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CASE NO.: Appeal (civil)  2202 of 2007

PETITIONER: Bharat Petroleum Corpn. Ltd

RESPONDENT: Maddula Ratnavalli & Ors

DATE OF JUDGMENT: 27/04/2007

BENCH: S.B. Sinha & Markandey Katju

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO.      2202               OF 2007 [Arising out of SLP (C) No.10662 of 2006]

WITH

CIVIL APPEAL NO.                      OF 2007 [Arising out of SLP (C) No.18532 of  2006]

S.B. Sinha, J.

       1.      Leave granted.                  2.      Appellant is a Government company.  The Parliament enacted  the Burmah Shell (Acquisition of Undertakings in India) Act, 1976 (The said  Act), inter alia,  to provide for acquisition and transfer of the title, right and  interest in the "Burmah Shell Oil Storage and Distributing Company of  India Ltd."  to Bharat Petroleum Corporation Limited. The said Act came  into force on 24.01.1976 which was the ’appointed day’ fixed within the  meaning of Section 2A(c)  of the Act.  By reason of Section 3 of the said Act  the right, title and interest of  Burmah Shell stood transferred to and vested  in the Central Government.  Section 5 of 1976 Act provides that the Central  Government shall be deemed to be the lessee or tenant under the  circumstances specified therein.  Sub-section (2) of Section 5 which is  relevant for our purpose reads thus :

"On the expiry of the terms of any lease or tenancy  referred to in sub-section (1) such lease or tenancy shall  if so desired by the Central Government be renewed on  the same terms and conditions on which the lease or  tenancy was held by Burmah-Shell immediately the  appointed day."

       3.      It is not in dispute that the Central Government in exercise of   its power conferred upon it under section 7 of the said Act directed that the  undertaking of the Burmah-shell shall vest in the appellant herein which is a  Government company;  the consequences, inter alia, wherefor is laid down  in sub-section (3) thereof which reads as under :

"The provisions of sub-section (2) of section 5 shall  apply to a lease or tenancy, which vests in a Government  company, as they apply to a lease or tenancy vested in  the Central Government and reference therein to the  "Central Government" shall be construed as a reference  to the Government company."

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       4.      Burmah-shell, the predecessor-in-interest of the appellant was a  lessee for a period of 30 years by virtue of a deed of lease which was  executed on or about 25.07.1959 by the respondent.  The stipulated rent was  Rs.50/- per month.  On expiry of the period of lease on 30.08.1985, the  appellant exercised its purported right of renewal by issuing a notice on or  about 24.05.1989 stating :

"On 1st August, 1977, another fresh certificate of  incorporation was issued under the same section of the  Companies Act, 1956, effecting the change in the name  of the Company from Bharat Refineries Ltd., to Bharat  Petroleum Corporation Ltd., which change as before does  not affect any rights or obligations of the Company.

This is to advise you that in terms of Section 5 and  Section 7(3) of the Burmah-Shell (Acquisition of  Undertaking in India) Act, 1976, extract of which is  enclosed for your reference, we desire to renew the lease  for a further period of 30 years commencing from  25.7.1989 on the same terms and conditions on which the  lessee abovementioned viz. Burmah-Shell Oil Storage &  Distributing Co. of India Ltd., held the lease immediately  before the appointed day viz. 24th January, 1976.

May we therefore, request you to let us know when it  will be convenient for you to have the lease registered on  terms similar to those existing in the current lease.  On  receipt of your advice in this matter, we shall take further  action."

       5.      Respondents did not agree thereto.  They, on the other hand, by  a letter dated 26.08.1990 stated that as the rent in respect of the said land has  not been paid and the provisions of the said Act have no application, the  tenancy shall stand terminated with effect from 24.09.1990.  Appellant was   called upon to vacate and deliver possession of the said premises stating :

"Please therefore take notice that if you fail to vacate and  deliver vacant possession of the said property  immediately after 24.09.1990 paying damages for use  and occupation at Rs.5,000/- per month and the costs of  this notice to my clients, they will be constrained to file a  suit against you for appropriate reliefs and that you will  also be liable for all my client’s cost."

