RAKESH BIRANI (D) THROUGH LRS. versus PREM NARAIN SEHGAL & ANR. on 21 March 2018

O R D E R

1. Leave granted.

2. The auction purchaser has come up in this appeal against thejudgment and order passed by the Division Bench of the High Courtaffirming the judgment passed by the Single Bench.

3. The brief facts in the present case are that the auction of theproperty was held on 14[th] February 2013. The appellant was the highestbidder. He offered a bid of Rs.38.30 lakhs and deposited a sum ofRs.3,80,500/- as earnest money on 1[st] February 2013. He further deposited25% of the auction amount of Rs.5.80/- lakhs on 15[th] February 2013 andremaining amount of Rs.28,69,500/- on 13[th] March 2013. The auctionpurchaser claimed that he was intimated regarding confirmation of saleby the Authorised Officer of the secured creditor by letter dated27[th] February 2013. As soon as he was intimated of the confirmation,he further deposited the 75% of the auction amount on 13[th] March 2013within 15 days of confirmation of sale.

4. The owner and principal borrower whose property was sold inauction questioned the same by way of filing a writ petition. The WritPetition (Civil) No.20653 of 2013 was filed by the respondent. The DivisionBench passed the order on 25[th] April 2013 that as the property hasalready been auctioned, directed the respondent to file an appeal underthe provisions of Securitisation and Reconstruction of Financial Assetsand Enforcement of Security Interest Act, 2002 (hereinafter referred toas “the Act of 2002”). Thereafter, an appeal was filed that was registeredas S.A. No.113 of 2013. The Debts Recovery Tribunal, Allahabad videorder dated 19[th] December 2013, has set aside the sale, the order wasconfirmed by the Debts Recovery Appellate Tribunal as well as by theSingle Judge and the Division Bench of the High Court. Hence, thepresent appeal by the auction purchaser.

5. The main question that arises for our consideration in the appealis, from which date the period of fifteen days would start for making thedeposit of remaining 75 percent; from the date of communication ofconfirmation of sale or from the date of the auction. The aforesaiddates are not in dispute. The decision depends upon the interpretation ofRule 9 of Security Interest (Enforcement) Rules, 2002 (for short “the2002 Rules). Rule 9 of the 2002 Rules reads as under:

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“9. Time of sale, issues of sale certificate and delivery ofpossession, etc.-

(1) No sale of immovable property under these rules, in the firstinstance, shall take place before the expiry of thirty days from thedate on which the public notice of sale is published in newspapersas referred to in the proviso to sub-rule (6) of rule 8 or notice ofsale has been served to the borrower:

Provided further that if the sale of immovable property by anyone of the methods specified by sub-rule (5) of rule 8 fails andsale is required to be conducted again, the authorised officer shallserve, affix and publish notice of sale of not less than fifteen daysto the borrower, for any subsequent sale.

(2) The sale shall be confirmed in favour of the purchaser whohas offered the highest sale price in his bid or tender or quotationor offer to the authorised officer shall be subject to confirmationby the secured creditor:

Provided further that if the authorised officer fails to obtain aprice higher than the reserve price, he may, with the consent ofthe borrower and the secured creditor effect the sale at suchprice.

(3) On every sale of immovable property, the purchaser shallimmediately, i.e., on the same day or not later than next workingday, as the case may be, pay a deposit of twenty five percent ofthe amount of the sale price, which is inclusive of earnest moneydeposited, if any, to the authorized officer conducting the sale andin default of such deposit, the property shall be sold again.

(4) The balance amount of purchase price payable shall be paidby the purchaser to the authorised officer on or before the fifteenthday of confirmation of the sale of the immovable property or suchextended period (as may be agreed upon in writing between thepurchaser and the secured creditor, in any case not exceedingthree months).

(5) In default of payment within the period mentioned in sub-rule(4), the deposit shall be forfeited (to the secured creditor) and theproperty shall be resold and the defaulting purchaser shall forfeitall claim to the property or to any part of the sum for such it maybe subsequently sold.

(6) On confirmation of sale by the secured creditor and if theterms of payment have been complied with, the authorised officerexercising the power of sale shall issue a certificate of sale of theimmovable property in favour of the purchaser in the form givenin Appendix V to these rules.

(7) Where the immovable property sold is subject to anyencumbrances, the authorised officer may, if he thinks fit, allowthe purchaser to deposit with him the money required to dischargethe encumbrances and any interest due thereon together with suchadditional amount that may be sufficient to meet the contingenciesor further cost, expenses and interest as may be determined byhim:

(Provided that if after meeting the cost of removing encumbrancesand contingencies there is any surplus available out of the moneydeposited by the purchaser such surplus shall be paid to thepurchaser within fifteen days from the date of finalisation of thesale.)

