Supreme Court of India
ORISSA INDUSTRIAL INFRASTRUCTURE DEVELOPMENT CORPORATIONversusM/S. MESCO KALINGA STEEL LTD. & ORS.
- Citation
- 2017 INSC 138
- Decided
- 14 February 2017
- Disposal
- Appeal(s) allowed
- Bench
- ARUN MISHRA
Holding
Because the lease deed was never executed, no contract existed, making the transaction void; therefore, IDCO was justified in resuming possession without the three‑month notice and forfeiting the amount under Section 70, and promissory estoppel does not apply.
Summary
The appellant IDCO allotted land to Mesco Kalinga Steel for a steel plant on the condition that a formal lease deed be executed. Mesco paid an initial instalment and took advance possession but never executed the lease deed despite repeated notices. After more than five years of default, IDCO gave a final notice and, on non‑compliance, resumed possession and forfeited the amount paid, later allotting the land to other parties. The High Court held that IDCO had violated a three‑month notice clause and ordered the land to be leased to Mesco. The Supreme Court reversed this, holding that because the lease deed—a condition precedent—was never executed, no contract existed; consequently, the three‑month notice requirement did not apply, the resumption was lawful, the forfeiture was justified under Section 70 of the Contract Act, and the doctrine of promissory estoppel was inapplicable. The appeal was allowed, the High Court order set aside and the writ dismissed.
Issues considered
- The execution of the lease deed was a condition precedent; does its non‑execution render the allotment void?
- Whether IDCO could lawfully resume possession without serving the three‑month notice required by Clause 18 of the policy decision.
- Whether Mesco could invoke promissory estoppel against IDCO.
- Whether the forfeiture of the amount paid by Mesco is permissible under Section 70 of the Indian Contract Act.
- Whether the High Court erred in directing IDCO to lease the land to Mesco.
Legislation cited
Subjects
land allotmentlease deedcondition precedentstatutory authorityresumption of possessionpromissory estoppelforfeitureSection 70Orissa Industrial Infrastructure Development Corporation Actadministrative law
Judgment
[2017] l S.C.R. 876
A ORISSA INDUSTRIAL INFRASTRUCTURE
DEVELOPMENT CORPORATION
v.
M/S. MESCO KALINGA STEEL LTD. & ORS.
B (Civil Appeal No. 2545of2017)
FEBRUARY 14, 2017
[ARUN MISHRA AND AMITAVA ROY, JJ.]
Orissa Industrial Infrastructure Development Corporation
Act, 1980 - s. 33 - Request made to appellant-Corporation for
c allotment of land (for establishing steel plant) - Corporation's
request to State Government to issue orders to process the allotment
- The State approved the allotment in principle subject to certain
terms and conditions - The proposed allottee was required to pay
the cost of the land in twenty half-yearly equal instalments -
D Execution of lease-deed was condition precedent for allotment of
land - On deposit of first instalment, advance possession of a
portion of land was given by the Corporation to the proposed
allottee - Lease deed was not executed even after the possession of
the land was taken over - After about more than five years,
appellant-Corporation gave final notice to deposit balance
E
defaulted amount toward the cost of the land - On failure to execute
the lease deed and to pay the defaulted amount, possession of the
land was cancelled and was resumed by the Corporation - The
amount deposited towards the one instalment was adjusted towards
compensation for use and occupation of the land and damages -
F After resumption, the land was further allotted to third parties -
Cancellation of possession and resumption of land was questioned
in court - High Court held that the Corporation had not complied
with Cl. I 8 of the policy decision whereby 3 month's notice was
required to be given before resuming the possession of the land and
directed the Corporation to lease out the fond to the proposed
G
allottee - On appeal, held: Under s. 33, Corporation can dispose
of the land subject to directions given by the State Government and
subject to such terms and conditions as are necessary - Execution
of lease-deed was condition precedent for allotment of land - Since
th:· r_-:.;.;e-deed was never executed, the relationship of lessor-lessee
H
876
ORISSA INDUSTRIAL INFRA. DEVELOPMENT CORPORATION v. 877
M/S. MESCO KALINGA STEEL LTD.
never came into being - Thus Cl. 18 of policy decision never came A
into force as no concluded contract came into being and the
transaction became void - Therefore, it is not necessary to serve
three months' notice before resumption of land and resumption was
;ustified - Forfeiture of amount for use and occupation of land
and for damages was also appropriate as compensation could be
B
claimed u/s. 70 of Contract Act - In the facts of the case, principle
of promissory estoppel is not attracted as no assurance was given
by the Corporation - Cost of Rs. 5 lakhs imposed on the respondent
(proposed al/ottee) - Contract Act, 1872 - s. 70 - Administrative
Law - Principle of Promissory Estoppel.
