Holding

The termination of the LOI was justified; amounts paid after the extended deadline must be refunded, while the non‑refundable amount paid within the deadline is not forfeitable and may be retained.

Summary

Paulmech Infrastructure Private Ltd (appellant) entered into a Letter of Intent (LOI) with Utkal Ashok Hotel Corporation Ltd (UAHCL) for a 40‑year lease of Hotel Nilachal Ashok, requiring payment of Rs 9.34 crore within 30 days, including a non‑refundable upfront sum of Rs 8.82 crore. The appellant failed to pay the full amount on time, obtained two extensions, and paid part of the sum after the final deadline of 15 December 2010. UAHCL terminated the LOI on 10 December 2013. The appellant filed a writ petition seeking quashing of the termination and execution of the lease; the High Court held that the factual disputes could not be decided in writ jurisdiction and sent the parties to an appropriate forum. The Supreme Court upheld the termination, held that the amounts paid after the extended deadline (Rs 4.11 crore) must be refunded as they would otherwise amount to unjust enrichment, and that the non‑refundable amount paid within the deadline (Rs 4.41 crore) is not forfeitable and may be retained. The Court directed refund of the post‑deadline payments, allowed the appellant liberty to sue for recovery of the earlier amount, and modified the High Court order.

Issues considered

The validity of UAHCL's termination of the LOI despite extensions and partial payments.
Whether payments made after the extended deadline are refundable or constitute unjust enrichment.
Whether the term ‘non‑refundable’ in the LOI amounts to forfeiture on default.
Whether a writ petition under Article 226 is the appropriate forum for adjudicating the contractual dispute.

Legislation cited

Constitution of Indias. Article 226

Subjects

lease agreementletter of intentterminationnon‑refundable paymentunjust enrichmentwrit jurisdictionArticle 226contract lawrefundextension of time

Judgment

1040 [2021]REPORTS
SUPREME COURT 6 S.C.R. 1040 [2021] 6 S.C.R.

A PAULMECH INFRASTRUCTURE PRIVATE LIMITED
v.
THE STATE OF ORISSA & ORS.
(Civil Appeal No. 6023 of 2021)
B OCTOBER 04, 2021
[M. R. SHAH AND A. S. BOPANNA, JJ.]
Lease: Lease agreement – Execution of – On facts, lease
agreement to be entered into between UAHCL and appellant
pursuant to the compliance of the Letter of Intent (LOI) – In terms
C
of the LOI, the appellant was to pay Rs 9.34 crore within the
stipulated period, however, the appellant failed to do so – Also full
payment not made within the extended period and also subsequent
to the extended period – Decision by UAHCL to terminate the LOI –
Writ petition by the appellant seeking quashing of the said letter to
D terminate LOI – High Court held that the disputed questions of fact
involved could not be gone into in the writ jurisdiction and relegated
the parties to an appropriate forum – On appeal, held: Appellant
having failed to adhere to the terms indicated in the LOI and the
payment required thereunder not being made even within the
extended period, the decision of UAHCL to terminate the LOI is
E
justified – Thus, termination of LOI is upheld – Directions sought
to execute the lease agreement does not arise – As regards the refund
of the amount paid, the word employed is not “forfeiture”, thus, the
amount payable towards the advance lease rentals and the other
advance payments provided in the LOI, cannot be forfeited if there
F is default in complying with the term – Amount of Rs.4.41 crores
paid within the stipulated period, cannot be forfeited – It is an
amount which would be available for accounting – More so, due to
the conduct of the appellant, UAHCL was unable to utilise the
property but on the other hand had to incur expenses and suffered
actual loss – In the interest of justice, UAHCL permitted to retain
G
the amount paid within the time frame – Liberty granted to the
appellant to file suit seeking recovery ofthe said amount – Amount
paid after the extended date cannot be retained by UAHCL since it
would amount to unjust enrichment – Issuance of direction to
UAHCL to refund the said amount deposited by the appellant.
H
1040
PAULMECH INFRASTRUCTURE PVT. LTD. v. THE STATE OF 1041
ORISSA

Disposing of the appeal, the Court A
HELD: 1.1 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 would include all the B
components indicated in Clause 2 of LOI and not just the upfront
component. The rest of the money was 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 C
15.12.2010. Despite 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. [Para 12,
13][1050-C-E]
1.2 The submission of the appellant that UAHCL having D
received the said payment cannot at this stage contend that the
payment was not made within the time stipulated, cannot be
accepted. 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 E
the appellant in complying with the terms of the LOI so as to
alter the 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 F
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 G
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. [Para 14][1050-F-H; 1051-A-B]

H
1042 SUPREME COURT REPORTS [2021] 6 S.C.R.

