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CASE NO.: Appeal (civil)  4002 of 2007

PETITIONER: Aggarwal & Modi Enterprises Pvt.Ltd. & Anr

RESPONDENT: New Delhi Municipal Council

DATE OF JUDGMENT: 31/08/2007

BENCH: Dr. ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T  

CIVIL APPEAL NO.   4002            OF 2007 (Arising out of SLP (C) No. 21183 of 2005)

Dr. ARIJIT PASAYAT, J.

1.      Leave granted.  

2.      Challenge in this appeal is to the order passed by a  Division Bench of the Delhi High Court dismissing the Letters  Patent Appeal filed by the appellants. Challenge before the  Division Bench was to the order passed by a learned Single  Judge dismissing the Writ Petition filed by the appellants.  Challenge in the Writ Petition was to the order dated  13.11.2001 passed by the respondent-New Delhi Municipal  Council (in short ’NDMC’). By the said order, the appellants  were held to be unauthorized occupants of the premises in  dispute namely, that of Chanakya Cinema Complex situated in  Diplomatic Enclave, New Delhi. Prayer was also to set aside the  letter dated 22.1.2002 issued by the NDMC seeking the vacant  and peaceful possession of the aforesaid complex. The  resolution passed by the NDMC dated 28.8.2001 was also  impugned to the extent it allowed the appellants to continue in  possession from 1st October, 2000 to 30th September, 2003  only. Prayer was also made for renewal of the lease/licence of  the appellants with the usual option for renewing the  lease/licence on appropriate terms and conditions. It is to be  noted that appellant No.1 (hereinafter referred to as the  ’company’) was the original lessee while appellant No.2 is the  shareholder of appellant No.1-Company. The writ petition was  filed by the company through one of its Directors Shri Rajesh  Khanna.  3.      Learned Single Judge noted that whatever may have been  the situation in the past, the basic issue was whether the terms  of lease permitted the tenancy beyond 30th September, 2003 as  contended by the appellants.  It was held that the appellants’  case was that renewal due in 2000 was to be effective from 1st  October, 2000 on mutually agreed terms. Since the terms have  not been mutually arrived at, in essence parties have not agreed  to renewal in 2000. Undisputedly, the appellants’ case was a  lease for fixed terms. The earlier two renewals were therefore of  no consequence. The licence granted to appellant No.1 was from  time to time and without premium. Specific periods were  indicated in the terms of licence itself. The writ application was

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accordingly dismissed. The order was questioned before the  Division Bench.  

4.      After analyzing the basic issue formulated for the dispute,  the Division Bench found no merit in the LPA and dismissed the  same. The following observations were made by the Division  Bench.  "27.  No formal licence deed was also executed  and there was no unqualified acceptance to  the offer contained in the NDMC’s letter dated  2nd December, 1991. Therefore, in the eyes of  law, no valid licence was granted for the third  block i.e. 1st October, 1990 to 30th September,  2000.

28.     Be as it may, vide order dated 25th May,  2001 stay granted in CWP No. 3244/1992 was  also vacated on the ground that even the  period of third block had come to an end. This  petition was also dismissed as withdrawn on  20th May, 2002. Even otherwise the NDMC’s  letter dated 2nd December, 1991 did not  contain any renewal clause. Therefore,  contractually there was no entitlement to seek  renewal after 30th September, 2000 and in fact  there was no such lease in operation under  which this right could be exercised. However,  while vacating the stay vide order dated 25th  May, 2001 since the Division Bench observed  that request of the appellants for renewal of  the licence agreement for further period be  considered, the NDMC adverted to this aspect.  Request of the appellants included allowing  them to convert the cinema complex into a  multiplex. Again, it was not in terms of lease  that the question of ’extension’ of lease period  was considered. But it was the request of the  appellants which was to be considered, and  NDMC agreed to bestow its consideration in  view of the observations of this court in its  order dated 25th May, 2001. As consideration  of this request was to take some time, the  Council first passed resolution dated 28th  August, 2001 extending the lease for a period  of three years i.e. from 1st October, 2000 to  30th September, 2003 pending final decision  on the proposal of the appellants to redevelop  the complex as multiplex-cum-commercial  center. This proposal was, thereafter,  considered and vide impugned order dated 13th  November, 2001 rejected the offer".          5.      It was noted that though offer of further renewal beyond  1st October, 1990 (third block) was initiated by NDMC letter  dated 2nd December, 1991, the response dated 5.12.1991 was  not an acceptance in the eyes of law and no further licence  deed/agreement was executed although offer dated 2nd  December, 1991 clearly stipulated that the same was subject to  execution of fresh agreement. The offer itself was challenged by  the appellants by filing CWP No.3244/1992 clearly meaning  thereby that it did not accept the said offer. They continued in  possession because of stay orders granted in the writ petition;  and in this manner without a contract. Even the third block  contained in the offer dated 2nd December, 1991 expired on 30th  September, 2000. In that sense, there was no agreement in

