Dismissed

M/S Kari Industries Private Ltd. v. State of U P and 3 Others

Allahabad HC15 Feb 2019WRIC/5420/2019

Case brief

AI extract

What is this about?

The High Court dismissed the writ petition filed by an industrial enterprise challenging the reservation of 2% subletting charges imposed by the State Industrial Development Corporation under a concluded contractual agreement. The court held that the dispute pertains to contract interpretation, which falls outside Article 226 jurisdiction.

What did the court decide?

Petition dismissed as it lacked merits and was not maintainable for challenging a contractual obligation.

M/S Kari Industries Private Ltd. Vs State… — Contract and Commercial Disputes | Allahabad HC (2019)

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Court No. - 34

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Case :- WRIT - C No. - 5420 of 2019

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Petitioner :- M/S Kari Industries Private Ltd Respondent :- State Of U P And 3 Others Counsel for Petitioner :- Sharique Ahmed,Arvind Srivastava Counsel for Respondent :- C.S.C., Anuj Pratap Singh, S.K. Mishra

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Hon'ble Sudhir Agarwal, J. Hon'ble Rajendra Kumar-IV, J.

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Heard learned counsel for petitioner, learned Standing Counsel for State and Sri S.K. Mishra, learned counsel for respondents- 2 to 4.

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By means of present writ petition, petitioner is trying to wriggle out of a contractual obligation and consequential demand raised by respondent-3, i.e., subletting charges at the rate of 2 per cent per annum.

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Facts in brief, giving rise to present dispute, are as under.

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Earlier petitioner's company was incorporated under the title "Sahibabad Recruitment Private Limited” but its title has now changed to "M/s Kari Industries Private Limited" under a certificate of incorporation issued by Registrar, Companies in accordance with the provisions of Companies Act, 1956 (hereinafter referred to as “Act, 1956”). An industrial plot was let out to petitioner by U.P. State Industrial Development Corporation (hereinafter referred to as "UPSIDC") in its industrial area at Shahiabad, District Ghaziabad. In respect to plot no. 40/2, Site-4, Sahibabad area 10422 square yards, a lease agreement was executed between petitioner and UPSIDC on 24.07.1996 and possession was handed over vide possession memo dated 13.08.1996. On 22.01.2010 petitioner moved an application for subletting part of plot measuring 2302.11 square meter in favour of M/s M.M. Metacraft Private Limited. Permission was granted by letter dated 06.02.2010 on the following, beside others, conditions:

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"1. The subletting is permitted for a period of 05 Years w.e.f.

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06.09.2010 in favour of M/s M.M. Metacraft Pvt., Ltd.

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2. You shall have to pay subletting charges/Rent @ 2 % of the prevailing premium rate of UPSIDC time to time for the Industrial land per sq. mtr. per year for the area sublet to M/S S.M. Metacraft Pvt. Ltd. You will deposit the rent @ Rs. 160/per sq. mtr i.e. 2% of the present prevailing rate amounting to Rs. 3,68,338/- for one year in advance within 30 days form the date of issue of this letter.

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3. A Tripartite Agreement will be entered into among UPSIDC, the allotee/ lessee and the Sublette which will contain all the terms & condition of subletting making the same binding on all the executants. This agreement will ensure that the Sublettee M/S M.M. Metacraft Pvt. Ltd will abide by the conditions of our normal lease deed and agreement & they shall also be responsible to pay the rent in case the allottee M/S Kari Industries Pvt. Ltd. fails to deposit the rent."

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As per Condition-2, petitioner was required to pay subletting charges/ rent at the rate of 2 per cent of the prevailing premium rate. The said subletting was allowed only for a period of five years with effect from 06.09.2010. In 2015 petitioner again sought renewal of subletting but it appears that petitioner was not inclined to pay subletting charges on the prevailing rate and instead made a representation to State Government for reducing the amount. Petitioner then came to this Court in Writ Petition No. 25323 of 2018 which was disposed of vide judgment dated 20.08.2018 directing UPSIDC to decide petitioner's representation and by order dated 21.12.2018, petitioner's representation has been decided and petitioner's claim that subletting charge should be taken at the rate of 0.5 per cent per square meter per annum instead 2 per cent, as was earlier charged, has been rejected.

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Learned counsel for petitioner could not dispute that at the time

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of initially granting permission for subletting, Condition-2 categorically said for payment of subletting charges/rent at the rate of 2 per cent of the prevailing premium rate of UPSIDC for industrial land per square meter per annum and petitioner now wants change of this condition which has been negatived by respondent-UPSIDC. Petitioner in order to enforce a contract of subletting cannot claim, as a matter of right, that one of the conditions of subletting which was imposed in 2010, now, should be modified for the reason that the stipulation of contract are settled by parties and for that purpose, unless it is shown that condition is against public policy or against law, no interference in writ jurisdiction is called for.

