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Supreme Court of India
Paulmech Infrastructure Private … vs The State Of Odisha on 4 October, 2021Author: A.S. Bopanna
Bench: M.R. Shah, A.S. Bopanna
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6023 OF 2021
(Arising out of SLP(Civil) No.25409/2017)
Paulmech Infrastructure Private ….Appellant(s)
Limited
Versus
The State of Odisha & Ors. …. Respondent(s)
JUDGMENT
A.S. Bopanna,J.
1. The appellant is before this Court assailing the
order dated 09.03.2017 passed by the High Court of
Orissa at Cuttack, in W.P.(C) No.23103/2013. By the
said order the High Court was of the opinion that the
disputed questions of fact involved in the petition cannot
Signature Not Verified
Digitally signed by R
be gone into in the writ jurisdiction. Accordingly, the
Natarajan
Date: 2021.10.04
16:15:22 IST
Reason:
prayer made in the petition was not entertained and the
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appellant was relegated to approach the appropriate
forum available for redressal of its grievance. The
appellant, therefore being aggrieved is before this Court.
2. The respondent No.1State of Odisha had granted
the lease of the property in question in favour of the
respondent No.5Utkal Ashok Hotel Corporation Limited
(for short ‘UAHCL’) for 99 years under the document
dated 24.01.1989. UAHCL was, in that view, running an
establishment in the name and style ‘Hotel Nilachal
Ashok’ in the said premises at Puri. The same being
unviable was closed down with the approval of Board of
Directors in the year 2004. Thereafter, UAHCL decided to
lease out the same for a period of 40 years. Tender was
floated in the year 2009. The appellant was one among
the tenderers who participated in the process and being
the highest bidder was considered. Accordingly, the
Letter of Intent (for short ‘LOI’) dated 19.01.2010 was
issued in favour of the appellant delineating the terms to
be complied pursuant to which the lease agreement was
to be signed.
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3. Among the other conditions which were to form
part of the lease agreement, even before executing the
lease agreement the requirement was for the appellant to
pay a sum of Rs.9.34 crores to UAHCL within 30
days, of which Rs.8.82 crores was towards non
refundable amount which was to be paid upfront; the
security deposit of Rs.26 lakhs and the advance
minimum guaranteed annual lease premium for the first
year of Rs.26 lakhs was also to be paid.
4. On payment of the said amount the lease was to
be executed and the other conditions would come into
operation. The appellant who was unable to pay the
amount within the time stipulated, requested the UAHCL
that they be permitted to deposit a part of the amount
i.e., Rs.4.41 crores on 19.09.2010 and the balance
amount by 15.04.2010 which was favourably considered
by UAHCL through their communication dated
12.02.2010. Such indulgence was shown as special case.
The appellant accordingly deposited a portion of upfront
amount to the tune of Rs.4.41 crores on 18.02.2010, but
the balance amount was not deposited within the
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extended time stipulated i.e., before 15.04.2010. In that
view, the lease agreement could not be executed.
However, in view of the request from the appellant,
UAHCL through their communication dated 25.11.2010
once again acceded to the request permitting the
appellant to pay the balance amount before 15.12.2010.
5. The appellant thereafter paid (i) the sum of Rs.2
crores on 28.12.2010, (ii) sum of Rs.1.41 crores on
29.12.2010 and (iii) the sum of Rs.70 lakhs on
07.01.2011. Such payment, according to the appellant
constitutes the payment which was required to be made
as per the LOI. However, the time gap which had ensued
had created a position wherein the grievance of the
employees was to be addressed and they were to be given
the benefit of voluntary retirement. Since the LOI dated
19.01.2010 had also provided for regulating the manner
in which the employees are to be treated during the lease
period and had provided the liberty to offer voluntary
retirement, the UAHCL required the appellant to bear the
liability towards the same. The same did not reach a
finality and in the meanwhile the Board of Directors of
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UAHCL took the decision to terminate the LOI dated
19.01.2010 since the appellant had failed to comply with
clause 2 thereof, which required the payment of Rs.9.34
crores within 30 days of issuance of LOI.
6. Even prior to communication of the decision on
10.12.2013, the appellant filed the special writ petition
before the High Court on 01.10.2013 wherein a prayer
was sought to direct UAHCL to execute the lease
agreement pursuant to the terms agreed under LOI dated
19.01.2010 and accept the balance amount along with
interest for delayed payment. During the pendency of
the writ petition the prayer was amended and the
appellant sought for quashing the letter dated
10.12.2013 whereby UAHCL decided to terminate the
LOI. UAHCL had filed their objection statement opposing
the writ petition including contending therein with regard
to the maintainability of the writ petition in a contractual
matter. The learned Division Bench of the High Court
having taken note of the rival contentions and the
dispute involved for adjudication, was of the opinion that
the disputed questions are best left to be resolved before
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the appropriate forum. The appellant is assailing the said
order.