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existence and there was no subsisting lease or agreement  written or oral which gave any right to the appellants to seek  further renewal under the lease.   6.      Though many points were urged in support of the appeal,  primary stand was that true scope and ambit of Section 141(2)  of the NDMC Act, 1994 (in short the ’Act’) has not been kept in  view and the manner in which NDMC is interpreting it, goes  against the intended legislative object. In any event, the  appellants have been ousted or discriminated or subjected to  hostile treatment as in no other case purported intention of  public auction has been resorted to.

7.      The appellants had themselves suggested that they should  be permitted to develop the property on the basis of the  consultant’s report. NDMC owns various properties but the  complex in question is the only cinema hall it has.  

8.      For the purpose of renewal, the parameters are different  and it cannot only be restricted to public auction.  Appellants  have been in occupation for long period. If ultimate object is  development, the present occupants would have preference. If  the scheme is acceptable to the occupants its offers should be  accepted.  9.      The consideration for which any immovable property may  be sold, leased or otherwise transferred shall not be less than  the value at which such immovable property could be sold,  leased or otherwise transferred in normal and fair competition  

10.     In essence, it means that the lease amounts should not be  less than the market value. The expression in the renewal  clause on which great emphasis is led speaks of "terms and  conditions to be mutually agreed upon". According to the  appellants it cannot mean that one of the parties can stipulate  unreasonable terms and conditions. In essence, the terms and  conditions have to be fair. While determining the fair value the  amount is what the existing tenant is required to pay. NDMC  itself had required payment of Rupees two crores per year. The  requirements of Section 141 (2) cannot apply to a case of  renewal. It is submitted that the appellants have been spent  more than rupees three crores after 2000. Though there has  been no renewal the High Court noted that discriminatory  treatment is being meted out to the appellants and, therefore, it  had directed the respondent-NDMC to give instances where  public auction had been resorted to.  

11.     In essence, it is submitted that the appellants should be  given an opportunity first to pay the fair price and not the  public auction price. The public body cannot resort to public  auction just with profit making motive.  

12.     Learned counsel for the NDMC on the other hand  submitted that initially there was a licence deed containing  renewal clause. For the subsequent tenures also there was such  a deed with renewal clause.  After that no agreement or lease  had been actually executed. For 18 years beginning from 1981- 82 the appellants were indulging in litigation and the prayer  was to set aside the licence deed. In fact, in the plaint originally  filed in the suit, it was averred that the deed was executed  under coercion. Similar was the plea in the subsequent suits. It  is pointed out that there was no pre-emptive right. One of the  objectives of NDMC was to have retail mall cum multi-plex. The  financial capacity of the appellants is not sufficient, they have  no expertise in the intended activities.  At the most, they have  some experience in running a uniplex. There was no  unconditional acceptance of terms offered in 1990 and no

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licence or agreement was executed after 1990. The writ petition  was filed in 1992.  