(8) On such deposit of money for discharge of the encumbrances,the authorised officer shall issue or cause the purchaser to issuenotices to the persons interested in or entitled to the moneydeposited with him and take steps to make the payment accordingly.

(9) The authorised officer shall deliver the property to the purchasefee from encumbrances known to the secured creditor on depositof money as specified in sub-rule (7) above.

(10) The certificate of sale issued under sub-rule (6) shallspecifically mention that whether the purchaser has purchasedthe immovable secured asset free from any encumbrances knownto the secured creditor or not.”

6. The submission raised by learned counsel appearing on behalfof the appellant was that Rule 9(4) of the 2002 Rules provided that theamount has to be deposited only after confirmation. Rule 9(2) alsocontemplates confirmation of the bid. Learned counsel has also takenus through Rule 9(5) so as to contend that in default of the paymentwithin the period mentioned in sub-rule (4), the deposit made shall beforfeited. The forfeiture is only to follow as consequence of non-depositof 75 percent of amount after confirmation of sale. Learned counsel A

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Ahas also relied upon the provisions of Rule 9(6) to submit that afterconfirmation of sale, in case, terms of sale have been complied with onlythen sale certificate is issued. In this case, sale certificate has beenissued by the owner in favour of the auction purchaser. Thus, the HighCourt has erred in law in interpreting the rule 9 of the rules of 2002 tomean that date of the auction is also the date of its confirmation.B

7. On the other hand, learned counsel appearing on behalf of theborrower-respondent No.1 contends that it is apparent from Rule 9(2)that there is confirmation of sale as soon as highest bid is accepted bythe authorised officer, within fifteen days, the deposit of 75% of theamount is to be made, failing which the only course is the forfeiture ofCthe remaining 25% of the amount that has been deposited and the property has to be resold.

8. In order to comprehend the rival submissions, it is necessary toponder as to intendment of Rule 9 of the 2002 Rules which deals withthe time of sale, issues of sale certificate and delivery of possession, etc.DPublic notice of sale is to be published in the newspaper and only afterthirty days thereafter, the sale of immovable property can take place.Under Rule 9(2) of the 2002 Rules, the sale is required to be confirmedin favour of the purchaser who has offered the highest sale price to theauthorised officer and shall be subject to confirmation by the securedEcreditor. The proviso makes it clear that sale under the said Rule wouldbe confirmed if the amount offered and the whole price is not less thanthe reserved price as specified in Rule 9(5). It is apparent that Rule 9(1)does not deal with the confirmation by the authorised officer. It onlyprovides confirmation by the secured creditor. Rule 9(3) makes it clearthat on every sale of immovable property, the purchaser on the sameFday or not later than next working day, has to make a deposit of twenty-five percent of the amount of the sale price, which is inclusive of earnestmoney deposited if any. Rule 9(4) makes it clear that balance amount ofthe purchase price payable shall be paid by the purchaser to the authorizedofficer on or before the fifteenth day of “confirmation of sale of theGimmovable property” or such extended period as may be agreed upon inwriting between the purchaser and the secured creditor. Thus, Rule9(2) makes it clear that after confirmation by the secured creditor theamount has to be deposited. Rule 9(3) also makes it clear that period offifteen days has to be computed from the date of confirmation. In thiscase, confirmation has been made and communicated on 27[th] February H

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2013 and within fifteen days thereof i.e. on 13[th] March 2013, the amountof seventy-five percent had been deposited. Thereafter, sale certificatehas been issued under Rule 9(6). Rule 9(5) also makes it clear that indefault of payment within the period mentioned in sub-rule 9(4), thedeposit shall be forfeited. There cannot be any forfeiture of the amountof 25 percent in deposit until and unless the sale is confirmed by thesecured creditor and there is a default of payment of 75 percent of theamount. The interpretation made by the High Court thus cannot beaccepted.

9. If we read the provisions otherwise then we find even beforethe confirmation of sale within fifteen days, the amount would be forfeitedby the authorised officer who may decide not to confirm the sale thatwould be a result not contemplated in Rule 9(2), 9(4) and 9(5) whichfortify our conclusion that it is only after the confirmation is made underRule 9(4) that amount has to be deposited and on failure to deposit theamount, twenty-five percent amount has to be forfeited and propertyhas to be resold. The provisions of Rule 9(6) also fortifies our conclusion,inasmuch as it is the expression used that on confirmation of sale by thesecured creditor and “if the term of payment has been complied with”sale certificate is issued otherwise the forfeiture takes place, thiscompliance has to be only after the confirmation of sale and not beforeit. Thus, various provisions of Rule 9 makes it clear that interpretationmade by Debts Recovery Tribunal and Debts Recovery AppellateTribunal and as affirmed by the High Court cannot be said to be correct.

