20 per 100 sq.ft. It is admitted position that FCI occupied the godown on August 1972. It was alleged that in violation of the term of the minimum occupancy guarantee, the respondents informed vide their letter dated January 25 , 1974 that they would release the godown on February 9, 1974 and would not pay compensation for use and occupation with effect from that date. It was contended by the appellants that no legal notice was served and thus the godown remained at the risk of the respondent and it was only on 21st June, 1976 that the appellants were able to let the godowns to another party. It was also stated that the godown was found abandoned in May and June, 1976. Appellants claimed damages in the sum of Rs.56,467.60/- at the rate of Rs.1969.80 per month for the period from February 1, 1974 to June 20, 1976. Besides, they also claimed Rs.3,000/- on account of loss or damage to property and Rs.10,054.57/- on account of extra interest which they had to pay to their bankers on account of loan incurred in connection with the construction of the godowns.
2. Respondents denied that they ever induced the appellants to construct the godown and took the stand that offer to take the godowns on lease was accepted subject to the terms and conditions mentioned in letter dated March 29, 1972. It was the stand of the respondents that as the appellants failed to comply with the conditions regarding specifications of construction, therefore, agreement regulating the tenancy and its duration could not be arrived at and regular lease deed for a period of five years was not executed. The claim of damages under various heads was also disputed by the respondents. From the pleadings of the parties, following issues were framed: .
”1) What were the terms on which the premises were let out to the defendants?
2) When the defendants delivered possession of the suit premises to the plaintiff?
3) Whether there is no concluded contract between the parties, so to what effect?
4) Whether the defendant served notice dated 25th January, 1974 upon plaintiff, if so to what effect?
5) What amount is due to the plaintiff from the defendants?
6) Whether this court has no jurisdiction to try the suit?
7) Relief.”
3. The whole controversy revolves round two aspects. As to what were the specifications for construction of godown issued by the respondents to the appellants, secondly whether a concluded contract came into existence between the parties on the basis of correspondence exchanged which was also acted upon. Whether in the absence of a registered lease deed, if any concluded contract on the basis of correspondence could have come into existence. The learned Single Judge while deciding issues nos. 1 and 3 eld that on the basis of material on record, the construction made by the appellants was not in accordance with the specifications of the respondents. In this regard, the learned Trial Court relied upon a report which is Ex.DW-1/1 dated August 5, 1972, Inter alia, stating that according to the specifications the brick work foundation and super structure should have been made with cement mortar and not with mud mortar as was the case with the godown in question. To appreciate the whole controversy, the report, which has been relied upon by the Trial Court for arriving at its finding, is reproduced below:
”Exhibit DW-1/1
As per the instructions of the DM vide his letter No.E.10(35) Const/Kanti Dev-Sharma/K.C. Sharma dt.27.7.72 I had gone to see the new godowns of Smt.Kanti Devi Sharma and K.C.Sharma and Dhanwantri Sharma and Smt. Bimlesh Tiwari Along with SAM(QC) and Godo on Supdt., Hapur.
The following were some of the points which were not in accordance to the FCI Specifications.
1) The boundary wall in foundation and super structure is with mud mortar and the foundation concrete is of lime concrete.
2) Damp proof course is of 3/4” thickness and does not have painting of bitumen on the top.
3) The outer cols. are 2′ X1′ -6” brick masonry up to about 20′ and 8′ from top towards lower portion are of ACC.
4) The flooring is of 9” local sand filling, over it is 4” lime concrete and over it is 1” thick CC 1:4:8 then final neat fence.
5) Exterior and interior of the godown have yet to be colour washed and white washed respectively. The trusses are also yet to be painted. Ramp, approach roads and storm water drains have not yet been provided. However, the party has submitted a certificate from the architect who has supervised the construction of godowns. The designing has also been done by the same architech.
Two certificates of the Architect are placed below. DM may kindly see.
Sd/- S.K.Sikand
5.8.72
DM J.E.(C)”
4. The Trial Court further held that DW 2, Assistant Manager, Food Corporation of India, has stated that lease deed sent along with letter dated February 28, 1973 (D-12) was forwarded to the Regional office but it was not executed and they received it on May 14, 1973 from the Regional Office stating that the godown was not up to the prescribed specifications.