13.     Several factors need to be noticed before we deal with the  scope and ambit of Section 141(2).

14.     What in essence the appellants are seeking for is specific  performance of the purported contract without filing a suit.   Admittedly, there is no renewal since long and in any event if  appellants’ case is accepted there is no agreement after 2003. In  that sense, the auction would be the first time exercise.  Undisputedly, NDMC is proposing to have multiplexes whereas  the present arrangement is one of uni-plex.  The reason as to  why NDMC wanted to have resort to public auction is spelt out  in the resolution dated 30th August, 2000. Para 2 of the  resolution reads as follows: "During the period of Asian Games, Ministry of  Urban Development transferred some plots of  land to NDMC for construction and  commissioning of Hotels on certain terms and  conditions and later on NDMC licensed these  premises for above purposes to eminent  companies for long periods of 99 years subject  to renewal of license fees after every 30 years.  Likewise, there are other establishments, like  cinema in Chankya Complex where the land  was transferred long back by the Ministry of  Urban Development to NDMC for developing  multiplex buildings. The premises have been  transferred on license for particular periods.  Above premises had been licensed before the  enactment of NDMC Act 1994."       

           15.     Similarly, in respect of specified group of premises with  the Ministries/Government Departments, renewal was to be  done at enhanced rate of 10% p.a. or the Central PWD  enhanced rates, whichever is higher.  

16.     Strong reliance has been placed by learned counsel for the  appellants on a decision of this Court in Jamshed Hormusji  Wadia v. Board of Trustees, Port of Mumbai and Anr. (2004 (3)  SCC 214), more particularly, para 14. The same reads as  follows:

"The Bombay Port Trust is an instrumentality  of State and hence an "authority" within the  meaning of Article 12 of the Constitution. (See  Dwarkadas Marfatia and Sons v. Board of  Trustees of the Port of Bombay). It is amenable  to writ jurisdiction of the court. This position  of law has not been disputed by either party.  The consequence which follows is that in all its  actions, it must be governed by Article 14 of  the Constitution. It cannot afford to act with  arbitrariness or capriciousness. It must act  within the four corners of the statute which  has created it and governs it. All its actions  must be for the public good, achieving the  objects for which it exists, and accompanied by  reason and not whim or caprice."   

17.     Undisputedly, there was no provision like Section 141 (2)  involved in that case. The parameters of limitation in Section  141 (2) relate to public auction. Undisputedly, the appellants

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have participated in the public auction originally. In Wadia’s  case (supra) the tenancy continued but in the present case  there is fresh auction.  

18.     For appreciating the true scope and ambit of Section  141(2), it is to be noted that by nature of the proposed changes  it has to be treated as fresh transaction particularly when not  only the nature of property changes but also the lease has  expired. Though strong reliance was placed on a resolution  dated 18.3.1999 by the appellants, it is to be noted that the  said resolution has practically no effectiveness in 2006.   19.     In the order of Chairman, NDMC dated 13.11.2001 it was  noted as follows:

"Chanakya Cinema complex is one of the  prestigious buildings owned by the NDMC,  which is located in Chanakyapuri area on a  part of land parcel measuring several acres  wherein prestigious buildings such as Akabar  Hotel etc. are situated.

Licence was given for running the cinema  to M/s Aggarwal & Modi Enterprises (Cinema  Project) Pvt. Ltd., hereinafter referred to as the  Company vide Agreement dated 03.10.1967  which was renewed from time to time and  which finally expired on 30.9.2000.  The  licence fee last paid was fixed at Rs.  15,15,000/- per annum.

The Company is, however, still in  occupation of the aforesaid premises and has  sublet various portions of the Chanakya  Cinema complex to others such as Nirulas  Hotel, Jewellery shops besides permitting  advertisement even inside the cinema complex  to other parties at huge premiums. Besides  this, they have also leased out parking lot  inside and outside cinema complex. The  company has also been in constant litigation  with NDMC in all these years primarily  questioning licence fee though it was fixed in  accordance with terms of the agreement  initially entered into between the parties and  as per the policies of the NDMC laid down by  the Council from time to time. In any event,  the licence fee stands paid by company till  30.9.2000 though two matters are still pending  which pertain to the revision of the licence fee.  During the course of litigation, the courts had  been passing interim order restraining the  NDMC from taking any action against the  company to dispossess them from the cinema  complex but the said orders were vacated on  25.05.2001 subject to the condition that  NDMC will consider the representation made  in the meanwhile by company giving certain  proposals to redevelop cinema complex and/or  continuation of licence in their favour for  running the cinema.