Allowing the appeals, the Court c
HELD: 1.As provided in section 33 of the Orissa Industrial
Infrastructure Development Corporation Act, 1980, the
Corporation can dispose of the land subject to directions given
by the State Government in such a manner and subject to such
terms and conditions as may be necessary. The allotment letter D
itself contemplated the execution of the lease deed as a condition
precedent. Condition No.18 of the general terms and conditions
to be inserted in lease deed provided that the lessee had to
remedy the breach within three months after notice. Aforesaid
condition No.18 never came into force and remained.inoperative E
in the facts of·the instant case as lease deed itself had not been
executed. Even otherwise, more than three months' time was
given to Mesco (respondent-proposed allottee) to remedy the
breach inasmuch as notice for resumption was initially given in
1997 and for more than 5Yz years till resumption in July, 2003,
breach was not remedied. In spite of receiving the advance F
possession, there was failure on the part of Mesco to execute
the lease deed though draft lease deed was sent to it in January,
1996 for execution. The relationship of lessor and lessee never
came into being, in the absence of execution of lease deed. The
execution of lease deed was necessary as the State Government G
had only accorded in principle approval and advised the
Corporation to allot the land that could only be done by execution
of lease deed. As a matter of fact, the Gorporation ought not to
have handed over advance possession of the land to Mesco
without execution of lease deed. Thus, no concluded contract
H
878 SUPREME COURT REPORTS [2017] 1 S.C.R.
A came into being and the transaction became void due to failure
on the part of Mesco to execute a formal lease deed, and
therefore, it was not necessary to serve three months' notice to
remedy the breach. [Paras 12, 13] (885-F-G; 886-E-H; 887-A-B;
888-C-D]
2. The Corporation is a statutory authority and it can act
only on the basis of written lease deed. The execution of lease
deed is necessary and it is in public interest to prevent
unauthorized leasing out of property on its behalf. Lease is
required to be executed in a prescribed format in the shape of
formal document which is sine qua non. In the absence thereof, it
c would not be permissible to hold th.it relationship of lessor and
lessee came into being. [Para 15] (889-B]
Bhikraj Jaipuria v. Union of1ndia AIR 1962 SC 113:
(1962] SCR 880 - relied on.
D 3. Possession had been enjoyed by Mesco without
execution of the lease deed. The conduct of the Corporation was
also not diligent. Notice was served in the year 1997 for resumption
but thereafter up to July, 2003 nothing was done by either the
Corporation or Mesco. Not even a single communication has been
placed on record by Mesco containing its proposal to remedy
E breach. No explanation has been placed on record for inaction on
the part of Mesco. The transaction became void, due to Mesco's
own lapse and negligence, and it has forfeited the right to get the
lease deed executed. After taking possession, it could not have
waited for so many years. What was required to be performed by
F Mesco was not done. It also failed to make any development of
worth on the land. There is no force in the submission that they
have spent a sum of Rs.22 crores as they were unable to explain
how they spent the said amount. Apart from that, having failed to
execute the lease deed, they were to invest at their own peril. In
case they have invested some amount, on that basis they cannot
G claim any .legal or equitable right. [Para 14] (888-E-H]
4. Forfeiture of amount of Rs.1.25 crores from Mesco was
also appropriate. Section 70 of the Contract Act deals with the
cases where a person does a thing not intending to act gratuitously
and others enjoyed it. In such a situation compensation can be
H claimed under section 70. Mesco would be rather liable to pay
ORIS SA INDUSTRIAL INFRA. DEVELOPMENT CORPORATION v. 879
MIS. MESCO KALlNGA STEEL LTD.
compensation in addition, for retaining possession so long. [Para A
16] [889-F-H; 890-A]
State of West Bengal v. Mis. B.K. Monda/ and Sons
AIR 1962 SC 779 : [1962] Suppl. SCR 876; New
Marine Coal Co. (Bengal) Private Ltd. v. The Union
of India AIR 1964 SC 152 : [1964] SCR 859; B
Laliteshwar Prasad Sahi v. Bateshwar Prasad and Ors.
AIR 1968 SC 580; Karamshi Jethabhai Somayya v.
State of Bombay (now Maharashtra) AIR 1964 SC
1714 : [1964] SCR 984; Mulamchand v. State of
Madhya Pradesh AIR 1968 SC 1218 : (1968] SCR
214 - relied on. c
5. The High Court has adventured into an avoidable
illegality while directing execution of lease deed. It is a settled
law that equity follows the rule of common law in respect of such
contracts. Renewal of lease is a privilege and if a tenant wishes
to claim the privilege, he must do so strictly within the time limited D
for the purpose. Where there is no time limit, an application may
be made within a reasonable time. If delay is on the part of lessee
for renewal arising out of m,ere neglect on his part and which
could have been avoided by reasonable diligence, would not entitle
him to claim renewal. Applying the same principle to the instant
case, it is apparent that the conduct of Mesco was unfair and E
unpardonable. The conduct disentitled it from indulgence by
Court in any manner. [Para 18] [892-A-C]
6. Mesco had no enforceable right for grant of any relief
by mere handing over of possession. Mesco was required to do
several acts in this case as per the general terms and conditions F
subject to which the lease was to be granted. Nothing has been
performed including payment of instalments etc. and in such a
situation no relief is permissible to be given. [Paras 19, 20] [8'12-
D-E; 894-B-C]
Khela Banerjee & Am: v. City Montessori School & G
Ors. (2012) 7 SCC 261; Rai Kishore (Dead) by LRs. v.
Prem Singh & Ors. (2011) 1 ~CC 657 : [2010] 14
SCR 1019; Mumbai International Airport Private
Ltd. v. Golden Chariot Airport & Anr. (2010) 10
sec 422 ; [2010] 12 SCR 326 - relied OD: H
880 SUPREME COURT REPORTS (2017] I S.C.R.
A 7. The plea of Mesco that the Corporation is bound by
promissory estoppel, is wholly unworthy of acceptance. It is not
the case of Mesco that there was any assurance given to it on the
basis of which it has acted upon. The ·State Government had
withdrawn its initial offer of equity participation oi Rs.25 crores
well before the order of allotment was issued. It was made clear
B
in the order that the State Government had directed the
Corporation to allot 2500 acres of land subject to execution of
lease deed. In such a situation there is no room to entertain the
plea of promissory estoppel and it is not the case that any of the
authorized persons had at any point of time, without execution of
c lease deed, asked Mesco to do anything. Any such assurance
even if it had been given, would be of no consequence. In the
facts of the instant case, the principle of promissory estoppel is
not attracted at all. The Corporation is a statutory body and can
act only in the mode prescribed and Mesco was informed of the
lease deed to be executed in prescribed format. [Para 21) [894-
D
G-H; 895-A-D) .