A 1.3 No doubt, the appellants 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 VRS amount will have to be paid by the
appellant to UAHCL. Apart from the reason assigned by the High
B
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
C 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 and the
D
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 said date
E 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. Notwithstanding such
conclusion reached by the High Court, ultimately it arrived at
the decision that in view of the disputed questions to be resolved
F
between the parties, the same cannot be gone into in writ
jurisdiction. [Para 15, 16][1051-B-G]
1.4 On facts, the High Court arrived at the conclusion that
such disputed questions of fact cannot be resolved in the writ
petition of the instant nature. Therefore, in the instant facts, the
G High Court has not dismissed the writ petition on maintainability
but having taken note of the issue involved was of the opinion
that the submission urged would necessitate the requirement of
recording evidence and therefore relegated the parties to an
appropriate forum. To that extent, though the observations made
H
PAULMECH INFRASTRUCTURE PVT. LTD. v. THE STATE OF 1043
ORISSA

by the High Court are taken note of, keeping in view the nature A
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 was justified and
the requirement for resolution of the dispute by an appropriate
B
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.
[Para 17][1052-F-H; 1053-A]
1.5 Having noted that the appellant had failed to adhere to
the terms indicated in the LOI and the payment required C
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 seeking calculation of interest on the amount deposited
and such amount is being sought to be adjusted towards the D
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 E
arise and the prayers in that regard are liable to be rejected.
[Para 18][1053-B-D]
1.6 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 F
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 G
employed is not “forfeiture”, therefore, the amount payable
towards the 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
H
1044 SUPREME COURT REPORTS [2021] 6 S.C.R.

A governing the parties. That apart, the amount was required to be
paid, latest by the extended date i.e., 15.12.2010. 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 15.12.2010. Hence the amount
paid after the extended date, in any event cannot be retained by
B
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
the same cannot be forfeited it is an amount which will be available
for accounting. In a normal circumstance, a direction was required
C to be issued to refund the said amount also. [Para 20][1053-F-H;
1054-A-C]
1.7 UAHCL submitted 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
D 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. However, in the whole process itself more than 10
months had elapsed. Soon thereafter the appellant had filed the
E 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
F have been suffered by UAHCL. At the same time, when this prima
facie aspect is noticed it would also not be 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
G retain the amount and grant liberty to the appellant to file an
appropriately constituted civil suit seeking recovery of the said
amount. [Para 21][1054-D-G]
1.8 The order passed by High Court is modified. In that
view, the prayer of the appellant to quash the letter terminating
H
PAULMECH INFRASTRUCTURE PVT. LTD. v. THE STATE OF 1045
ORISSA

the letter of LOI is rejected. Consequently, the termination of A
LOI is upheld. However, UAHCL is directed to refund the
amounts deposited by the appellant after the extended date in all
amounting to Rs.4.11 crores within the stipulated period. The
appellant is reserved liberty to file a civil suit for recovery of
Rs.4.41 crores paid to UAHCL. [Para 22][1055-B-D]
B
Unitech Ltd. and Others vs. Telangana State Industrial
Infrastructure Corporation 2021 (2) SCALE 653; 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 C
Textile Corporation Ltd. vs. Haribox Swalram AIR 2004
SCC 1998 : [2004] 3 SCR 738; Dwarka Prasad v. B.D.
Agarwal AIR 2003 SC 2686 : [2003] 1 Suppl. SCR
336; Defence Enclave Residents’ Society v. State of U.P.
AIR 2004 SC 4877 – Referred to. D
Case Law Reference
2021 (2) SCALE 653 referred to Para 16
AIR 1976 SC 475 referred to Para 17
AIR 1976 SC 386 referred to Para 17 E
[2004] 3 SCR 738 referred to Para 17
[2003] 1 Suppl. SCR 336 referred to Para 17
AIR 2004 SC 4877 referred to Para 17
CIVIL APPELLATE JURISDICTION: Civil Appeal No.6023 of F
2021.
From the Judgment and Order dated 09.03.2017 of the High Court
of Orissa at Cuttack in W.P. (C) No.23103 of 2013.
Sanjay Bansal, Ms. Swati Bansal, Ms. Vaishali Gupta, G. K. Bansal, G
Advs. for the Appellant.
Ashok K. Gupta, Sr. Adv., Abhishek Gupta, Farrukh Rasheed,
Ms. Ikshita Singh, Kapil Raghav, Gaurav Sharma, Som Raj Choudhury,
Advs. for the Respondents.
H
1046 SUPREME COURT REPORTS [2021] 6 S.C.R.