7. We have heard Mr. Sanjay Bansal, learned counsel
appearing for the appellant, Mr. Ashok Kumar Gupta,
learned senior counsel appearing for UAHCL and
perused the appeal papers.
8. The learned counsel for the appellant would
contend that the action of UAHCL to cancel the LOI and
retain the amount paid thereunder is not justified. In an
attempt to fortify his submission, the learned counsel
has referred to LOI dated 19.01.2010 with reference to
clause 2, to point out that the upfront amount payable
within 30 days though not paid within the time
stipulated therein, the appellant had sought extension of
time to pay which was agreed to by the communication
dated 04.02.2010 and extended by the communication
dated 25.11.2010. Though the time agreed thereunder is
up to15.12.2010, the amount paid by the appellant on
28.12.2010 (Rs.2 crores), 29.12.2010 (Rs.1.41 crores)
and 07.11.2011 (Rs.70 lakhs) had been accepted without
demur and as such the upfront payment of Rs.8.82
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crores as required had been paid. In that view, the lease
agreement was required to be executed. It is contended,
though that was position, UAHCL instead of executing
the lease agreement had through the communication
dated 13.04.2011 raised the issue of the appellant
having to bear the total liability on account of providing
voluntary retirement to the employees which was as per
the decision of the Board of UAHCL due to insistence of
the State Government, though it was not a condition in
the LOI nor could have been included in the lease
agreement. It is pointed out that clause 11 of the LOI
though provided for regulating the manner in which the
employees are to be maintained had indicated that the
appellant shall not retrench them but the liberty was for
the appellant to consider VRS. As such it could not be
imposed on the appellant is the contention. In such
circumstance, it is contended by the learned counsel that
the appellant having made the payment was entitled for
the lease agreement to be executed in their favour. Hence
the termination being bad, be set aside and the UAHCL
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be directed to execute the lease agreement is his
submission.
9. The learned counsel for UAHCL would on the other
hand contend that the LOI was issued in favour of the
appellant after the tender process and as such the terms
of the LOI was required to be complied. Despite the
payment of Rs.9.34 crores required to be made within 30
days, the appellant had failed to comply with the same. It
is true that as per the request of the appellant the time
was extended, but it was only a concession as a special
case. Even as per the extension granted the payment was
required to be made by 15.12.2010. But, even as per the
admitted case of the appellant the payment towards the
balance of the upfront amount was made only on
28.12.2010, 29.12.2010 and 07.01.2011 which was
subsequent to the date till which extension was provided.
That apart, since the requirement is to pay Rs.9.34
crores within the time stipulated, the security deposit
and advance minimum guaranteed annual lease
premium amount was also required to be paid within the
time stipulated but had not been paid. As such the
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appellant cannot contend that they have performed their
obligation so as to assail the termination of LOI and seek
execution of the lease agreement. In that view, while
justifying the termination it is also contended that the
upfront amount of Rs.8.82 crores being onetime non
refundable amount, it is within the powers of UAHCL to
retain the same. Alternatively, it is contended that
UAHCL was forced to incur idle expenses towards
maintenance and the benefits payable to the employees
without getting returns as the lease had not materialised
due to the default committed by the appellant. In this
regard, roughly an amount of Rs.4.5 crores has been
incurred by UAHCL which in any event, the appellant is
liable to reimburse. In that view, the learned counsel
seeks that the appeal be dismissed.
10. In the light of the contentions put forth, it is seen
that the lease agreement was to be entered into between
the parties pursuant to the terms depicted in LOI and on
compliance of the initial obligations set out therein. The
present dispute relates to the initial payment that was
required to be made by the appellant within the time
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frame set out in the LOI and nonadherence to which has
resulted in termination of LOI. Clause 2 of the LOI
provides for the same, which reads as hereunder:
“2. You shall execute the Operating Lease
Agreement within 30 days of the issue of LOI
and pay an amount of Rs.9.34 crore within
these 30 days as per following details
i. Onetime nonrefundable upfront
payment of Rs.8.82 crore.
ii. Security Deposit (Rs.26.00 lakh) as per
article iv.
iii. Advance Minimum Guaranteed Annual
Lease Premium for the first year
(Rs.26.00 lakh) as per annexix
Financial Bid.”