8. The High Court has totally misdirected itself in directing
to lease out the balance land. The High Court has also ignored
that certain intervening events have taken place and there was
total failure on the part of Mesco to carry out its obligations. The
E High Conrt conld not have issued the direction more so in the
changed situation and in view of the defaults committed by Mesco.
As a matter of fact, Mesco was never inclined to abide by the
terms of the letter dated 4.7.2003. When resumption was made
on 25. 7.2003, a representation was submitted on 20.8.2003 by
F Mesco. In that, an attempt was made to dictate its own terms in
the garb of prayer for payment. As a matter of fact, it is apparent
from the conduct of Mesco that it had no justification at any point
of time not to execute the lease deed. It was delaying the same
for the reasons best known to it which was wholly impermissible
conduct, particularly after taking possession. The breach was not
G remedied for several years much less for three months in which
it was to be remedied. Thus, High Court misadventured into
holding the action of the Corporation of resumption of land to be
illegal. There was no equitable or legal consideration in favour
of the respondent herein and a writ is not issued to perpetuate
H an illegality. Not ouly the conduct ofMesco was unfair, third party
ORISSA INDUSTRIAL INFRA. DEVELOPMENT CORPORATION v. 881
MIS. MESCO KALIN GA STEEL LTD.
rights bad also intervened. Lawful method had been exercised A
for resumption of land and cancellation of letter of handing over
the possession. [Para 23] [895-F-H; 896-A-B]
Case Law Reference
[1962] SCR 880 relied on Para 15
B
[1962] Suppl. SCR 876 relied on Para 16
[1964) SCR 859 relied on Para 16
AIR 1968 SC 580 relied on Para 17
. [1964) SCR 984 relied on Para 17
c
[1968) SCR 214 relied on Para 18
c2012) 1 sec 261 relied on Para 19
[2010) 14. SCR 1019 relied on Para 20
[2010) 12 SCR 326 ~elied on Para 21 D
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2545
of2017
WITH
Criminal Appeal No. 2546 and 2547 of2017.
E
ARUN MISHRA, J. I. Leave granted.
2. The appeals have been preferred by Orissa Industrial
Infrastructure Development Corporation (in short 'IDCO') and also by
Jindal Stainless Ltd. aggrieved by the impugned judgment and order dated
30. l 0.2007 passed by the High Court ofOrissa, thereby directing IDCO F
to lease out 825.68 acres of land and to enter into a lease agreement
· with M/s. Mesco Kalinga Steel Ltd.
3. The factual matrix discloses that Mesco Kalinga Steel Ltd.
(in short 'Mesco') had applieo to IDCO for allotment of2500 acres of
land on 30.6.1994 and IDCO in turn, requested the Government ofOrissa G
to issue necessary orders to process the allotment. On 28.10.1994 the
State Government conveyed in principle approval for allotment of2500
acres ofland on the terms and conditions laid down in the policy decision
of the State Government as revised on 25.1.1995 for establishment of
stee I p!ant.
H
•
882 SUPREME COURT REPORTS [2017] i S.C.R.
A 4. Initially the State Government had agreed for equity
participation of Rs.25 crores towards the cost of land. This offer was
withdrawn by the State Government on 2.2.1995 and was communicated
to Mesco. IDCO wrote a letter on 21.3.1995 to Mesco to deposit the
land cost in twenty half-yearly equal instalments and further requested
to deposit Rs.1.25 crores towards the first instalment and Rs. 13.08
B
iakhs towards ground rent and cess. Mesco deposited Rs. 1.25 crores
with IDCO on 3.4.1995. On 13.6.1996 IDCO requested Mesco to take
over possession of 1756.29 acres ofland in the first phase and to submit
the draft lease deed for execution. Mesco took over possession of the
land on 18.6.1996. However, lease deed was not executed. Thereafter,
c on 13.10.1997, the State Government intimated the proceedings of the
meeting held on 26.9.1997 to IDCO and required it to execute the lease
deed in favour ofMesco and also to realize the instalments due.
5. On 27.10.1997, IDCO requested Mesco to submit draft deed
oflease agreement for execution within 15 days, failing which steps will
D be taken for cancellation of allotment and resumption of land. IDCO
again requested on 26.11.1997 to submit the draft deed of agreement for
execution. However Mesco kept quiet and failed to get the lease deed
executed. Thereafter, for more than 5 V2 years nothing happened. No
steps were taken by Mesco to get the lease deed executed. Thereafter,
IDCO gave final notice to Mesco on 4.7.2003 to deposit the balance
E defaulted amount of Rs.22.44 crores along with statutory dues and to
execute the lease deed by 19.7.2003 failing which it was intimated that
the said land shall be resumed at their cost and the amount paid shall be
adjusted towards compensation for use and occupation of the land; apart
from that, Mesco shall also be liable for damages. Ultimately on 25.7.2003
F on failure to get the lease deed executed, land was resumed and
possession letter of 1756.29 acres of land was cancelled by JDCO. The
amount ofRs.1.25 crores deposited by Mesco was forfeited and adjusted
towards compensation for use and occupation of the land and damages.
6. After resumption of the land, JDCO allotted 209.59 acres of
G land out of the land in question to Visa Industries Ltd. on 7.11.2003 and
also allotted 71.20 acres out of the disputed land to Jindal Stainless Ltd.
Possession of the land was handed over to Visa Industries Ltd. on
30.8.2004 and to Jindal Stainless Ltd. on 28.2.2005. IDCO further allotted
533.52 acres of disputed land to Jindal Stainless Ltd. and another 120
acres of land out of the disputed land to Visa Industries Ltd. and handed
H
ORJSSA INDUSTRIAL INFRA. DEVELOPMENT CORPORATION v. 883
M/S. MESCO KALINGA STEEL LTD. [ARUN MISHRA, J.]
over possession to Jindal and Visa on I I. I I .2005 and I 7. I 1.2005 A
respectively. The lease deed etc. have been executed between the
aforesaid parties.
