The High Court dismissed a writ petition seeking specific performance of a lease agreement and quashing of an order terminating a Letter of Intent. The court held that no concluded contract existed as payment terms were not met and disputed facts precluded writ jurisdiction.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
HIGH COURT OF ORISSA : CUTTACK
W.P.(C) No. 23103 of 2013
In the matter of an application under Articles 226 and 227 of the Constitution of India.
AFR
Paulmech Infrastructure Pvt. Ltd. .....… Petitioner
-Versus-
State of Orissa and others ......... Opp. Parties
For petitioner : Mr. Milan Kanungo, Sr. Counsel along with M/s. Yaspal Mohanty, S.K. Mishra, P.S. Acharya and A. Patnaik, Advocates For opp. parties : Mr. N.K. Mishra, Sr. Counsel along with M/s. N.K. Mishra, A.K. Roy, A. Mishra, P. Dash and S. Pradhan, Advocates. [O.Ps. No. 3 and 5] Mr. B.P. Pradhan, Additional Government Advocate [ O.Ps. No. 1 and 2 ]
PRESENT
THE HONOURABLE THE CHIEF JUSTICE MR. VINEET SARAN AND
THE HONOURABLE DR. JUSTICE B.R. SARANGI
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Decided on : 09.03.2017
VINEET SARAN, C.J. M/s. Utkal Ashok Hotel Corporation
Ltd. (UAHCL) was, on 24.01.1989, granted a lease of certain area of land in Puri by the Orissa Government for 99 years. The Corporation was running ‘Hotel Nilachal Ashok’ in the said premises at Puri. In the year 2004, the hotel was closed down with the approval of Board of Directors, as operation of the same was found unviable. The UAHCL, thereafter, decided to lease out the said property for a period of 40 years, for which proceedings had been initiated in the year 2005-06, but there were no bidders. Then in the year 2009, it was again re-tendered, in which the petitioner, as well as two others participated. The petitioner, being the highest bidder, was issued a Letter of Intent (LOI) on 19.01.2010, according to which, besides several other conditions, the petitioner was to deposit a sum of Rs.9.34 crores within 30 days. Out of the said amount, Rs.8.82 crores was towards non-refundable upfront payment, and a sum of Rs.26.00
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lakhs towards security deposit, and another amount of Rs.26.00 lakhs towards advance minimum guaranteed annual lease premium for the first year.
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by the extended date granted, which was 15.04.2010. The lease agreement, of course, could thus not be executed. The matter remained pending, and ultimately on 25.11.2010, the opposite party-UAHCL allowed extension of time for payment of the balance bid amount by 15.12.2010. Admittedly, this was the last extension for payment of the balance amount which was granted by the opposite party-UAHCL to the petitioner. Even then, the petitioner did not deposit the balance amount within such extended time.
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the petitioner at the time of execution of lease deed, which was not replied to by the opposite party-UAHCL.
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party-UAHCL was faced with difficulties in getting clearance and as such, it was not possible for it to proceed further. The said decision of the Board of Directors of opposite partyUAHCL was intimated to the petitioner vide communication dated 10.12.2013.
“1. Admit the writ petition.
1(a) Quash the letter dated 10/12/2013 where by the Board of Directors of OP No. 5 Company had decided to terminate the Letter of Intent dated 19/01/2010.
2. Direct the O.P. No.- 5 and O.P. No.-3 to execute the lease agreement pertaining to the lease of Hotel Nilachal
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Ashok, Puri in pursuance of the letter of intent dated 19.01.2010.
3. Direct the O.P. No.5 and O.P. No.3 to calculate interest on the amounts deposited by the petitioner company, more particularly Rs.4.41 Crores since 17.02.2010, Rs. 2 Crores since 28.12.2010, Rs. 1.41 Crores since 29.12.2010 and Rs.70 lakhs since 07.10.2011 and further direct the said authorities to adjust the said interest towards balance payments.”
Counsel appearing along with Mr. P.S. Acharya, learned counsel for the petitioner; as well as Mr. N.K. Mishra, learned Senior Counsel appearing along with Mr. A. Mishra, learned counsel for the contesting opposite parties no.3 and 5, i.e., Indian Tourism Development Corporation (ITDC) and UAHCL; and also Mr. B.P. Pradhan, learned Addl. Government Advocate appearing for the State-opposite parties. The opposite party no.4, Orissa Tourism Development Corporation is not represented. Even otherwise no prayer has been made against the said opposite party no.4.