10. Thus, we find that the provisions had been fully complied withby the auction purchaser as he has complied with the provisions of Rule9 by making a deposit of 75 percent of the amount from the date ofconfirmation of sale. The sale certificate was rightly issued in favour ofauction purchaser. Thus, the auction could not have been set aside. Sincethe sale certificate has been issued, let the possession be delivered inaccordance with law, as expeditiously as possible.

11. The appeal is allowed and the impugned orders are set aside.No order as to costs.

Devika Gujral

Appeal allowed.

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STATE OF HIMACHAL PRADESH

v.

RAVINDER KUMAR SANKHAYAN (DEAD) AND ORS.

(Civil Appeal No. 3392 of 2006)

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MARCH 28, 2018

[DIPAK MISRA, CJI AND A. M. KHANWILKAR, J.]

Constitution of India – Art. 226 – Judicial review – Scope of– PIL filed by respondent No.1 before High Court alleging that theproperty owned and possessed by Municipal Corporation, ShimlaCwas leased out to Himachal Pradesh Tourism DevelopmentCorporation (HPTDC) at a rate much lower than the prevailingmarket rate, without conducting auction or resorting to tenderprocess – While considering the prayer for various interim reliefssought by the writ petitioner, High Court proceeded to pass orderDdtd. 24[th] May, 2005 directing Municipal Corporation to issue publicadvertisement for leasing out the subject property – In continuationof the said order, High Court passed another order dtd. 5[th] July,2005 – Held: Interim order dtd. 24[th] May, 2005, transcends beyondthe relief claimed by the writ petitioner and more so, it is a mandatoryorder passed at an interlocutory stage without recording any justEand tangible reasons therefor – High Court did not even advert tothe efficacy of subsisting contract between the MunicipalCorporation and HPTDC – Contract between the MunicipalCorporation and HPTDC or the rental policy of the State, asapplicable to the Municipal Corporation, was not challenged muchFless quashed by High Court – Without deciding on the issue ofvalidity of the subsisting contractual terms and conditions betweenthe Municipal Corporation and HPTDC, High Court could not andshould not have ventured to pass order dtd. 24[th] May, 2005 – Orderdated 5[th] July, 2005 is only a consequential order which must,therefore, meet the same fate – Interim orders passed by High CourtGwere in complete disregard of the scope of judicial review and areset aside – Writ petition which is still pending for final decisionbefore High Court is disposed of – Himachal Pradesh MunicipalCorporation Act, 1994 – s.157 – Constitution of India – Art.226 –PIL.

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Allowing the appeals, the Court

HELD: 1.1 The interim order passed on 24[th] May, 2005,transcends beyond the relief claimed by the writ petitioner andmore so, is a mandatory order passed at an interlocutory stagewithout recording any just and tangible reasons therefor. TheHigh Court did not even advert to the efficacy of the subsistingcontract between the Municipal Corporation and HPTDC. It wasnobody’s case that HPTDC was in unauthorized occupation ofthe subject properties. At best, the High Court felt that the agreedlease rent payable by HPTDC in respect of subject propertieswas on the lower side, which inevitably progenerated financialloss to the Municipal Corporation. Before recording such afinding, it was necessary for the High Court to first authoritativelyhold that HPTDC was not legally entitled to remain in occupationof the subject premises. Notably, the contract between theMunicipal Corporation and HPTDC or the rental policy of theState, as applicable to the Municipal Corporation, was notchallenged much less quashed by the High Court. Even thedecision of the Municipal Corporation recorded in its meetingheld on 28[th] March, 2005, was neither been challenged nor beenquashed by the High Court. [Paras 8, 9] [766-H; 767-A-D]

1.2 It is unfathomable as to how the High Court could havepassed the order dated 24[th] May, 2005, to straightway direct theMunicipal Corporation to issue tender notice. There is noindication in the order passed by the High Court on 24[th] May,2005, of having quashed the subsisting contract betweenMunicipal Corporation and HPTDC. Without deciding on theissue of validity of the subsisting contractual terms and conditionsbetween the Municipal Corporation and HPTDC, the High Courtcould not and should not have ventured to pass the order, suchas dated 24[th] May, 2005. The order dated 5[th] July, 2005 is only aconsequential order which must, therefore, meet the same fate.The interim orders passed by the High Court were in completedisregard of the scope of judicial review. It is also in completedisregard of Section 157 of the Himachal Pradesh MunicipalCorporation Act, 1994, which mandates the procedure for grantof lease. First, the proposal should be recommended by theMunicipal Corporation; and second, the agreement can be A