7. A representation was submitted by Mesco on 20.8.2003
questioning resumption in which Mesco submitted its own terms and
conditions for payment. The said representation was rejected on B
26.92003 by IDCO. The first round of litigation in the form ofW.P. (C)
No.12857/2003 was filed by Mesco questioning the cancellation and
resumption ofland. The High Court disposed of the said writ petition on
15 .1.2004. Pursuant thereto, representation dated 20 .1.2004 submitted
to IDCO had been rejected on 25.2.2004. Thereafter, in the second
round of litigation, W.P. (C) No.2453/2005, during its pendency, Mesco c
came up with another representation dated 22.8.2005 to IDCO which
was rejected on 7.10.2005 on the ground that it was highly unsatisfactory,
unconvincing and completely unacceptable. Mesco amended the writ
petition to question the rejection order dated 7.10.2005. On 11.4.2007
and 12.4.2007, the High Court again asked IDCO whether it was willing D
to lease out the remaining land to Mesco. As JDCO was unable to do so,
the High Court allowed the writ application to lease out 825.68 acres of
land. Aggrieved thereby, the appellants are before us.
8. The High Court has held that since IDCO has not complied
with clause 18 contained in the policy decision dated 25.1.1995 in as E
much as 3 months' notice has not been given, it was not open to resume
the possession otherwise than in due course of law. Since Mesco had
confined its prayer to the available land to the aforesaid extent, the High
Court liad issued directions to lease out 825.68 acres of land.
9. It was submitted by learned senior counsel on behalf of the F
appellants that the High Court has erred in law in setting aside the order
of resumption of land as there was failure on the part of Mesco to get
the lease deed executed despite repeated reminders made by IDCO in
the years 1996 and 1997 and thereafter for several years there was lull,
and ultimately after issuance of notice, resumption of land was made
which has been subsequently allotted to other industries and the remaining G
land was required for their future expansion. The land for mining purposes
is also not available at present. The instalments were also not deposited.
In the absence of execution oflease deed, the relationship of lessor and
lessee never came into being, as such the 3 months' notice for resumption
H
884 SUPREME COURT REPORTS [2017] l S.C.R.
A of land was not required. Three months' notice is required to terminate
a lease deed. The order of resumption was passed and pursuant thereto,
possession has rightly been taken as Mesco was not vested with any
right to retain possession having failed to pay the instalments and execute
tli\! lease deed. The order passed by JDCO for forfeiture of the amount
deposited to the tune of Rs.1.25 crores was fully justified in the facts·
B
and circumstances of the case. No development had been made by
Mesco on the land in question. Thus, the impugned order may be set
aside.
10. Learned senior counsel appearing on behalf of the respondent
urged that the order of the High Court is appropriate and no case for
c interference in the appeal is made out. Setting up of the steel plant would
be in the interest of the State and the public at large. Due to certain legal
proceedings etc, Mesco could not get the lease deed executed. It was
necessary to serve 3 months' notice to resume the land which has not
been done. On l\ specific query being posed about the development over
D the land, it was stated that the boundary wall had been constructed.
However, no plant etc. could be established before resumption of the
land.
11. Before dilating upon the rival submissions, it is appropriate to
take note of certain facts. The Government of Orissa, Department of
E Steel & Mines had conveyed its in principle approval for allotment of
2500 acres of land for establishment of 2 million tons steel plant with
ultimate capacity of 3 million tons per anrium. The offer for equity
participation of Rs. 25 crores was withdrawn by the State Government
vide letter dated 5.1.1995 before direction for allotment was issued and
JDCO was advised to hand over 2500 acres of land on long term lease
F basis on the terms and conditions stipulated in the revised terms and
conditions issued by the Government on 25.1.1995. They were required
to deposit Rs.1.25 crores towards the first instalment and Rs.13,08,842/
- towards ground rent and cess as reflected in the letter dated 21 .3 .1995.
The amount of Rs.1.25 crores was deposited on 3.5.1995. Vide
G communication dated 13.6.1996 of !DCO, possession of 1756.29 acres
of land was required to be taken and Mesco was further required to
submit a draft deed of agreement in duplicate. It appears that on
18.6.1996 advance possession of 1756 acres of land had been handed
over to Mesco but the draft deed of agreement for execution of lease
deed was not submitted by it, hence a letter was written on 2i 10.1997
H
ORISSA INDUSTRIAL INFRA. DEVELOPMENT CORPORATION v. 885
MIS. MESCO KALINGA STEEL LTD. (ARUN MISHRA, J.]
by IDCO to resume the land and to cancel allotment. In communication A
dated 26. J J. 1997, IDCO wrote that it had sent draft lease deed to Mesco
on 20.1.1996 and required the latter to submit the draft oflease agreement
for execution immediately. Thus it is apparent that though the possession
had been taken by Mesco but, at the same time, there was inexplicable
neglect on its part to execute the lease deed. Due to the contumacious
B
default on the ·part ofMesco for several years, lease deed could not be
executed. Ultimately IDCO had served notice dated 4.7.2003 to Mesco
regarding resumption ofland referring to its earlier communications dated
2 7.10.1997 and 26.11.1997 to execute the lease deed or to face
resumption ofland. The amount of instalments had also not been deposited
except the initial amount of Rs. I .25 crores. Thus Mesco was required c
by notice to deposit the balance defaulted amount ofRs.22,84,48,890/-
and to execute the lease deed by 19.7.2003 failing which land shall be
resumed and the amount paid by Mesco shall be adjusted towards
compensation for use and occupation of the land and there shall be future
liability of damages and costs thereupon. As nothing was done by Mesco,
D
vide communication dated 25.7.2003, IDCO resumed the land and
cancelled delivery of deed of possession dated 18.6.1996. The amount
deposited was forfeited.