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inasmuch as they have not complied with their bit of obligation under the LOI and by their conduct, especially the letter dated 02.06.2011 requiring the petitioner to disburse the amount for payment of VRS of 30 employees, they had themselves extended the time for deposit of the balance amount by the petitioner, as in the said communication it was mentioned that the entire amount, including for VRS, should be paid prior to execution of the lease deed. According to Mr. Kanungo, the amount of VRS was to be calculated by the opposite party-UAHCL, which was never communicated to the petitioner. It is further contended that prior to the passing of the impugned order dated 10.12.2013, neither any opportunity of hearing was given, nor show cause notice was issued to the petitioner, as such the order was passed in violation of the principle of natural justice, and thus liable to be quashed.
Counsel appearing for the contesting opposite parties no.3 and 5 has submitted that no rights had accrued in favour of
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the petitioner, as by mere issuance of the LOI, only an offer was made, which, though accepted by the petitioner, was not complied with by the petitioner, even though time was extended initially up to 15.04.2010 and thereafter up to 15.12.2010, and since the petitioner has not paid the admitted amount within the stipulated time or even thereafter, no right has accrued in favour of the petitioner. It is also contended that since the terms of the LOI, which was merely an offer, were not complied with, there was no concluded contract between the parties, as no agreement was signed, and thus also the petitioner would not have a right for revival of the offer or LOI, which was made by the opposite party-UAHCL. It was lastly contended that no direction or specific performance of an agreement or contract would be issued by this Court as disputed questions of fact are involved in this petition, which can be decided only by leading evidence, which could be done in a civil court and not in writ jurisdiction.
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length and have carefully perused the record. The LOI, which was issued by the opposite party-UAHCL on 19.01.2010, was merely an offer, which was accepted by the opposite partyUAHCL by its Letter of Acceptance issued on 02.02.2010. In the said Letter of Acceptance also the petitioner had made a request for extension of time, which was duly accepted by the opposite party-UAHCL vide communication dated 12.02.2010, according to which the entire payment was to be made in two instalments, first one on or before 19.02.2010 and the balance on or before 15.04.2010. It is not disputed that the second instalment was not paid by the petitioner, for which the petitioner approached the opposite party-UAHCL for extension, and finally on 25.11.2010 the last extension for payment of the balance amount was granted, which was up to 15.12.2010. It is not the case of the petitioner that the balance amount was paid within the extended time. In fact no amount was paid by the petitioner between 19.02.2010 and 15.12.2010. From the record it is clear that after
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15.12.2010 there was no correspondence made by the opposite party-UAHCL extending the time of contract or accepting the payment made by the petitioner. Although it is not denied that certain deposits were made by the petitioner after the extended date, i.e., 15.12.2010, but no acknowledgement of the same by the opposite party-UAHCL has been brought on record with regard to deposit of any such amount.
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30 persons were seeking voluntary retirement under the VRS Scheme, for which the payment had to be made, and since the petitioner was involved in the entire process and the management of the Hotel had yet not been handed over to the petitioner, the General Manager of the Hotel had intimated the petitioner of the liability of VRS, which would accrue, for which the petitioner would be liable as per the terms of the LOI.
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that merely by issuance of LOI, no right had accrued in favour of the petitioner until the petitioner had complied with the terms of the LOI as had been accepted by the petitioner by its LOA dated 02.02.2010.
“...... a letter of intent merely indicates a party’s intention to enter into a contract with the other party in future. A letter of intent is not intended to bind either party ultimately to enter into any contract.....”
Others, (2015) 13 SCC 233, the apex Court held:
“When the LOI is itself hedged with the condition that the final allotment would be made later after obtaining CRZ and other clearances, it may depict an intention to enter into contract at a later stage. Thus, we find that on the facts of this case it appears that a letter with intention to enter into a contract which could take place after all other formalities are completed. However, when the completion of these formalities had taken undue long time
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and the prices of land, in the interregnum, shot up sharply, the respondent had a right to cancel the process which had not resulted in a concluded contract.”