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Aexecuted by the Municipal Corporation only after grant of priorsanction by the Government for leasing out the property. Thewrit petitioner had not even prayed for quashing of the subsistingcontract between the Municipal Corporation and HPTDC inrespect of the subject properties. The gravamen of the reliefsclaimed in the writ petition was to direct the MunicipalBCorporation to lease out the subject premises on the basis of theprevailing market rent. Such relief could be entertained only afterthe subject premises were to be vacated by HPTDC upon expiryor termination of the subsisting contract between HPTDC andthe Municipal Corporation. [Paras 10-12] [767-G-H; 768-A-C, CE-F]

1.3 The only relief that could have received the attentionof the High Court was to direct the Municipal Corporation torecover its outstanding legal dues from various governmentalauthorities and individuals. However, the emphasis in the writDpetition in this behalf is only with regard to the dues recoverablefrom HPTDC in respect of the subject premises. Assuming thatthere are outstanding dues payable by HPTDC to the MunicipalCorporation, that matter could be resolved with the interventionof the State. In that, if HPTDC is financially incapable of settlingthe claim/demand of the Municipal Corporation, the State mayEhave to provide financial assistance to HPTDC to the extentnecessary, failing which the Municipal Corporation will be leftwith no other option but to take recourse to statutory remediesfor recovery of its dues from HPTDC in relation to the subjectpremises. Since the State has also come up in appeal against theFdecision of the High Court, it must take initiative to find out asuitable solution in accordance with law, expeditiously and withina reasonable time, failing which it may be open to the MunicipalCorporation to resort to recovery proceedings against HPTDCand including eviction of HPTDC from the suit premises consequent to termination of the contract inter partes.G[Paras 13, 14] [768-F-H; 769-A-B]

2. Since the tender process in which the impleadedrespondent, N & S Resorts had participated (and gave the highestoffer) was subject to the outcome of the pending legal proceedings,no right would accrue to it in the stated premises except to getHrefund of the amount paid as earnest money for participating in the Court directed tender process. The amount so paid by theimpleaded respondent shall be refunded to it, with interest at therate of 9% p.a. (equivalent to the bank rate for fixed depositsprevailing at the time the deposit was made) from the date ofdeposit till its realization. [Para 15] [769-E-F]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3392of 2006.

From the Judgment and Order dated 05.07.2005 of the High Courtof Himachal Pradesh at Shimla in CWP No. 555 of 2004

WITH

Civil Appeal Nos. 3393 and 3394 of 2006.

J. S. Attri, Sr. Adv., Naresh K. Sharma, Varinder Kumar Sharma,Sanjay Jain, Anil Nag, Ms. Tarannum Cheema, Hiral Gupta, DavinderSingh, Advs. for the appearing parties.

The Judgment of the Court was delivered by

A. M. KHANWILKAR, J. 1. These appeals emanate from thejudgment and interim orders dated 24[th] May, 2005 and 5[th] July, 2005passed by the High Court of Himachal Pradesh at Shimla in Civil WritPetition No.555 of 2004, during the pendency of the said writ petition.Civil Appeal No.3392 of 2006 has been filed by the State of HimachalPradesh (for short “the State”) against the judgment and order dated 5[th]July, 2005, whereas the other two appeals, i.e. Civil Appeal Nos.3393 &3394 of 2006 have been filed by the Himachal Pradesh TourismDevelopment Corporation (for short “HPTDC”) against the judgmentand orders dated 24[th] May, 2005 and 5[th] July, 2005, respectively.

2. The stated writ petition was filed by the original respondentNo.1, who died during the pendency of the proceedings in this Court. Heclaimed to be a public spirited person. He was aggrieved by the acts ofcommission and omission of the Municipal Corporation, Shimla, wherebythe property owned and possessed by the Municipal Corporation wasleased out to HPTDC at a rate much lower than the prevailing marketrate, without conducting auction or resorting to tender process.Additionally, the Municipal Corporation had failed to recover the municipaltaxes from HPTDC, including the rental/lease money, which was quitesubstantial, causing loss to the Municipal Corporation. This is the cruxof the grievance made in the aforementioned writ petition, for whichfollowing reliefs were claimed:

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A“(I) Respondents may kindly be restrained from allotting the abovementioned stall to H.P.M.C. which is loss-making venture inpublic interest, or in the alternative quash the said allotmentto the respondent No.3 and disposed of the same inaccordance with law and direct the respondents to demolishthe illegal structures.B

(II) Respondent Municipal Corporation be directed to recover itsoutstanding legal dues from various governmental authoritiesand individuals.

(III) The respondent Municipal Corporation be directed to rejectCits leased out properties to a realistic revision of (monthlylease amounts) monthly rentals.