12. The memorandum of understanding (MOU) was reached
between the Government of Orissa and Mesco Group of Industries on
4.5 .1994. According to the same, Government of Orissa had undertaken E
to recommend leasehold rights for mining at suitable mining locations.
The MOU was required to be converted into agreement in due course
of time. As per the general terms and conditions framed by the
Government ofOrissa on 25.1.1995 for allotment ofland for steel plants,
the cost of land was Rs. I lakh per acre. The amount was to be paid in F
instalments as provided with a right to hold the demised property for 90
years. Condition No.18 of the general terms and conditions to be inserted
in lease deed provided that the lessee had to remedy the breach within
three months after notice. Clause 18 of the general terms and conditions
is extracted hereunder :
G
"18. If the dues of the Lessor hereby reserved or any part
thereof shall at any time being arrears and unpaid for three
months next after the date on which the same shall have become
due, whether the same shall have been lawfully demanded or
not, or if there is a breach or non-observance by the Lessee of
H
886 SUPREME COURT REPORTS [2017] 1 S.C.R.
A any of the conditions and covenant herein contained and the
lessee £ails to remedy the breach within three months of the
notice in writing given by the lessor or becomes insolvent Qr
enters into an agreement with his creditors for composition
of the said business. This agreement will be deemed to have
been terminated and the Lessee may notwithstanding the waiver
B
of any previous causes of action or rights or remedy of re enter
and without prejudice to any such rights, or remedy of the lessor
for recovery of dues under the lease, enter upon the demised
property and repossess the same as if this demised property had
not been leased out. In such a case the lessee shall pay to the
c Lessor such amount by way of damages or such other charges
as may be determined by the Lessor. The amount of damages
or other dues recoverable from the Lessee will be adjusted against
the amount already paid.by the Lessee. lfafter such adjustment
there remains surplus, the same shall be returned to the lessee
without any interest. 1f after such adjustment there shall remains
D
some dues recoverable from the lessee and if lessee fails to pay
the same, the lessor shall be free to take any legal action as it
deems for realization." (emphasis supplied)
Aforesaid condition No.18 never came into force and remained
inoperative in the facts of the instant case as lease deed itself had not
E been executed. Even otherwise, more than three months' time was given
to Mesco to remedy the breach inasmuch as notice for resumption was
initially given in 1997 and for more than SY:. years till resumption in July,
2003, breach was not remedied. In spite of receiving the advance
possession, there was failure on the part of Mesco to execute the lease
F deed though draft lease deed was sent to it in January, 1996 for execution.
The relationship of lessor and lessee never came into being, in the absence
of execution of lease deed. The execution of lease deed was necessary
as the State Government had only accorded in principle approval and
advised IDCO to allot the land that could only be done by execution of
lease deed. As a matter of fact, IDCO ought not to have handed over
G advance possession of the land to Mesco without execution of lease
deed. However, for the reasons best known to IDCO, advance possession
was given. The allotment letter itself contemplated the execution of the
lease deed as a condition precedent. As provided in section 33 of the
Orissa Industrial Infrastructure Development Corporation Act, 1980 (for
H
ORIS SA INDUSTRIAL INFRA. DEVELOPMENT CORPORATION v. 887
MIS. MESCO KALINGA STEEL LTD. [ARUN MISHRA, J.]
short 'the Act'), the Corporation can dispose of the land subject to A
directions given by the State Government in such a manner and subject
to such terms and conditions as may be necessary. The condition
precedent was that of execution of lease deed, and as it was so directed
by State Government also, in our considered opinion, no concluded
contract came into being and the transaction became void due to failure
B
on the part of Mesco to execute a formal lease deed.
13. Section 33 of the Act is extracted hereunder:
"Section 33. Disposal of land by the Corporation. - (I)
Subject to any directions given by the State Government the
Corporation may dispose of- C
(a) Any land acquired by the State Government and transferred
to it, without undetiaking or carrying out any development
thereon; or
(b)Any such land after undertake or carrying out such D
development as it thinks fit,
to such person in such manner and subject to such terms and
conditions, as it considers expedient for securing the purposes
of this Act.
E
(2) The powers of the Corporation with respect to the disposal
of land under sub-S. (I) shall be so exercised as to secure, so far as
· practicable, that -
(a) where the Corporation proposes to dispose of by sale any
such land which is surplus to its requirement, the Corporation
shall offer the land in the first instance to the persons from F
whom it was acquired, if they desire to purchase it, subject to
such requirements as to its development and use as the
Corporation may think fit to impose.
(b) persons who are residing or carrying on business or other
activities on any such land shall, if they desire to obtain G
accommodation on land belonging to the Corporation and are
willing to comply with any requirements of the Corpor~tion
as to its development and use have an opportunity to obtain
thereon accommodation suitable to their reasonable
H
888 SUPREME COURT REPORTS [2017) 1 S.C.R.
A requirements on terms settled with due regard to the price at
which any such land has been acquired from them.
(3) Nothing in this Act shall be construed as enabling the
Corporation to dispose of land by way of gift, but subject as
aforesaid; reference in this Act to the disposal of land shall
B be construed as reference to the disposal thereof in any
manner whether by way of sale, mortgage, exchange, or lease
or by the creation, of any easement, right or privilege or
otherwise."