       6.      Despite service of the said notice, as the appellant did not  deliver vacant possession of the tenanted premises; a suit for eviction was  filed.  In their written statement, the appellants averred:

"The allegations that the lease expired on 24.07.1989,  that the plaintiffs demanding delivery of vacant  possession and arrears of rent or damages, that the  plaintiffs require the plaint schedule property for their  bonafide use for construction of shops and carrying on  business are all absolutely false.  The alleged requirement  of the plaintiffs is false and its an afterthought and made  to lend support of their claim for possession contrary to  the statutory renewal/protection available to this  defendant."

       7.      By reason of a judgment dated 30.12.1999, the learned Senior  Civil Judge, Anakapalle, Andhra Pradesh dismissed the said suit in view of  the provisions of the 1976 Act holding that the appellant had a right to  continue to occupy the leasehold as a tenant on the same terms and  conditions on which the tenancy was granted.  An appeal preferred  thereagainst, however, was allowed by the First Appellate Court opining:-

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"In the above decision, it was held that the words "if so  desired means if so needed", and it is quite likely that  immediately after the undertakings were taken over by  the Central Government, it could not be possible to  obtain suitable alternative premises, for continuing  business activities of the undertakings of the Caltex  (India) and therefore, the Central Government has to be  armed with the power to get the leases and tenancies  renewed or continued after their expiry under sub-section  (3).  So the power under sec.7(3) for renewing or  continuing by the Act of Parliament, and as per the Act,  the defendant company got right to renew the lease on  the same terms and conditions for a further period of 30  years.  He further deposed that they exercised their  option to renew the lease by a letter dt. 24.5.1989.  Thus,  D.W. has not explained or given reasons to show that the  need for renewal of lease for a further period of 30 years.   In the chief-examination he stated that there is a bridge  viz., Sarda Bridge near lease hold premises, and bridge  was closed due to heavy traffic and the traffic was  diverted to bye-pass road, and therefore, the rental value  of the lease hold premises is reduced.  At page-4 he  admitted that Subramanyam and others are the retail  dealers of Bharat Petroleum Corporation and after  closure of the bridge the sale of petroleum products are  decreased as heavy traffic was effected.  He stated that  the local trade was continuing.

It is, therefore, clear from the above admission of D.W.1  that due to the closure of the bridge near the schedule  premises, the highway traffic is being diverted through  the bye-pass road.  It is thus clear from the above  evidence that there is no need for renewal of the lease.  There is no allegation in the written statement that the  defendant needs the premises.  Therefore, it is clear from  the pleadings, as well as the evidence of DW.1 that there  is no need for renewal of lease.  By virtue of the above  provision as of right, the defendant-corporation is not  entitled for renewal of lease for a further period of 30  years. It is against the spirit of the above decisions.  The  learned Senior Civil Judge, has lost sight of the above  aspects and erroneously held that the defendant  Corporation as of right, by virtue of the above provisions,  is entitled for renewal of the lease.  Thus the finding of  the lower court that Ex.A.1 quit notice is invalid is  erroneous.

The object of the Act is to prove better service to the  public and the same can be achieved only when the outlet  is situated at a place where there will be more vehicular  traffic but the vehicular traffic at the schedule premises is  completely closed, and the same has been diverted into  the bye-pass road.  Therefore, the defendant cannot serve  the public, as it was earlier by continuing petrol bunk in  the schedule premises.  By taking shelter under the above  technicality, the retailer of the defendant-Corporation  Subramanayam and others cannot be allowed to squat on  the property for a poultry (sic paltry) monthly rent of  Rs.50/-."