In a meeting of Council held on 30th  August, 2000, a decision has already been  taken that the present term of licences of

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hotels/cinemas and other similar commercial  complexes, shall not be renewed on the expiry  of the present term and fresh licence shall be  as per the provisions of Section 141(2) of  NDMC Act, 1994.

With a view to comply the directions of  the Hon’ble High Court, feasibility of  developing the property as Multiplex as  proposed by the company was also considered  by NDMC. We also decided to give personal  hearing to an authorized representative of the  company before disposing of their  representation dated 05.04.2000 and  14.03.2001. Shri Aditya Khanna & Vikas Jalan  appeared before me personally on 17.10.2001  and reiterated the submissions made in the  representations i.e.

1. To renew the licence of the cinema complex  on the existing terms and/or;

2. To permit the company to develop the  cinema complex in a Multiplex by investing  their own funds and assured the Council that  they will be in a position to pay Rs.1.80 crores  per annum as licence fee.

20.     It is to be noted that the lease deed prior to 1994 was to be  renewed in the light of 1994 Act. That being so, the resolution  dated 30.8.2000 as quoted above has certain significant  relevance.  

21.     Section 141(2) of the Act reads as follows:

"(2)    The consideration for which any  immovable property may be sold, leased or  otherwise transferred shall not be less than  the value at which such immovable property  could be sold, leased or otherwise transferred  in normal and fair competition."

22.     The mandate of Section 141(2) is that any immovable  property belonging to NDMC is to be sold, leased, licensed or  transferred on consideration which is not to be less than the  value at which such immovable property could be sold, leased,  or transferred in fair competition. The crucial expression is  "normal and fair competition". In other words, NDMC is  obligated to adopt the procedure by which it can get maximum  possible return/consideration for such immovable property. The  methodology which can be adopted for receiving maximum  consideration in a normal and fair competition would be the  public auction which is expected to be fair and transparent.  Public auction not only ensures fair price and maximum return  it also militates against any allegation of favouritism  on the  part of the Government authorities while giving grant for  disposing of public property. The courts have accepted public  auction as a transparent mean of disposal of public property.  (See State of UP v. Shiv Charan Sharma (AIR 1981 SC 1722),  Ram and Shyam Company v. State of Haryana (1985 (3) 267),  Sterling Computers Ltd. v. M & N Publications Ltd. (1993 (1)  SCC 445), Mahesh Chandra v. Regional Manager, UP Financial  Corporation (1993 (2) SCC 279), Pachaivappa’s Trust v.  Official  Trustee of Madras (1994 (1) SCC 475), Chairman and M.D.  SIPCO, Madras v. Contromix Pvt. Ltd. (1995 (4) SCC 595), New

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India Public School v. HUDA (AIR 1996 SC 3458), State of  Kerala v. M. Bhaskaran Pillai (1997 (5) SCC 432) and Haryana  Financial Corporation v. Jagdamba Oil Mills (2002 (3) SCC  496).          23.     Disposal of public property partakes the character of trust  and there is distinct demarcated approach for disposal of public  property in contradiction to the disposal of private property i.e.  it should be for public purpose and in public interest. Invitation  for participation in public auction ensures transparency and it  would be free from bias or discrimination and beyond reproach.

24.     Above being the position, the judgments of learned Single  Judge as affirmed by the Division Bench do not suffer from any  infirmity to warrant interference. The appeal is sans merit,  deserves dismissal which we direct. However, considering the  long period of occupation, which is presently without legal  sanction, the appellants are granted time till 31st December,  2007 to deliver vacant possession to the respondent-NDMC. 25.     We have not expressed any opinion on the aspect relating  to dues of the appellants to the NDMC, as they are stated to be  pending adjudication in other disputes.