It is apparent from section 33(1) and 33(3) that it was necessary
c to execute the lease deed as the Corporation could dispose of the land
only in the manner as provided in law and otherwise also it was so
stipulated in the Government order itself. Thus, due to neglect ofMesco
the transaction became void and it was not necessary to serve three
months' notice to remedy the breach. However, in the facts of the case
for several years the breach was not remedied after communication
D dated 27.10.1997 till July, 2003.
14. In the instant case it is apparent that possession had been
enjoyed by Mesco without execution of the lease deed. The conduct of
IDCO was also not diligent. Notice was served in the year 1997 for
resumption but thereafter up to July, 2003 nothing was done by either
E IDCO or Mesco. Not even a single communication has been placed on
record by Mesco containing its proposal to remedy breach and on a
specific query being made to the learned counsel appearing for Mesco,
they were unable to explain as to what transpired between l 997 and
2003 except a vague submission was made that it was mired in certain
F 1itigations which fact has not been even pleaded. Thus, no explanation,
good, bad or otherwise has been placed on record for inaction on the ·
part ofMesco. The transaction became void, due to Mesco's own lapse
and negligence, and it has forfeited the rightto getthe lease deed executed.
After taking possession, it could not have waited for so many years.
What was required to be performed by Mesco was not done. It also
G failed to make any development of worth on the land. We find no force
in the submission that they have spent a sum of Rs.22 crores as they
were unable to explain how they spent the said amount, and only a bald
statement was made that they have constructed a boundary wal I. It has
not been established that a sum ofRs.22 crores had been spent by Mesco.
H Apart from that, having failed to execute the lease deed, they were to
ORI SSA INDUSTRIAL INFRA. DEVELOPMENT CORPORATION v. 889
MIS. MESCO KALIN GA STEEL LTD. [ARUN MISHRA, J.]
invest at their own peril. In case they have invested some amount, on A
that basis they cannot claim any legal or equitable right.
15. IDCO is a statutory authority and it can act only on the basis
of written lease deed. The execution of lease deed is necessary and it is
in public interest to prevent unauthorized leasing out of property on its
behalf. Lease is required to be executed in a prescribed format in the B
shape of formal document which is sine qua non. In the absence thereof,
it would not be permissible to hold that relationship oflessor and lessee
came into being.A situation arose under section 175(3) of the Government
oflndiaAct, 1935 a formal document was required to be executed which
provision was pari materia.toArticle 299 of the Constitution, this Court
held in Bhikraj Jaipuria v. Union of India AIR 1962 SC 113 that for a c
contract between Government and private individuals, formal document
is necessary and where it is required that a thing shall be done in the
prescribed manner or form but does not set out the consequences of
non-compliance, the question whether the provision was mandatory or
directory has to be judged in the light of the intention of the.legislature as D
disclosed by the object. If the provisions of statute are mandatory, the
thirig done not in the manner or form prescribed can have no effect or
validity. This Court also observed that it is in the interest of the public
that the question whether a binding contract has been made between
the State and a private individual should not be left to dispute and litigation.
E
It is apparent that there is a manner of executing the lease deed
with the Corporation. Prescribed form of draft lease deed had been
sent by !DCO to Mesco but it failed to execute it. Thus, there was no
contract which could have been enforced and it became void due to
inaction ofMesco itself.
F
16. Forfeiture of amount ofRs.1.25 crores was also appropriate.
Jn State of West Bengal v. Mis. B.K. Monda/ and Sons AIR I 962 SC
779, this Court held thatthe provision of section 175(3) is mandatory and
non-compliance makes the contract invalid and section 70 of the Contract
Act prevents unjust enrichment. It applies as much to individuals as to
corporations and Government. Section 70 of the Contract Act deals with G
the cases where a person does a thing not intending to act gratuitously
and others enjoyed it. In such a situation compensation can be claimed
under section 70 and this Court has held that section 175(3) of the
Government oflndiaAct is not in conflict with the principles enunciated
under section 70 of the Contract Act. Thus, we find no force in the
H
890 SUPREME COURT REPORTS [20 I 7] I S.C.R.
A submission on the part ofMesco with respect to the forfeiture of amount
ofRs.1.25 crores. In addition, they would be liable to pay as compensation
for retaining possession so long. In Nell' Marine Coal Co. (Bengal)
Private Ltd. v. The Union of India AIR 1964 SC 152 also, this Court
has held that when a contract is found to be void due to the provisions of
section 175(3) of the Government oflndia Act it becomes unenforceable
B
but in case a party had performed its obligation, section 70 is attracted in
order to recover compensation.
17. In La/iteshwar Prasad Sa hi v. Bateshwar Prasad and
Ors. AIR 1968 SC 580 where mere agreement was entered into in
contravention of Article 299 of the Constitution and was not ratified by
c the Government, it was held not to be a contract as it was void and
unenforceable. Similar is the view taken in Kara111shi Jethabhai
Somayya v. Stat~ of Bombay (now Maharashtra) AIR 1964 SC 1714.
It is true that the said provisions are not attracted in the instant case but
statutory corporation has also to act as per the mode prescribed by law.
D I 8. There is no question of estoppel or ratification in such cases.