       8.      A Second Appeal preferred thereagainst by the appellant has  been dismissed by the High Court of Andhra Pradesh holding :

"\005In this case, it is an admitted fact that for 17 long

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years during the pendency of this lis, neither the  appellant paid the rents nor deposited to the credit of the  suit to prove their bona fides that there is a bona fide  requirement, apart from their legal right to have renewal  automatically under sections 5(2) and 7(3) of the Act.  Further, it is in the evidence that as soon as the by-pass  road had come up in Anakapalle, the diesel component of  the petrol bunk was closed and the business of the  appellant-company was decreased to a considerable  extent.  This all shows that since the rent was only  Rs.50/- per month as agreed under Ex.B1 lease deed and  the appellant though not having much business at the  present place, just they want to enjoy the suit land for  another 30 years in the guise of sections 5(2) and 7(3) of  the Act, just for a rent of Rs.50/- per month.  During the  pendency of the lis, the appellant has not come forward  with any proposal to enhance the rent.  In fact, appellant  did not deposit even that meager rent of Rs.50/- per  month for 17 long years.  Therefore, it cannot be said that  the appellant acted fairly.  The renewal was actuated by  unfair and unreasonable motives.  As such, it cannot be  said that in the guise of section 5(2) of the Act, the  appellant is entitled for automatic renewal.

In view of the above discussion, whether mere expressing  desire for renewal or not furnishing reasons for renewal  is necessary to be examined in this case.  May be, in  Bharat Petroleum Corporation Ltd. Vs. P. Kesavan  (supra), the point did not arise for consideration directly,  and only as a general discussion, the Apex Court held  that in view of sections 5(2) and 7(3) of the Act, renewal  is automatic.  Further, whether sections 5(2) and 7(3) of  the Act are to be given a restrictive meaning to construe  that with an intention to protect the interest of the  Government of India under the Act, the automatic  renewal was contemplated of those leases, which were  expired around that time i.e. 1976 also need not be gone  into in this case.  The very conduct of the appellant is  nauseating and does not inspire the confidence of the  Court to show any indulgence.  No substantial question  of law arises for consideration under section 100 of the  Civil Procedure Code.  The Second Appeal is devoid of  merit and liable to be dismissed."

       9.      Appellant is, thus, before us.           10.     Before embarking upon the rival contentions of the parties we  may, however, notice that the decree passed by the Appellate Court as  affirmed by the High Court was put to execution by the respondents on  04.06.2006.  Indisputably, the decree has been executed and the respondent  has been put in possession of the decretal premises.

       11.     Mr. Sudhir Chandra, learned Senior Counsel appearing on  behalf of the appellant submitted that the appellant, by reason of Section  5(2) read with Section 7(3) of the 1976 Act, had an unbridlled statutory right  to exercise its option for renewal of the lease which in terms thereof would  be deemed to have been renewed for another term of 30 years from  25.07.1989 and in that view of the matter the impugned judgment cannot be  sustained.  

        12.    Mr. Aman Lekhi, learned Senior Counsel appearing on behalf  of the respondents, on the other hand, submitted that an action on the part of  the appellant should conform to the doctrine of fairness and in that view of  the matter, the impugned judgment cannot be interfered with.   

       13.     Appellant-company is a ’State’ within the meaning of Article

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12 of the Constitution of India.  It is, therefore, enjoined with a duty to act  fairly and reasonably.  Just because it has been conferred with a statutory  power, the same by itself would not mean that exercise thereof in any  manner whatsoever will meet the requirements of law.  The statute uses the  words "if so desired by the Central Government".  Such a desire cannot be  based upon a subjective satisfaction.  It must be based on objective criteria.   Indisputably, the 1976 Act is a special statute.  It overrides the provisions of  Section 107 of Transfer of Property Act.  The action of the State, however,  must be judged on the touchstone of reasonableness.  Learned counsel for  both the parties have relied upon a 3 Judge Bench decision of this Court in  Bharat Petroleum Corporation Ltd. v. P. Kesavan & Anr. [(2004) 9 SCC  772] wherein this Court held :