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It is evident that aforesaid condition of 2 per cent subletting charges is neither illegal nor against law nor against public policy, therefore when at the stage of renewal it is being insisted by UPSIDC, in our view, the same cannot be subject matter of challenge in writ petition under Article 226. It amounts to insisting upon respondents to enter into a modified contract with petitioner on a condition not acceptable to respondents. In our view, such insistence on the part of petitioner to ask other side to enter into a contract as per desire of petitioner is not maintainable in a writ petition filed under Article 226. 8. Supreme Court in Bareilly Development Authority Versus Ajai Pal Singh, AIR 1989 SC 1076 , said as under:

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"19. Thus the factual position in this case clearly and unambiguously reveals that the respondents after voluntarily accepting the conditions imposed by the BDA have entered into the realm of concluded contract pure and simple with the BDA and hence the respondents can only claim the right conferred upon them by the said contract and are bound by the terms of the contract unless some statute steps in and confers some special statutory obligations on the part of the BDA in the contractual field. In the case before us, the contract

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between the respondents and the BDA does not contain any statutory terms and/or conditions. When the factual position is so, the High Court placing reliance on the decision in Ramana Dayaram Shetty's case (1979) IILLJ 217 SC has erroneously held:

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It has not been disputed that the contesting opposite party is included within the term 'other authority' mentioned under Article 12 of the Constitution. Therefore, the contesting opposite parties cannot be permitted to act arbitrarily with the principle which meets the test of reason and relevance. Where an authority appears acting unreasonably this Court is not powerless and a writ of mandamus can be issued for performing its duty free from arbitrariness or unreasonableness.

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20. This finding, in our view, is not correct in the light of the facts and circumstances of this case because in Ramana Dayaram Shetty's case there was no concluded contract as in this case. Even conceding that the BDA has the trappings of a State or would be comprehended in 'other authority' for the purpose of Article 12 of the Constitution, while determining price of the houses/flats constructed by it and the rate of monthly installments to be paid, the 'authority' or its agent after entering into the field of ordinary contract acts purely in its executive capacity. Thereafter the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines the rights and obligations of the parties inter-se. In this sphere, they can only claim rights conferred upon them by the contrac t in the absence of any statutory obligations on the part of the authority (i.e. BDA in this case) in the said contractual field.

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21. There is a line of decisions where the contract entered into between the State and the persons aggrieved is non-statutory and purely contractual and the rights are governed only by the terms of the contract, no writ or order can be issued under Article 226 of the Constitution of India so as to compel the authorities to remedy a breach of contract pure and simple Radhakrishna Agarwal Vs. State of Bihar [1977] 3 SCR 249, Premji Bhai Parmar Vs. Delhi Development Authority [1980] 2 SCR 704 and D. F. O. v. Biswanath Tea Company Ltd. [1981] 3 SCR 662.

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22. In view of the authoritative judicial pronouncements of this Court in the series of cases dealing with the scope of interference of a High Court while exercising its writ jurisdiction under Article 226 of the Constitution of India in cases of non-statutory concluded contracts like the one in hand, we are constrained to hold that the High Court in the present case has gone wrong in its finding that there is arbitrariness and unreasonableness on the part of the appellants herein in increasing the cost of the houses/flats and the rate of monthly installments and giving directions in the writ petitions as prayed for. " (emphasis added)

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In Kerala State Electricity Board and another Vs. Kurien E. Kalathil and others 2000 (6) SCC 293 , Court said that interpretation and implementation of a clause in a contract cannot be subject-matter of a writ petition. If a term of contract is violated, ordinarily remedy is not the writ petition under Article 226. A contract would not become statutory simply because it is for construction of a public utility and it has been awarded by a statutory body. A statute may expressly or impliedly confer power on a statutory body to enter into contracts in order to enable it to discharge its functions. Disputes arising out of the terms of such contracts or alleged breaches have to be settled by the

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ordinary principles of law of contract. The fact that one of the parties to the agreement is a statutory or public body will not by itself affect the principles to be applied. The disputes about the meaning of a covenant in a contract or its enforceability have to be determined according to the usual principles of the Contract Act. Every act of a statutory body need not necessarily involve an exercise of statutory power. Statutory bodies have power to contract or deal with property like private parties. Such activities may not raise any issue of public law. When it is not shown that contract is statutory and parties are within the realm of their authority, contract between the parties is in the realm of private law. The disputes relating to interpretation of terms and conditions of such contract cannot be agitated in a petition under Article 226 of the Constitution.

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In view of above exposition of law and considering the facts and circumstances of the case, we do not find that the petitioner is entitled for relief as prayed for.

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The writ petition lacks merits. Dismissed.

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Dt. 15.02.2019 Akram/PS

M/S Kari Industries Private Ltd. v. State of U P and 3 Others

Case brief

What is this about?

What did the court decide?

M/S Kari Industries Private Ltd. v. State of U P and 3 Others

Case brief

What is this about?

What did the court decide?

What the court decided

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