5. On the other hand, before us, it was contended by Mr. G. N. Aggarwal, learned counsel appearing for the appellants that the Trial Court fell in error on both counts by not appreciating that the conditions/specifications which respondents have imposed on the appellants was through the letter dated March 29, 1972, which is Ex.D-5. The parameters of specifications as culled out on the basis of the aforesaid Ex.D-5 are totally different than reliance placed by the learned Trial Judge on the report, Ex.DW 1/1. The contents of Ex.D-5 are important. Same document has been also exhibited as P-3 and the contents of the same are reproduced later in the judgment.
6. During the course of hearing, we have asked learned counsel appearing for the respondents, Mr. Pudussary, as to how he reconciles the report (Ex.DW-1/1) with the specifications as contained in Ex.D-5. The only answer he could give us was in relation to paragraph 4 of Ex.DW-1/1. Para 4, which has been reproduced above, simply says that the flooring was of 9” local sand filling, over it was 4”lime concrete and over it is 1”thick cement concrete 1:4:8 then final neat fence. From a careful study of Ex.D-5 and condition no.1 of specifications, the only stipulation by the respondents was that the godown should be constructed having one and a half feet plinth with cement concrete flooring with a minimum height of the wall and ceiling of 20 feet. It is not disputed in the report Ex.DW-1/1 that there was cement flooring. As a matter of fact, the appellants had put 4”lime concrete and over it 1” thick cement concrete flooring. By no stretch it can be inferred that there was no cement concrete as has been contended by the counsel for respondents. Considering this and other specifications as were communicated to the appellants, it could be held that there was no breach of any stipulation regarding specifications of construction. Ex.D-24 is the report of Senior Assistant Manager of the respondents: Same reads as under:-
”They had provided quite adequate 3′ high plinth with cement concrete flooring and brick wall, cement plastered on both the sides. Approximate inner dimensions of godown No.1 is length 137′ and breadth 148′. They have provided two gates on each length side symmetrically opposite to each other and only one gate on front side. They have also provided six equidistant top wall ventilators on all the four sides of 3′ x 2′ in size with double iron bar and netting fittings. This was to facilitate sufficient ventilation to some extent. The bigger shed no.1 is divided in three bays of equal dimension – 148′ x 45′. The height of above fitting is 22′ and the central height is 27′ approximately. Thus stacks of the required normal size and of height could e easily built up.”
7. From the perusal of the specifications contained in Ex.D-5, the appellants were to provide the godown with a height of 20′. The appellants provided the height of 22′. They also provided the godown with all the specifications as laid down in Ex.D-5.
Therefore, the finding of the Trial Court on placing reliance on the report of DW-1/1 without scrutinising the specifications which were given by the respondents to the appellants vide their letter dated 29th March, 1972 (Ex.D-5) is contrary to record. the same is set aside. The plea of the appellants that godowns were constructed according to specifications of the respondents is further buttressed by a communication dated 28.02.1973 of respondents, EX.D-12, copy of which was produced by respondents can egorically stipulating therein that godowns were constrcuted on the FCI specifications and on account of five year occupancy guarantee as per apprvoal given by respondents office letter No.E-10(3)/71/Genl./Vol.1 dated 29.03.1972.
8. Let us now deal with the next submission of the learned counsel for the parties with regard to the fact, Whether a concluded contract on the basis of correspondence came into existence or not. Ex.PW-1 is a copy of telegram dated 9th March, 1972 from the respondents to the appellants. Same reads as under:-
”CONFIRM TELEGRAPHICALLY IF RENT RUPEES TWENTY PER HUNDRED SQ.FT. WITH FIVE YEARS GUARANTEE ACCEPTABLE. FOODCORP.”
9. Ex.P-2 is a telegram from the appellants to the respondents which reads as under:
” REFUTEL NINTH STOP RENTAL TWENTY RUPEES PER HUNDRED SFT AND FIVE YEARS OCCUPATION GUARANTEE INITIALLY FOR GODOWN PROPOSED TO BE CONSTRUCTED IN HAPUR ACCEPTABLE”
10. Thereafter on 29th March, 1972 an acceptance letter for construction of godown subject to five year occupancy guarantee was written by the respondents to the appellants. Same is reproduced below:
” Exhibit _P-3
The Food Corporation of India
Regional office: 16, Station Road, Lucknow.