(IV) The respondents may kindly be directed to produce the entirerecords pertaining to this case for the kind perusal of thisHon’ble Court.

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(V) Any other writ, order or direction deemed fit and proper inthe facts and circumstances mentioned herein above mayvery kindly be passed in favour of the petitioner and againstthe respondents.

(VI) Cost of the writ petition may kindly be granted throughout inEfavour of the petitioner.”

3. The Municipal Corporation as well as the State resisted thesaid writ petition, by filing affidavits. The State asserted that the land inquestion is owned by the Government of Himachal Pradesh. The entryin the revenue record indicates that the possession of the property wasFwith the Municipal Corporation since 1977. Be that as it may, the propertyknown as “Goofa”, situated at the Ridge in Shimla Town, was let out toHPTDC. A lease document was executed on 2[nd] January, 1978 stipulatingthe terms and conditions of the lease. The differences between theMunicipal Corporation and HPTDC regarding the rent were resolved interms of the award passed by the Secretary (LSG) to the GovernmentGof Himachal Pradesh. The Municipal Corporation and HPTDC werebound by the said award, whereunder enhanced rent in respect of thesubject properties was specified. The Municipal Corporation in its meetingheld on 20[th] July, 1988, had taken a decision regarding the increase ofrent payable by HPTDC. The thrust of the stand taken by the State was H

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that HPTDC, being a State Corporation, was obliged to engage inpromoting tourism within the State and in terms of the tourism policy ofthe State, the directions given by the State were required to be carriedout by HPTDC. The possession of the subject premises by the HPTDCcannot be equated with a private lease or occupation by a privateindividual, as the activities of the HPTDC were to effectuate the largerpublic interest and tourism within the State. Significantly, the leaseagreement between HPTDC and the Municipal Corporation was stillsubsisting.

4. Despite the opposition to the writ petition by the State authorities,the High Court, while considering the prayer for interim relief sought bythe writ petitioner for issuing directions to the Municipal Corporation tofile a list of properties owned and possessed by the Municipal Corporationand also to place on record its outstanding legal dues of payment by thevarious Government authorities and individuals, including the monthlyrental values for which the properties have been leased out by theMunicipal Corporation, proceeded to pass an order on 24[th] May, 2005,without considering the cardinal aspects such as that there is a subsistingagreement between HPTDC and Municipal Corporation in respect ofthe subject premises. Being swayed away by the submission made bythe intervener – applicant, whose application was allowed on the samedate, that he was willing to offer a monthly lease amount of Rs.2,50,000/- (annual amount of Rs.30 lakhs), the High Court opined that thedifference between the lease rent payable by HPTDC and the offermade by the intervener was quite substantial, for which reason theMunicipal Corporation should issue public advertisement for leasing outthe subject property. The High Court passed the following order:

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CWP No.555/2004.

24.05.2005 Present: Mr. B.C. Negi Advocate, for the petitioner.Mr. M.S. Chandel, Advocate General, with Mr. J.K. Verma, Dy.A.G. for respondent No.1.

Mr. Ajay Mohan Goel, Advocate, for respondent No.2.Mr. Shrawan Dogra, Advocate, for respondent No.3.Mrs. Ranjana Parmar, Advocate, for respondent No.4.Mr. Ankush D. Sood, Advocate for respondent No.5.

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CMP No.1043/2005.

Learned counsel for all the parties submit that they have noobjection to this application being allowed to the limited and theonly extent of the applicant herein being permitted to intervene inthe proceedings. We order accordingly. The other prayers madein the application are declined.

The application is disposed of.

CWP No.555/2004.

In CMP No.1043/2005 we have ordered today that the applicanttherein be allowed to intervene in these proceedings. In thatapplication, the applicant has offered to take the property, Ashianaand Goofa Restaurants situated at the Ridge, Shimla on a monthlylease amount of Rs.2,50,000/-/- (annual lease amount of Rs.30lacs). This offer of the aforesaid applicant is against the presentlease money of Rs.2,86,992/- per annum which works out toRs.23,916/- per month as is being paid by H.P. TourismDevelopment Corporation. As per the Statement of Accounts filedby respondent No.2 HPTDC actually it has been in arrears withrespect to the payment of aforesaid lease amount also at theaforesaid rate and the amount of arrears, has been worked out atRs.18,50,361/- as on 31[st] March, 2005.

What, therefore, clearly emerges is that as against the aforesaidannual amount of Rs.2,86,992/- being paid by HPTDC to ShimlaMunicipal Corporation, for the same property a party before ushas offered to pay Rs.30,00,000.00 per annum which is more thanten times the aforesaid amount. This is just one party offering topay the aforesaid amount. We are sure that there is a strongpossibility, actually bright prospects, of many more parties comingforward to take the property on lease and offer lease money evenhigher, much higher, than what the intervener has offered to pay.