11. A perusal of the same indicates that the appellant
was obliged to pay an amount of Rs.9.34 crore within
30 days from 19.01.2010 and execute the Operating
Lease Agreement. Towards the said amount, a sum of
Rs. 8.82 crore was payable upfront as an onetime non
refundable amount. Though the learned counsel for the
appellant sought to contend that the Minimum
Guaranteed Annual Lease Premium and Security
deposit of Rs. 26 lakh each are to be paid subsequently
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when the lease is executed, in our view it cannot be
considered to be loose ended. Since Clause 2 refers to
Rs.9.34 crore which is payable in 30 days and that
includes the said amount of Advance Annual Premium
and Security deposit, the entire amount was payable
within 30 days. And the Lease Agreement was
simultaneously executable. It only means that the same
should be paid and the formality of execution of Lease
Agreement also should be completed in the said 30 days
and the payment to be made includes the upfront
amount of Rs.8.82 crore.
12. In that backdrop it is necessary to examine the
manner in which the things have proceeded after issue
of LOI. Admittedly the appellant was not ready with the
amount to make the payment within the timeframe
contemplated under Clause 2 of LOI. The appellant,
through their letter dated 04.02.2010 requested UAHCL
that they be allowed to pay 50% of the bid money by
19.02.2010 which in our view will include all the
components indicated in Clause 2 of LOI and not just
the upfront component. The rest of the money was
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undertaken to be paid by 15.04.2010. UAHCL through
their reply dated 12.02.2010 allowed the same as a
special case. The appellant once again through their
letter dated 17.11.2010 requested for extension of time
for payment of Rs.4.93 crore. UAHCL again extended
the time till 15.12.2010.
13. Despite such indulgence shown by UAHCL the
appellant did not make the balance payment before
15.12.2010. Instead, the sum of Rs.4.11 crore was paid
subsequent thereto and that too, in instalments of Rs. 2
crores on 28.12.2010; Rs.1.41 crore on 29.12.2010 and
Rs.70 lakhs on 07.01.2011.
14. Though the learned counsel for the appellant seeks
to contend that UAHCL having received the said
payment cannot at this stage contend that the payment
was not made within the time stipulated, we are unable
to accept such contention. UAHCL is a corporation
which has different departments and as such the
remittance made being accepted in itself cannot be taken
as an act to condone the delay caused by the appellant
in complying with the terms of the LOI so as to alter the
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terms of contract. There is no material on record that
subsequent to 15.12.2010, there is any positive act on
behalf of UAHCL to either extend the time for payment or
for having expressly condoned the delay and having
accepted the payment so as to regularise the
transaction. This is relevant more so in the context that
at an earlier point as against the time stipulated for
payment under the LOI specific correspondence was
exchanged between the parties and the time had been
expressly extended prior to the time fixed earlier having
expired. In such situation, when admittedly the balance
payment had not been made prior to 15.12.2010, unless
the appellant had obtained express extension from
UAHCL mere tendering the payment and the same
having been accepted cannot be construed as a positive
act to alter the contract.
15. No doubt, the appellants have relied on the
communication dated 13.04.2011 addressed by the
General Manager, UAHCL indicating therein that the
issue of offering VRS to all the employees unwilling to
join the new management was a consideration and the
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VRS amount will have to be paid by the appellant to
UAHCL. Apart from the reason assigned by the High
Court to indicate that the same cannot be treated in
favour of the appellant, the said letter does not indicate
that the discussion in that regard was after indicating to
the appellant that the delay in payment of the upfront
amount has been condoned and accepted. If at all the
said aspect relating to VRS of the employees was also
mutually agreed and, in that context, if UAHCL had
proceeded to condone the delay and enter into the lease
agreement it is only in such circumstance the exchange
of correspondence in that regard would have assumed
relevance. If that be the position, when admittedly the
appellant was required to make the agreed payments
within the timeframe indicated under LOI dated
09.01.2010 and the appellants themselves being unable
to comply with the requirement, though having secured
extensions on two occasions cannot turn around to
contend otherwise at this juncture. Despite the extended
period having come to an end on 15.12.2010, the
appellant not having made the full payment within the
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said date cannot at this stage contend to have complied
with the terms so as to seek a direction to UAHCL to
execute the lease agreement. In fact, the High Court
having examined the material on record has also arrived
at such conclusion.