"The said Act is a special statute vis-‘-vis the Transfer of  Property Act which is a general statute.  By reason of the  provisions of the said Act, the right, title and interest of  Burmah Shell vested in the Central Government and  consequently in the appellant Company.  A lease of  immovable property is also an asset and/or right in an  immovable property.  The leasehold right, thus, held by  Burmah Shell vested in the appellant.  By reason of sub- section (2) of Section 5 of the Act, a right of renewal was  created in the appellant in terms whereof in the event of  exercise of its option, the existing lease was renewed for  a further term on the same terms and conditions.  As  noticed hereinbefore, Section 11 of the Act provides for a  non obstante clause."

       14.     Whereas submission of Mr. Sudhir Chandra, learned Senior  counsel is that the  Court can interfere with the ’desire’ expressed by the  Government company only when it is actuated by any malice or ill-will but  not when the same was either unfair or unreasonable.  In fine, the contention  is that the State in a matter of this nature is  required to act fairly.   

       15.     We do not see any incongruity in the said decision.  A  judgment, as is well known, must be read in its entirety.  It must be  construed reasonably and if necessary, in the light of the constitutional and  statutory provisions.

       16.     An executive action must be informed by reason.  An unfair  executive action can only survive for a potent reason. An action which is  simply unfair or unreasonable would not be sustained.  Objective satisfaction  must be the basis for an executive action.  Even subjective satisfaction on  the part of a State is liable to judicial review.  The ’State’ acting whether as a  ’landlord’ or a ’tenant’ is required to act bona fide and not arbitrarily, when  the same is likely to affect prejudicially the right of others.   

       17.     In Amarnath Ashram Trust Society & Anr. v. Governor of U.P.  & Ors. [(1998) 1 SCC 591], it was held : "\005Thus the decision of the Government to withdraw  from acquisition was based upon a misconception of the  correct legal position. Such a decision has to be regarded  as arbitrary and not bona fide. Particularly in a case  where as a result of a decision taken by the Government  the other party is likely to be prejudicially affected, the  Government has to exercise its power bona fide and not  arbitrarily. Even though Section 48 of the Act confers  upon the State wide discretion it does not permit it to act  in an arbitrary manner..."                  18.     We are, however, not oblivious of the legal principle that only  because a statute causes hardship, the same may not be declared ultra vires.    (Dura Lex Sed Lex).  We may, in this regard, notice certain principles :

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       19.     In Raghunath Rai Bareja and Anr. v. Punjab National Bank and  Ors.  [2006 (13) SCALE 511], it is stated :

"Learned counsel for the respondent-Bank submitted that  it will be very unfair if the appellant who is a guarantor  of the loan, and director of the Company which took the  loan, avoids paying the debt.  While we fully agree with  the learned counsel that equity is wholly in favour of the  respondent-Bank, since obviously a Bank should be  allowed to recover its debts, we must, however, state that  it is well settled that when there is a conflict between law  and equity, it is the law which has to prevail, in  accordance with the Latin maxim ’dura lex sed lex’,  which means ’the law is hard, but it is the law’.  Equity  can only supplement the law, but it cannot supplant or  override it."  

       20.     A statute, however, must be construed justly.   An unjust law is  no law at all (Lex injusta non est lex).   

       21.     In Kailash Chand & Anr. v.  Dharam Dass [(2005) 5 SCC 375],  Lahoti, C.J. opined  : "We find it difficult to accept the construction placed on  the third proviso, in para 14 of the judgment in Molar  Mal case. In Rakesh Wadhawan v. Jagdamba Industrial  Corpn. this Court has held that a statute can never be  exhaustive. The legislature is incapable of contemplating  all possible situations which may arise in future litigation  and in myriad circumstances. The scope is always there  for the court to interpret the law with pragmatism and  consistently with the demands of varying situations. The  construction placed by the court on statutory provisions  has to be meaningful. The legislative intent has to be  found out and effectuated. Law is part of the social reality. (See Law in the Scientific Era by Justice Markandey  Katju, 2000 Edn., p. 33.)  Though law and justice are not synonymous terms they  have a close relationship, as pointed out by the American  jurist Rawls. Since one of the aims of the law is to  provide order and peace in society, and since order and  peace cannot last long if it is based on injustice, it  follows that a legal system that cannot meet the demands  of justice will not survive long. As Rawls says: Laws and  institutions no matter how efficient and well arranged,  must be reformed or abolished if they are unjust. (ibid., p.  72.) Clearly, law cannot be so interpreted as would cause  oppression or be unjust."