No.E/10(3)/71/General/Vol.I
Date 29.3.1972
To
Smt.Bimlesh Tiwari,
W/O Shri S.M.Tiwari
T-20, Green Park Extension,
New Delhi -16.
Subject: Acceptance letter for construction of godown for letting out to F.C.I. on long term guarantee basis.
Dear Sirs,
” With reference to your telegram No.Nil dated 13th March, 1972 I am pleased to convey the approval for construction of godown offered by you at Hapur having a covered usuable area of 10080 sq.ft. on the following terms and conditions:-
1. Godown will be constructed having 1-1/2 ft.plinth with cement concrete flooring with a minimum height of the wall/ceiling of 20 ft. The four walls will be plastered from inside and cement pointed from outside. There will be adequate number of doors and ventilators as per plan submitted by you.
2. On both sides of the godowns, puce approachable road will be provided by you for smooth operation which will not be less than 20 ft. wide at any point.
3. Rent will be at the rate of Rs.20/- per 100 sq.ft. covered area per month.
4. The F.C.I. agrees to give you an occupancy guarantee of this godown for period of five years from the date of handling over and, thereafter, it will be on month to month basis if it is decided to retain the godown by the Corporation.
5. The godown must be handed over by 30th June, 1972. In case godowns are not handed over as per the schedule time mentioned here, it will be at the option of the FCI to take the godown or not to take them and also to withdraw or amend this offer.
6. Proper drainage around the godown, drinking water facility and electric light fittings will be provided both in the godowns and on the road. The payment of the electricity consumed will be made by the Corporation.
On the Construction being handed over to the FCI after completion, a further agreement will have to be executed by you in the proforma to regulated occupancy.”
Yours faithfully,
sd/-
For Sr.Regional Manager
CC:
1. The Distt. Manager, FCI, Hapur,
2. The Zonal Manager(N), FCI, Marshall House, New Delhi for post facto approval.
3. The Manager (S and C), FCI, HO, New Delhi.
4. F/No.E/10(3)/71/Hapur Centre.
5. E.10(3)/72/Smt.B.Tiwari.”
11. We need not go into any other documents. In view of these Exs.P1, P2 and P3, a concluded contract came into existence. It is well settled that it is not necessary that a concluded contract must be in writing. A formal contract is a mere formality and merely because the same was not executed in writing, it would not mean that a final and binding contract had not come into existence. A contract can come into existence by exchange of letters which can be culled from them. It is not necessary that there must be a single formal document signed and executed by both the parties. When an offer is made and the same is accepted, it would result in a concluded contract. In the present case, as can be be seen from Exs.P1 to P3 that there was an offer to construct with five years occupancy guarantee which was accepted and acted upon by the appellants. Without going into the controversy as to who made the offer first or there was an invitation to offer, it is apparent that there was an offer to construct on certain conditions with five years occupancy guarantee which was accepted without any rider and therefore a godown according to specifications of respondents was constructed. Nothing more was required to be done. The whole exercise in the impugned judgment with regard to Sections 105, 106 and 107 of Transfer of Property Act is of no consequence as executing a lease was in furtherance of an already concluded contract under which a godown was to be constructed according to specifications given by letter dated 29.3.1972 with five year occupancy guarantee. The concluded contract could not be negated on the plea that a lease deed was not executed subsequently by respondents though the godown was taken and used by respondents without any objection egarding non compliance of specifications. What appellants had agreed was construction of a godown on the basis of five year occupancy guarantee of the respondents on charges of such godown @ Rs.20 per 100 sq.ft. In Food Corporation of India, Bhopal and Ors v.M/s Babulal Agarwal , in somewhat similar circumstances, a Division Bench of the Madhya Pradesh High Court, where the appellant was Food Corporation of India, took the similar view and held:
” Where the assurance given by the Food Corporation of India, in writing that it would take the plinths to be constructed by owners of land on lease for a period of three years, the owners of land invested huge amounts for construction of plinths, the Corporation cannot back out subsequently from its promise and terminate lease before expiry of three years on mere ground that the agreement executed by the parties was not admissible in evidence being not registered and, therefore, the lease was month-to-month which could be terminated under Section 106, Transfer of Property Act. Moreover, the Corporation being statutory corporation cannot be allowed to resile from its promise so as to cause harm or injury to owners. It was more so, as the contract was not opposed to public policy under Section 23 of the Contact Act, or prohibited by any statutory provision of law or ultra vires the authority.”