With a view thus to attract the best offers and to ensure that theproperty is given on lease/license basis which will be in best publicinterest and also in the interest of Corporation, we direct respondentNo.2 to publish and also in the interest of Corporation, we directrespondent No.2 to publish advertisements in three leadingnewspapers within ten days from today inviting offers from interested parties for obtaining the aforesaid property on lease/license basis. In the advertisements so published, respondent No.2shall ensure that the last date of receipt of offers is not later than30[th] June, 2005.

With a view to attracting the best offers, it shall be desirablethat the property is offered on a long term lease/license basis.Also while issuing the advertisement, respondent No.2 shall ensurethat for the benefit of prospective bidders, it fully describes andspecifically defines the exact details of the property sought to beleased/licensed.

H.P. Tourism Development Corporation and the intervenerherein, both are at liberty to respond to the invitation of respondentNo.2 in the aforesaid advertisement and to submit their respectiveoffers. The submission of offers by the HPTDC and by theintervener shall be without prejudice to their rights and contentionsin this case. It is, however, also specifically made clear that ifthey both, or anyone of them, fails to offer in response to theaforesaid invitation to offer, they shall be doing so entirely at theirown risk and responsibility.

On the next date the Commissioner, Municipal Corporation shallfile his affidavit informing this Court the details of the offers receivedand the action proposed thereupon.

List on 4[th] July, 2005. Copy Dasti.”

5. This interim order passed by the High Court has been assailedby HPTDC by way of Civil Appeal No.3393 of 2006. Pursuant to theaforementioned interim order passed by the High Court, the MunicipalCorporation issued Tender Notice on 9[th] June, 2005, inviting offers fromthe interested parties. The impleaded respondent N & S Resorts gavethe highest offer of rent of Rs.6,51,000/- per month (annual rent ofRs.78,12,000/-). In continuation of the aforementioned order, the HighCourt proceeded to pass another interim order on 5[th] July, 2005 whichreads thus:

“As a sequel to, and in compliance with the directions containedin our order dated 24[th] May, 2005 the Commissioner, MunicipalCorporation, Shimla has filed his affidavit which has been affirmedon 1[st] July, 2005. In his affidavit the Commissioner has informed A

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us that the Corporation had issued a tender notice on 2[nd] June,2005 whereby sealed tenders were invited for leasing out theproperty in question for a period of 25 years on monthly rentalbasis. In response to the said tender notice, the following fiveparties submitted their tenders and offered the rates (per months)as shown against the name of each one of them:-

1. N & S Resorts,Rs.6,51,000.00

The Mall, Shimla

2. RA 3 & Co.

Rs.4,80,000.00

48/1, The Mall Shimla Ashiana Restaurant, Chhota Shimla.

3. The Pillancle ServiceRs.4,75,251.00

Co. Jasmine Villa, Top

Floor, Near CPRI, Shimla-1.

4. Mahavir & Co.

Rs.4,11,000.00

Lower Bazar, Shimla

5. Ascot Hotels & Resorts

Rs.2,75,000.00

Ltd.

As per the aforesaid affidavit, as well as the aforesaid statementof offers and also as per the comparative statement of tendersfiled as Annexure R-2/B to the aforesaid affidavit, it clearlytranspires that M/s. N&S Resorts, The Mall, Shimla has offeredthe highest rate of Rs.6,51,000/- per month. The Committeeconstituted by the Corporation, as is evidently clear from the perusalof Annexure R-2/B, has also recommended that the offer of M/sN&S, The Mall Shimla may be accepted.

In our order dated 24[th] May, 2005 we had clearly recounted thatwith respect to the same property H.P. Tourism DevelopmentCorporation had been paying the annual lease money ofRs.2,86,992/- which actually worked out to Rs.23,916/- which ispresently being paid by H.P. Tourism Development Corporation,the aforesaid M/s N&S Resorts has now offered the monthlylease money of Rs.6,51,000/- , almost twenty eight-twenty ninetimes of what is being paid by HPTDC. We have no doubt in ourminds that the aforesaid offer by PTDC. We have no doubt in our minds that the aforesaid offer by M/s. N&S Resorts is in bestpublic interest. We are also convinced that H.P. TourismDevelopment Corporation did not have any legal, contractual orstatutory right to continue occupying the premises in question forany indefinite period.