       22.     The Parliament moreover is presumed to have enacted a  reasonable statute (see Breyer, Stephen  (2005): Active Liberty: Interpreting  Our Democratic Constitution, Knopf (Chapter on Statutory Interpretation -  pg. 99 for "Reasonable Legislator Presumption" ).         23.     We may also notice that recently in M/s. Ispat Industries Ltd. v.  Commissioner of Customs, Mumbai [2006 (9) SCALE 652], one of us  (Katju, J.)  stated :

"In this connection, it may be mentioned that according  to the theory of the eminent positivist jurist Kelsen (The  Pure Theory of Law) in every legal system there is a  hierarchy of laws, and whenever there is conflict between  a norm in a higher layer in this hierarchy and a norm in a  lower layer the norm in the higher layer will prevail (see  Kelsen’s ’The General Theory of Law and State’)."

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       24.     With that we may add that a statutory order or discretion  exercised by a statutory authority must also be tested on the anvil of the  constitutional scheme.

       25.     This Court  number of times  has laid emphasis on reasonable  action on the part of the State even as a landlord. [See M/s. Dwarkadas  Marfatia & Sons v. Board of Trustees of the Port of Bombay [(1989) 3 SCC  293] and in contractual matters \026 Noble Resoources Ltd. v. State of Orissa &  Anr. [(2006) 10 SCC 236] and State of Karnataka & Anr. v. All India  Manufacturers Organisation & Ors. [(2006) 4 SCC 683].

       26.     Reasonableness and non-arbitrariness are the hallmarks of an  action by the State.  Judged from any angle, the action on the part of the  appellant does not satisfy the test of fairness or unreasonableness.  It being  wholly arbitrary cannot be sustained.

       27.     In any event, when two views are possible, a view which  satisfies the constitutional rights or requirements, must be preferred.   

       28.     In M.L. Kamra v. Chairman-cum-Managing Director, New  India Assurance Co. Ltd. & Anr. [(1992) 2 SCC 36], this Court held : "The Court ought not to interpret the statutory provisions,  unless compelled by their language, in such a manner as  would involve its unconstitutionality, since the legislature  or the rule making authority is presumed to enact a law  which does not contravene or violate the constitutional  provisions. Therefore, there is a presumption in favour of  constitutionality of a legislation or statutory rule unless  ex facie it violates the fundamental rights guaranteed  under Part III of the Constitution. If the provisions of a  law or the rule is construed in such a way as would make  it consistent with the Constitution and another  interpretation would render the provision or the rule  unconstitutional, the Court would lean in favour of the  former construction.

29.     Right of property although is not a fundamental right,  nonetheless remains a constitutional right and any expropriatory  legislation  must be construed strictly. [See Hindustan Petroleum Corporation Ltd. v.  Darius Shahpur Chennai & Ors. [(2005) 7 SCC 627]].           

       30.     In the instant case, the concurrent finding of fact is that the  desire of the appellant was not bona fide.  In any event, possession of the  lease holding has already been delivered.  Respondents have received  possession after a long struggle.  It is, therefore not a case where we should  interfere with the impugned judgment particularly in view of the finding of  fact arrived at by the courts below.

       31.     For the aforementioned reasons, these appeals are dismissed  with costs.  Counsel’s fee assessed at Rs. 50,000/-.