12. Therefore we hold that the whole approach of the Trial Court was misdirected. The Trial Court has not apprised itself properly with the material and evidence on record, Exs.P1, P2 and P3 and DW-1/1 and D-5. Therefore, the Trial Court erred in returning the finding that the tenancy was for month-to-month and, therefore, the respondents not liable for five year occupancy guarantee given by them for getting the godown constructed from appellants. Mr. Pudussary, learned counsel appearing for the respondents in support of his contention has cited Anthony v. K.C. ITTOOP and Sons and others as well as Satish Chand Makhan and others v. Govardhan Das Byas and others. His plea with regard to Sections 105, 106 and 107 of Transfer of Property Act will not absolve the liability of respondents because appellants had incurred considerable expenses in construction of godown according to given specifications of the respondents. Therefore, in instant case the questions as raised by respondents based on the provisions of Transfer of Property Act, cannot be applied. Therefore, the ratio of Satish Chand Makhan’s case is not applicable in the present case. There cannot be any dispute with regard to the proposition of law laid down in Anthony and Satish Chand Makhan’s case as we have discussed earlier. In view of the fact that a concluded contract came into existence the execution of a lease deed was a mere formality and if the same was not executed, the respondents cannot take advantage of their own lapse and can not absolve themselves of consequence and can not deprive the appellants of their rights and the amounts they are entitled for. They have lured the appellants in investing an amount which was taken by the appellant by borrowing from the Bank. The appellants have paid interest on such borrowings believing and relying on the representation of the respondents. Therefore, we also find force in the arguments of the counsel for the appellants that Section 115 of the Evidence Act and the concept of Promissory estoppel also comes into play. Supreme Court in Amrit Banaspati Co. Ltd v. State of Punjab, held :
” 3. Law of Promissory Estoppel which found its `most eloquent exposition’ in Union of India v. Indo Afghan Agencies , crystallised in Motilal padampat Sugar Mills v.State of U.P. as furnishing cause of action to a citizen, enforceable in a Court of law, against Government if it or its officials in course of their authority extended any promise which created or was capable of creating legal relationship, and it was acted upon, by the promiseirrespective of any prejudice…….
In Delhi Cloth and General Mills Ltd.v.Union of India it was held: ” All that is now required is that the party asserting the estoppel must have acted upon the assurance given to him. Must have relied up to the representation made to him. It means, the party has changed or altered the position by relying on the assurance or the representation. The alteration of position by the party is the only indispensable requirement of the doctrine. It is not necessary to prove further any damages, detriment or prejudice to the party asserting the estoppel.”……
7. The Government cannot be permitted to go back on its promise by producing some documents lying in its file which was neither known, nor announced nor acted upon as it would be unjust and unfair, therefore, illegal…….
8. But Promissory Estoppel being an extension of principle of equity, the basic purpose of which is to promote justice founded on fairness and relieve a promiseof any injustice perpetrated due to promisor’s going back on its promise, is incapable of being enforced in a Court of law if the promise which furnishes the cause of action or the agreement, express or implied, giving rise to binding contract is statutorily prohibited or is against public policy.”
13. In view of the fact that under Exs. P1, P2 and P3, five years occupancy period was guaranteed, which commenced on actual possession of the property taken by respondents which was as per respondents’ requirement and specifications. The respondents used the godown for some period and thus it can not be inferred that there was vagueness or uncertainty in the contract in question. Therefore, the judgment and finding of the Trial Court is set aside. The decree as prayed for in the plaint for a sum of Rs.69,522.17 with interests @ 12 per cent is granted in favor of the appellants. The appellants shall also be entitled to pendente lite interest @ 12% from the date of institution of suit and up to the realisation of decretal amount. Costs of this appea is also awarded to the appellants against respondents.
14. Appeal is allowed accordingly.