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In Arya Vyasa Sabha v. Commissioner of Hindu Charitable & Religious Institutions & Endowments , AIR 1976 SC 475, notices were issued by the authority calling upon the petitioners to have their temples and institutions registered. It was contended that the action was violative of Articles 14, 19(1)(f), 25, 26 and 31 of the Constitution.
The High Court dismissed the petition observing that whether or not a particular institution is of a religious denomination is a question of fact or, in any event, a mixed question of fact and law which can more satisfactorily and effectively be adjudicated upon in a competent civil court. The Supreme Court held that by dismissing the petition, the High Court had not committed any error.
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land was violative of the provisions of the Constitution. The High Court dismissed the petition.
Confirming the order, the Supreme Court stated:
“In our opinion, in a case where the basic facts are disputed, and complicated questions of law and fact depending on evidence are involved the writ court is not the proper forum for seeking relief.”
Swalram , AIR 2004 SC 1998, the petitioner asserted that
though goods were manufactured by the respondent and payment was made, no goods were supplied. The respondent, however, denied receipt of payment or manufacture of goods for the petitioner. It was held that such highly disputed ‘questions of fact’ could not be decided in a writ petition under Article 226 of the Constitution.
Similar view has also been taken by the apex
Court in Dwarka Prasad v. B.D. Agarwal , AIR 2003 SC 2686, as well as in Defence Enclave Residents’ Society v. State of U.P., AIR 2004 SC 4877.
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in the aforementioned judgments and applying the same to the present context, this Court is of the considered view that disputed questions of fact are involved in this petition, which cannot be gone into in writ jurisdiction, as for deciding the issues involved in the case, parties will have to lead evidence, which cannot be done under Article 226 of the Constitution of India. Accordingly, we are of the view that prayers made in this writ petition do not deserve to be granted in writ jurisdiction. However, it shall be open for the petitioner to approach the appropriate forum available to it in law for redressal of its grievance, if so advised.
.…….......…………… (VINEET SARAN) CHIEF JUSTICE
…………………..……….. ( DR. B.R. SARANGI) JUDGE
Orissa High Court, Cuttack The 9th March, 2017, Ajaya/GDS
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3 issues framed by the court
Whether a Letter of Intent (LOI) creates a concluded contract requiring specific performance by the court.
Whether the petitioner acquired a retinal right to the lease deed before complying with payment deadlines.
Whether disputed questions of fact regarding contract formation are triable in writ jurisdiction under Article 226.
Colour shows how this judgement treated each authority
Dresser Rand S.A. v. Bindal Agro Chem Ltd.Referred¶16
Dresser Rand S.A. v. Bindal Agro Chem Ltd., 2006 (1) SC 751
Rishi Kiran Logistics Private Limited v. Board of Trustees of Kandla Port Trust and OthersReferred¶16
Rishi Kiran Logistics Private Limited v. Board of Trustees of Kandla Port Trust and Others, (2015) 13 SCC 233 · Who else cites this
Arya Vyasa Sabha v. Commissioner of Hindu Charitable & Religious Institutions & EndowmentsReferred¶18
Arya Vyasa Sabha v. Commissioner of Hindu Charitable & Religious Institutions & Endowments, AIR 1976 SC 475 · Who else cites this
DLF Housing Construction (P) Ltd. v. Delhi Municipal CorporationReferred¶18
DLF Housing Construction (P) Ltd. v. Delhi Municipal Corporation, AIR 1976 SC 386 · Who else cites this
National Textile Corporation Ltd. v. Haribox SwalramReferred¶18
National Textile Corporation Ltd. v. Haribox Swalram, AIR 2004 SC 1998 · Who else cites this
Dwarka Prasad v. B.D. AgarwalReferred¶18
Dwarka Prasad v. B.D. Agarwal, AIR 2003 SC 2686 · Who else cites this
Defence Enclave Residents' Society v. State of U.P.Referred¶18
Defence Enclave Residents' Society v. State of U.P., AIR 2004 SC 4877 · Who else cites this
AFR Paulmech Infrastructure Pvt. Ltd.
State of Orissa and others
VINEET SARAN
B.R. SARANGI
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