A The Judgment of the Court was delivered by
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
B that the disputed questions of fact involved in the petition cannot be gone
into in the writ jurisdiction. Accordingly, the prayer made in the petition
was not entertained and the appellant was relegated to approach the
appropriate forum available for redressal of its grievance. The appellant,
therefore being aggrieved is before this Court.
C 2. The respondent No.1-State of Odisha had granted the lease of
the property in question in favour of the respondent No.5-Utkal 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
D 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
E 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.
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-
F
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
G 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
H case. The appellant accordingly deposited a portion of upfront amount
PAULMECH INFRASTRUCTURE PVT. LTD. v. THE STATE OF 1047
ORISSA [A. S. BOPANNA, J.]

to the tune of Rs.4.41 crores on 18.02.2010, but the balance amount A
was not deposited within the 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.
B
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 C
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 D
a finality and in the meanwhile the Board of Directors of 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 E
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 F
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 G
opinion that the disputed questions are best left to be resolved before 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.
H
1048 SUPREME COURT REPORTS [2021] 6 S.C.R.

A 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
B
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
C payment of Rs.8.82 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
D
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
E 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 be directed to
execute the lease agreement is his submission.
F
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
G 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
H 07.01.2011 which was subsequent to the date till which extension was
PAULMECH INFRASTRUCTURE PVT. LTD. v. THE STATE OF 1049
ORISSA [A. S. BOPANNA, J.]

provided. That apart, since the requirement is to pay Rs.9.34 crores A
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 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
B
that view, while justifying the termination it is also contended that the
upfront amount of Rs.8.82 crores being one-time 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 C
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 D
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 frame set out in the LOI and
non-adherence to which has resulted in termination of LOI. Clause 2 of
the LOI provides for the same, which reads as hereunder: - E

“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. One-time non-refundable upfront payment of Rs.8.82 crore. F
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 annex-ix-Financial Bid.”
11. A perusal of the same indicates that the appellant was obliged
G
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 one-time 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 when the lease H
1050 SUPREME COURT REPORTS [2021] 6 S.C.R.

A 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
B
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
C 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 undertaken to be
D 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
E 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
F 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
G 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
H stipulated for payment under the LOI specific correspondence was
PAULMECH INFRASTRUCTURE PVT. LTD. v. THE STATE OF 1051
ORISSA [A. S. BOPANNA, J.]

exchanged between the parties and the time had been expressly extended A
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.
B
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 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 C
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 D
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 E
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 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 F
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 G
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: H
1052 SUPREME COURT REPORTS [2021] 6 S.C.R.

A “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
B
entitlement of Unitech to seek a refund is not questioned nor is
the availability of the land for 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.
C 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 well-settled
parameters.”
D 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.
E 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 instant
F 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
G 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
H terminate the LOI dated 19.01.2010 was justified and the requirement
PAULMECH INFRASTRUCTURE PVT. LTD. v. THE STATE OF 1053
ORISSA [A. S. BOPANNA, J.]

for resolution of the dispute by an appropriate forum ought to have been A
left open only to the incidental aspect which may require appropriate
evidence to be tendered and adjudication to be made by an appropriate
forum.
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 B
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 C
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. D
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
contend that the LOI provides that the one-time upfront amount to be
paid is non-refundable, in that view, it is contended that the said amount E
is not liable to be refunded. Even otherwise due to the delay caused by
the appellant and having obtained the status-quo 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.
F
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 G
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 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, H
1054 SUPREME COURT REPORTS [2021] 6 S.C.R.

A 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
B
(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
C amount which will be available for accounting. In a normal circumstance,
a direction was required to be issued to refund the said amount also.
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
D 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
E 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
F 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 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
G 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
H it would be open for the competent civil court to independently consider
PAULMECH INFRASTRUCTURE PVT. LTD. v. THE STATE OF 1055
ORISSA [A. S. BOPANNA, J.]

that aspect of the matter on its own merits for which we have not A
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 re-tender
the same in any manner.
B
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 C
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 D
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 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. E
(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 F
costs.
(vi) Pending application, if any, shall stand disposed of.

Nidhi Jain Appeal disposed of. G

H