16. Notwithstanding such conclusion reached by the
High Court, ultimately it has arrived at the decision that
in view of the disputed questions to be resolved between
the parties, the same cannot be gone into in writ
jurisdiction. The learned counsel for the appellant in
that view has placed reliance to the case in Unitech
Ltd. and Others vs. Telangana State Industrial
Infrastructure Corporation (TSICC and Ors.) 2021 (2)
SCALE 653, the decision to which one of us (Mr. Justice
M.R. Shah) is a member on the Bench, with specific
reference to para 32 thereof, which reads as hereunder:
“32. Much of the ground which was sought to be
canvassed in the course of the pleadings is now
subsumed in the submissions which have been
urged before this Court on behalf of the State of
Telangana and TSIIC. As we have noted earlier,
during the course of the hearing, learned Senior
Counsel appearing on behalf of the State of
Telangana and TSIIC informed the Court that the
entitlement of Unitech to seek a refund is not
questioned nor is the availability of the land for
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carrying out the project being placed in issue.
Learned Senior Counsel also did not agitate the
ground that a remedy for the recovery of moneys
arising out a contractual matter cannot be availed of
under Article 226 of the Constitution. However, to
clear the ground, it is necessary to postulate that
recourse to the jurisdiction under Article 226 of the
Constitution is not excluded altogether in a
contractual matter. A public law remedy is available
for enforcing legal rights subject to wellsettled
parameters.”
17. Having noted the said decision, a reference to the
order passed by the High Court would indicate that the
High Court though having referred to the decisions in
Arya Vyasa Sabha v. Commissioner of Hindu
Charitable & Religious Institutions & Endowments,
AIR 1976 SC 475, DLF Housing Construction Private
Ltd. Vs. Delhi Municipal Corporation AIR 1976 SC
386, National Textile Corporation Ltd. vs. Haribox
Swalram AIR 2004 SCC 1998 , Dwarka Prasad v. B.D.
Agarwal, AIR 2003 SC 2686, and Defence Enclave
Residents’ Society v. State of U.P. AIR 2004 SC 4877
to note the limitations while considering a writ petition
under Article 226 of the Constitution of India has in that
view taken note of the fact situation arising in the
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instant case. It is on facts that the High Court has
arrived at the conclusion that such disputed questions
of fact cannot be resolved in the writ petition of the
present nature. Therefore, in the present facts, the High
Court has not dismissed the writ petition on
maintainability but having taken note of the issue
involved was of the opinion that the contentions urged
would necessitate the requirement of recording evidence
and therefore relegated the parties to an appropriate
forum. To that extent, though we take note of the
observations made by the High Court, keeping in view
the nature of the considerations made, the prayers
which were sought in the amended writ petition were
required to be conclusively answered by the High Court
on the aspect as to whether the decision of UAHCL to
terminate the LOI dated 19.01.2010 was justified and
the requirement for resolution of the dispute by an
appropriate forum ought to have been left open only to
the incidental aspect which may require appropriate
evidence to be tendered and adjudication to be made by
an appropriate forum.
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18. Keeping these aspects in view, having noted that the
appellant had failed to adhere to the terms indicated in
the LOI dated 19.01.2010 and the payment required
thereunder not being made even within the extended
period, the Board of Directors of UAHCL were justified in
deciding to terminate the LOI through their letter dated
10.12.2013. In fact, the prayer no. 3 seeking calculation
of interest on the amount deposited and such amount is
being sought to be adjusted towards the balance
payments would in itself indicate that even to the
knowledge of the appellant, the entire payments had not
been made even as on the date of the filing the writ
petition. In such circumstance, when the LOI has been
rightly terminated, the directions sought in the writ
petition to execute the lease agreement pertaining to
‘Hotel Nilanchal Ashok’, Puri does not arise and the
prayers in that regard are liable to be rejected.
19. Having arrived at the above conclusion, the next
aspect which would engage our attention is as to the
manner in which the amount paid by the appellant is to
be treated. The learned counsel for UAHCL would
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contend that the LOI provides that the onetime upfront
amount to be paid is nonrefundable, in that view, it is
contended that the said amount is not liable to be
refunded. Even otherwise due to the delay caused by the
appellant and having obtained the statusquo order from
the court by litigating with regard to the subject matter
UAHCL have been prevented from otherwise utilising the
property which has caused loss to them and the said
amount would be adjustable towards the same is his
contention.