Apart from the fact that the HPTDC does not have anycontractual or statutory right to continue occupying the premisesin question for any indefinite period, merely because the HPTDCis a Government owned Corporation, does not mean that, in law, itshould have any preferential right of holding on to the occupationof the property despite it paying a very meager amount as leasemoney. Related to this issue is also the question of pure commercialnature of the property. The property in question is a Restaurant,situated at perhaps the most prime location of Shimla town. TheRestaurant is to be run on pure commercial lines and has to servethe best public interest. Therefore, viewed from every angle, itcannot be said that merely because the HPTDC is a governmentowned Corporation, it should be treated differently than others inthe matter of allotment of property on lease. We feel that in suchlike matters whichever party pays the highest price should beheld entitled to the grant of lease.

It may also be worthwhile to recount that at one stage, we hadan occasion to go through the accounts of HPTDC for the lastfew years and we found that in every year the HPTDC has beenincurring losses, year after year, as far as the running of thisparticular Restaurant in question is concerned. Not only that,actually at one stage the HPTDC was in such a precarious positionthat it had not even paid the arrears of rent to the Corporation foralmost a decade or so. In this background, therefore, burdeningthe HPTDC with the running of this restaurant and at the sametime depriving the Municipal Corporation of its legitimate right ofleasing out the property for the highest available rent, would beagainst the principles of natural justice.

In the best interest of the Corporation as well as in best publicinterest, therefore, we approve of the recommendation of theCommittee constituted by the Corporation and direct theCorporation to lease out the premises in question in favour of thehighest bidder. All the consequences accordingly shall also follow A

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Aincluding the consequence of H.P. Tourism DevelopmentCorporation being asked to vacate the premises without any lossof time. Actually from today onwards for whatever period theH.P. Tourism Development Corporation continues to remain inoccupation of the premises, it shall be its obligation to pay to theMunicipal Corporation the monthly lease amount at the rate asBhas now been offered by M/s N&S Resorts for the period that itremains in occupation.

We also wish to observe and direct that the MunicipalCorporation, Shimla shall ensure, before leasing out the propertyto M/s. N&S Resorts, that the interests of the Corporation areCfully secured and protected in so far as ensuring the payment ofthe lease money to the Corporation by M/s. N&S Resorts isconcerned. It may, therefore, insist on receiving advance paymentfrom the aforesaid party or security or taking such other steps.The purpose, of course, is to ensure that the lease money beingDoffered by the aforesaid party is paid to the Corporation regularlyand without any delay.

List after three months. On the next date, the Commissionershall file his latest affidavit giving us the status report in complianceto the aforesaid directions.

ECMP NO.1341 of 2005

All the parties in this petition may file reply to this application infour weeks.”

6. Even this interim order has been assailed before this Court byway of Civil Appeal No.3392 of 2006 by the State and by way of CivilFAppeal No.3394 of 2006 by HPTDC. During the pendency of theseappeals, the operation of the impugned judgment passed by the HighCourt has been stayed by this Court.

7. We have heard Mr. J.S. Attri, learned senior counsel appearingfor the State of Himachal Pradesh and Mr. Varinder Kumar SharmaGand Ms. Tarannum Cheema, learned counsels appearing for therespondents.

8. After perusing the reliefs claimed in the writ petition, purportedlypublic interest litigation and the application for interim relief filed by thewrit petitioner, it is perceptible that the interim order passed on 24[th] May, H

2005, transcends beyond the relief claimed by the writ petitioner andmore so, is a mandatory order passed at an interlocutory stage withoutrecording any just and tangible reasons therefor. We say so because theHigh Court has not even adverted to the efficacy of the subsisting contractbetween the Municipal Corporation and HPTDC. It was nobody’s casethat HPTDC was in unauthorized occupation of the subject properties.At best, the High Court felt that the agreed lease rent payable by HPTDCin respect of subject properties was on the lower side, which inevitablyprogenerated financial loss to the Municipal Corporation. Beforerecording such a finding, it was necessary for the High Court to firstauthoritatively hold that HPTDC was not legally entitled to remain inoccupation of the subject premises.

9. Notably, the contract between the Municipal Corporation andHPTDC or the rental policy of the State, as applicable to the MunicipalCorporation, has not been challenged much less quashed by the HighCourt. Even the decision of the Municipal Corporation recorded in itsmeeting held on 28[th] March, 2005, has neither been challenged nor beenquashed by the High Court. The said resolution records as under:

“The following decisions were taken:-

1. It has been agreed that HPTDC will pay 10% increase in therent after every three years as per policy. The enhancement willbe applicable and shall be calculated w.e.f. 1.11.1990 as the rentof Ashiana Restaurant was fixed at Rs.13,500/- vide Govt. orderdated 24.11.1987, accordingly the first increase of 10% will bedue w.e.f. 1.11.1990.