In Mula111chand v. State of Madhya Pradesh AIR ! 968 SC I 218, this
Court observed thus :
"6 ...... The principle is that the provisions of Section 175(3) of
the Government oflndiaAct, 1935 or the corresponding provisions
E of Article 299(1) of the Constitution of India are mandatory in
character and the contravention of these provisions nullities the
contracts and makes them void. There is no question of estoppel
or ratification in such a case. The reason is that the provisions of
Section 175(3) of the Government of India Act and the
F corresponding provisions of A11icle 299( I) of the Constitution
have not been enacted for the sake of mere form but they have
been enacted for safeguarding the Government against
unauthorised contracts. The provisions are embodied in Section
175(3) of the Government of India Act and Article 299( I) of the
Constitution on the ground of public policy- on the ground of
G protection of general public -and these formalities cannot be
waived or dispensed with. Ifthe plea of the respondent regarding
estoppel or ratification is admitted, that would mean in effect the
repeal of an important constitutional provision intended for the
protection of the general public. That is why the plea of estoppel
H
ORIS SA INDUSTRIAL INFRA. DEVELOPMENT CORPORATION v. 891
M/S. MESCO KALINGA STEEL LTD. [ARUN MISHRA, J.]
or ratification cannot be permitted in such a case. But if money A
is deposited and goods are supplied or if services are rendered in
terms of the void contract, the provisions of Section 70 of the
Indian Contract Act may be applicable. In other words if the
conditions imposed by Section 70 of the Indian Contract Act are
satisfied then the provisions of that section can be invoked by
B
the aggrieved party to the void contract. The first condition is
that a person should lawfully do something for another person or
deliver something to him; the second condition is that in doing
the said thing or delivering the said thing he must not intend to
act gratuitously; and the third condition is that the other person
for whom something is done or to whom something is delivered c
must enjoy the benefit thereof. If these conditions are satisfied,
Section 70 imposes upon the latter person the liability to make
compensation to the former in respect of, or to restore, the thing
so done or delivered. The important point to notice is that in a
case falling under Section 70 the persmi doing something for
D
another or delivering something to another cannot sue for the
specific performance of the contract, nor ask for damages for
the breach of the contract, for the simple reason that there is no
contract between him and the other person for whom he does
something or to whom he delivers something. So where a claim
for compensation is made by one person against another under E
Section 70 it is not on the basis of any subsisting contract between
the parties but on a different kind ofobligation. The juristic basis
of the obligation in such a case is not founded upon any contract
or tort but upon a third category of law, namely, quasi-contract
or restitution. In Bibros av. Fairbairn, 1943 AC 32 Lord Wright
F
has stated the legal position as follows:
" ... any civilised system oflaw is bound to provide remedies
for cases of what has been called unjust enrichment or unjust
benefit, that is, to prevent a man from retaining the money
of. or some benefit derived from, another which it is against
conscience that he should keep. Such remedies in English G
Law are generically different from remedies in contract or
in to11, and are now recognised to fall within a third category
of the common law which has been called quasi-contract or
restitution".
H
892 SUPREME COURT REPORTS [2017] I S.C.R.
A · In the light of aforesaid decision, when we consider the overall
conduct ofMesco in the instant case, we are fully satisfied that the High
Court has adventured into an avoidable illegality while directing execution
of lease deed. It is a settled law that equity follows the rule of common
law in respect of such contracts. Renewal oflease is a privilege and if a
tenant wishes to claim the privilege, he must do so strictly within the
B
time limited for the purpose. This Court has further considered the
question where there is no time limit, an application may be made within
a reasonable time. If delay is on the part of lessee for renewal arising
out of mere neglect on his part and which could have been avoided by
reasonable diligence, would not entitle him to claim renewal. Applying
c the same principle to the instant case, it is apparent that the conduct of
Mesco was unfair and unpardonable. The conduct disentitled it from
indulgence by Court in any manner. We are constrained to observe that
a number of times the High Court had unnecessarily directed the matter
to be reconsidered and on each and every occasion there was rejection
of the representation by the concerned authorities. Thus, no equitable
D
consideration was available with Mesco to invoke the writ jurisdiction
for the reliefs sought. Relief granted is not permissible as per law.
19. Mesco had no enforceable right for grant of any relief by
mere handing over of possession. The question came up before this
Court in Khela Banerjee & Anr. v. City Montessori School & Ors.
E (2012) 7 SCC 261 when bid was cancelled and was not accepted but
the Manager of the respondent convinced the Governor to pass individual
order of possession and acceptance of the balance amount in ten six-
monthly instalments; thereafter instalments were not paid. This Court
held that no enforceable right accrued in favour of the respondent
F notwithstanding the execution of the agreement dated 12.1.1996 and the
offer made by the respondent to inake the payment of the balance price
was rightly rejected. This Court has held thus :
"29. The first question which merits consideration is whether
the conclusion recorded by the High Court on the issue of
G enforceability of the agreement dated 12-1-1996 is correct and
Respondent 1'sprayer for issue of a direction to LDA to accept
the balance price was rightly rejected. It is an admitted position
that in response to tender notice dated 20-12-1994, Respondent
I gave bid~ for four plots including Plot No. 92-A/C and paid
25% of the price offered by it but did not pay the balance amount
H
ORI SSA INDUSTRIAL INFRA. DEVELOPMENT CORPORATION v. · 893
M/S. MESCO KALINGA STEEL LTD. [ARUN MISHRA, J.]
necessitating cancellation of the bid, about which •intimation A
was given vide letter dated 14-6-1995. Respondent I did not
challenge the cancellation of bids by availing appropriate legal
remedy but its Manager succeeded in convincing the
Governor of the State to pass an unusual order for handing
over possession of the plots and acceptance of the balance
B
amount in six-monthly instalments. The reasons which
prompted the Governor to act in violation of the Rules of Business
and ordain restoration of the plots in favour of Respondent I
albeit without setting aside the decision of LOA to cancel the
bids are not borne out from the records produced. before this
Court. Therefore, we hold that the order passed by the Governor c
and the consequential actions taken by the State Government
and LOA including the execution of agreement dated 12-1-1996
did not create an enforceable right in favour of Respondent I ·
and the High Court rightly declined to issue a mandamus to LOA
to accept the offer made on its behalf for payment of the balance
D
pnce.