20. On taking note of the contention, a close perusal of
the phrase employed in the LOI would indicate the one
time payment made upfront is shown as “non
refundable” and such payment is towards execution of
the Operating Lease Agreement. If that be the position,
the terms of LOI is clear that the said payment is towards
the lease rentals and is the upfront payment which
becomes a part of the lease transaction and therefore not
refundable only if the lease agreement comes into
operation and not otherwise. The word employed is not
“forfeiture”, therefore, the amount payable towards the
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advance lease rentals and the other advance payments
provided in clause 2 of the LOI, cannot be forfeited if
there is default in complying with the term and entering
into the lease agreement, going by the stipulations
contained in the LOI governing the parties herein. That
apart, as noted, the amount was required to be paid,
latest by the extended date i.e., 15.10.2010. The very
termination of the LOI is for the reason that the entire
payment was not made even within the timeframe. The
cause for termination of LOI occurred on 15.10.2010.
Hence the amount paid on 28.12.2010 (Rs.2 crores),
29.12.2010 (Rs.1.41crores) and 7.01.2011 (Rs. 70 lakhs)
being clearly made after the said date in any event
cannot be retained by UAHCL as otherwise it will amount
to unjust enrichment. Therefore, it is liable to be
refunded. Even with regard to the amount of Rs.4.41
crores which was paid on 07.02.2010, since we have held
that the same cannot be forfeited it is an amount which
will be available for accounting. In a normal
circumstance, a direction was required to be issued to
refund the said amount also.
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21. However, as noted it is the contention on behalf of
UAHCL that due to the conduct of the appellant in not
paying the amount within time and completing the lease
agreement formalities and thereafter involving UAHCL in
litigation and taking benefit of the status quo order,
UAHCL was unable to utilise the property but on the
other hand had to incur expenses. On this aspect, prima
facie it is seen that the lease transaction ought to have
been entered into before 19.02.2010. It is on account of
the difficulty expressed by the appellant, the time for
payment of upfront amount was extended ultimately up
to 15.12.2010, in which process itself more than 10
months had elapsed. Soon thereafter the appellant had
filed the writ petition before the High Court and the
matter has been pending before one forum or the other
for nearly a decade during which time the property could
not be utilised nor expenses could be frozen. Even if that
be so, it would not be appropriate for this Court to
hazard a guess with regard to the actual loss that would
have been suffered by UAHCL. At the same time, when
this prima facie aspect is noticed it would also not be
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appropriate for this Court to direct UAHCL to refund the
amount to the extent of Rs.4.41 crore which was paid
within the timeframe and allow UAHCL to thereafter
initiate recovery process. On the other hand, it would be
in the interest of justice to permit UAHCL to retain the
amount and grant liberty to the appellant to file an
appropriately constituted civil suit seeking recovery of the
said amount. In the said proceedings it would be open for
UAHCL to put forth the contention to set off the amount
towards the loss suffered by them or to seek for counter
claim if any further amount is due. In such proceedings
it would be open for the competent civil court to
independently consider that aspect of the matter on its
own merits for which we have not expressed any opinion
on merits relating to that aspect. Even with regard to the
claim of interest, if any, by the appellant that aspect is
also kept open to be adjudicated in the civil suit. The
pendency of the suit shall not be an impediment for
UAHCL to deal with the property or to retender the same
in any manner.
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22. In the light of the above we pass the following
order:
(i) The order dated 09.03.2017 passed by
High Court of Orissa at Cuttack in W.P.
(C) No.23103/2013 stands modified.
(ii) In that view, the prayer of the appellant
to quash the letter dated 10.12.2013
terminating the letter of LOI dated
19.01.2010 stands rejected.
Consequently, the termination of LOI
dated 19.01.2010 is upheld. However,
UAHCL is directed to refund the
amounts deposited by the appellant on
28.12.2010 (Rs.2 crores), on 29.12.2010
(Rs.1.41 crores) and on 07.01.2011
(Rs.70 lakhs), in all amounting to
Rs.4.11 crores within four weeks from
this day.
(iii) The appellant is reserved liberty to file a
civil suit for recovery of Rs.4.41 crores
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paid to UAHCL on 17.02.2010 subject to
the observations made above and all
contentions of the parties in that regard
are left open.
(iv) In view of the above conclusions and
disposal of the appeal, the amount of
Rs.3 crores deposited by the appellant
before this Court, which is kept in fixed
deposit shall be refunded to the
appellant with accrued interest thereon.
(v) The appeal is disposed of accordingly
with no order as to costs.
(vi) Pending application, if any, shall stand
disposed of.
……………………J.
(M.R. SHAH)
……………………J.
(A.S. BOPANNA)
New Delhi,
October 04, 2021
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