2. HPTDC also agreed to enhance the rent as per policy of theMunicipal Corporation from time to time in future.

The decisions taken in the meeting were also discussed with theMD, HPTDC, Shimla, who also agreed and gave his consent tosettle/enhance the rent as per policy of the Municipal Corporation,Shimla.”

10. It is unfathomable as to how the High Court could have passedthe order dated 24[th] May, 2005, to straightway direct the MunicipalCorporation to issue tender notice. There is no indication in the orderpassed by the High Court on 24[th] May, 2005, of having quashed thesubsisting contract between Municipal Corporation and HPTDC. As AB

C

D

E

F

G

H

Aaforesaid, without deciding on the issue of validity of the subsistingcontractual terms and conditions between the Municipal Corporationand HPTDC, the High Court could not and should not have ventured topass the order, such as dated 24[th] May, 2005.

11. The order dated 5[th] July, 2005 is only a consequential orderBwhich must, therefore, meet the same fate. We hold that the interimorders passed by the High Court were in complete disregard of thescope of judicial review. Further, a mandatory order has been passed atan interlocutory stage by the High Court without even bothering toexamine the efficacy of the subsisting contractual obligations of theMunicipal Corporation and HPTDC. It is also in complete disregard ofCSection 157 of the Himachal Pradesh Municipal Corporation Act, 1994,which mandates the procedure for grant of lease. First, the proposalshould be recommended by the Municipal Corporation; and second, theagreement can be executed by the Municipal Corporation only aftergrant of prior sanction by the Government for leasing out the property. ItDis not necessary for us to examine the stand of the State that the MunicipalCorporation can moot a proposal for grant of sanction for leasing out,only in respect of the property owned by the Corporation.

12. Suffice it to observe that the writ petitioner had not even prayedfor quashing of the subsisting contract between the Municipal CorporationEand HPTDC in respect of the subject properties. The gravamen of thereliefs claimed in the writ petition is to direct the Municipal Corporationto lease out the subject premises on the basis of the prevailing marketrent. Such relief could be entertained only after the subject premiseswere to be vacated by HPTDC upon expiry or termination of thesubsisting contract between HPTDC and the Municipal Corporation.F

13. In our opinion, the only relief that could have received theattention of the High Court was to direct the Municipal Corporation torecover its outstanding legal dues from various governmental authoritiesand individuals, namely, prayer clause (II) of the writ petition. However,the emphasis in the writ petition in this behalf is only with regard to theGdues recoverable from HPTDC in respect of the subject premises.Assuming that there are outstanding dues payable by HPTDC to theMunicipal Corporation, that matter could be resolved with the interventionof the State. In that, if HPTDC is financially incapable of settling theclaim/demand of the Municipal Corporation, the State may have to H

provide financial assistance to HPTDC to the extent necessary, failingwhich the Municipal Corporation will be left with no other option but totake recourse to statutory remedies for recovery of its dues from HPTDCin relation to the subject premises. Since the State has also come up inappeal against the decision of the High Court, it must take initiative tofind out a suitable solution in accordance with law, expeditiously andwithin a reasonable time, failing which it may be open to the MunicipalCorporation to resort to recovery proceedings against HPTDC andincluding eviction of HPTDC from the suit premises consequent totermination of the contract inter partes.

14. In light of these observations, nothing would survive forconsideration in the writ petition as filed before the High Court, which isstill pending for final decision. As a result, besides setting aside theimpugned judgment and orders dated 24[th] May, 2005 and 5[th] July, 2005,respectively, we are inclined to dispose of the said writ petition with theaforementioned observations. Thus, the Writ Petition No.555 of 2004,filed in the High Court of Himachal Pradesh at Shimla, be deemed tohave been disposed of accordingly.

15. The only other issue that remains to be addressed is about theamount of earnest money paid by the impleaded respondent N & SResorts by way of banker’s cheque dated 27[th] June, 2005 in the sum ofRs.10 lakhs. Since the tender process in which the impleaded respondenthad participated, was subject to the outcome of the pending legalproceedings, no right would accrue to it in the stated premises except toget refund of the amount paid as earnest money for participating in theCourt directed tender process. The amount so paid by the impleadedrespondent shall be refunded to it, with interest at the rate of 9% perannum (equivalent to the bank rate for fixed deposits prevailing at thetime the deposit was made) from the date of deposit till its realization.The Municipal Corporation shall forthwith refund such amount to theimpleaded respondent N & S Resorts but not later than twelve weeksfrom today, failing which the Municipal Corporation shall be liable to payinterest at the rate of 12% per annum from the date of deposit till thedate of its realization.

16. We, accordingly, allow these appeals in the above terms, withno order as to costs.

Divya Pandey

Appeals allowed.

A

B

CD

E

F

G

H