30. It is significant to note that the agreement dated
12-1-1996 contained an unequivocal stipulation that if
Respondent 1 fails to pay the instalments of balance price
within the prescribed time-limit then the agreement would
become void and LDA will be free to sell the plot to any E
other person. Admittedly, Respondent 1 did not pay the
instalments of balance price. Therefore, the agreement stood
automatically terminated and LDA became entitled to dispose
of the plot by adopting an appropriate mechanism consistent
with the doctrine of equality enshrined in Article 14 of the F
Constitution. It is rather intriguing as to why the jimctionaries
of LDA remained silent for more than 13 years and did not
repossess the plot in question. This was perhaps due to the
pressure brought by the Manager of Respondent 1 from
different quarters. administrative as ire/I us political.
G
xxx xxx xxx
32. We have carefully gone through the provisions of the
2009 Act and find that they do not even remotely deal with the
issue of allotment ofland to the educational institutions. Therefore,
H
894 SUPREME COURT REPORTS [2017] I S.C.R.
A the Division Bench of the High Court was not at all justified in
ordering transfer of the plot to Respondent I and that too by
ignoring its own finding that the said respondent was a ranked
defaulter and the writ petition was filed after a time gap of 13
years without any tangible explanation."'
B (emphasis added by us)
20. Mesco was required to do several acts in this case as per the
general terms and conditions subject to which the lease was to be granted.
Nothing has been performed including payment of instalments etc. and
in such a situation no relief is permissible to be given as held by this
c Court in Raj Kishore (Dead) by LRs. v. Prem Singh & Ors. (2011) I
SCC 657 in which this Court has referred to Halsbwy's Lml's ofEngland
thus :
"33. This Coui1 also quoted with approval the following
passage from Halsbury's Laws of England, Vol. 14, Illrd Edn.,
D p. 622, Para 1151:
"1151. Conditions must as a general rule be strictly
observed.-Where under a contract, conveyance, or will a
beneficial right is to arise upon the performance by the
beneficiary of some act in a stated manner, or at a stated
E time, the act must be performed accordingly in order to obtain
the enjoyment of the right, and in the absence of fraud,
accident or surprise, equity will not relieve against a breach
of the terms."
It is apparent that when several acts are to be done in a stated
F manner and in stipulated time and none of them has been performed, as
in the instant case, such gross breach became irremediable and no
equitable principle could have come to the rescue of Mesco as it has
utterly failed to fulfil its obligations.
21. It was submitted on behalf ofMesco that IDCO is bound by
G promissory estoppel. We find the submission to be wholly unworthy of
acceptance. It is not the case of Mesco that there was any assurance
given to it on the basis of which it has acted upon. The State Government
had withdrawn its initial offer of equity participation of Rs.25 crores
well before the order of allotment was issued. It was made clear in the
order that the State Government had directed IDCO to allot 2500 acres
H
ORI SSA INDUSTRIAL INFRA. DEVELOPMENT CORPORATION 'v. 895
M/S. MESCO KALINGA STEEL LTD. [ARUN MISHRA. J.]
ofland subject to execution of lease deed. In such a situation there is no A
room to entertain the plea of promissory estoppel and it is not the case
that any of the authorized persons had at any point of time, without
execution oflease deed, asked Mesco to do anything. Any such assurance
even if it had been given, would be of no consequence as held by this
Court in Mumbai International Airport Private ltd. v. Golden Chariot
B
Airport & Anr. (20 I 0) I 0 SCC 422. Therein a question arose that the
Airports Authority of India being a statutory body constituted under
section 3 of the Airports Authority of India Act, 1944 was required to
execute the contract in a particular form as provided under the Act and
the Regulations. As such it was held that even if oral assurance of
execution of licence is proved, such assurance cannot bind the statutory c
body. In the facts of the instant case, the principle of promissory estoppel
is not attracted at all. IDCO is a statutory body and can act only in the
mode prescribed and Mesco was informed of the lease deed to be
executed in prescribed format. Thus the High Court could not have issued
the impugned direction.
D
22. In the writ petition, a prayer had been made for grant of
relief of a declaration that Mesco has acquired full title to hold the property
in question for a period of 99 years from the date of possession and
IDCO has lost its title to the said land and has the remedy to recover the
balance amount by filing a suit. The prayer was wholly misconceived. In
the instant case, on the basis of MOU or allotment letter, no right has E
accrued to Mesco, and it having failed to perform its mandatory part, the
MOU/offer became void and unenforceable. IDCO was fully justified
in resuming the land.
23. The High Court has totally misdirected itself in directing to
lease out the balance land. The High Court has also ignored that certain F
intervening events have taken place and there was total failure on the
part of Mesco to carry out its obligations. The High Court could not
have issued the direction more so in the changed situation and in view of
the defaults committed by Mesca. As a matter of fact, Mesco was
never inclined to abide by the term' of the letter dated 4.7.2003. When G
resumption was made on 25. 7.2003, a representation was submitted on
20.8.2003 by Mesco. In that, an attempt wqs made to dictate its own
terms in the garb of prayer for payment.A a matteroffact, it is apparent
from the conduct of Mesco that it had no justification at any point of
time not to execute the lease deed. It was delaying the same for the
H
896 SUPREME COURT REPORTS [2017) 1 S.C.R.
A reasons best known to it which was wholly impermissible conduct,
particularly after taking possession. The breach was not remedied for
several years much less for three months in which it was to be remedied.
Thus, High Court misadventured into holding the action of IDCO of
resumption of land to be illegal. There was no equitable or legal
consideration in favour of the respondent herein and a writ is not issued
B
to perpetuate an illegality. Not only·the conduct of Mesco was unfair,
third party rights had also intervened. Lawful method had been exercised
for resumption of land and cancellation of letter of handing over the
possession.
24. Resultantly, the impugned order passed by the High Court is
c hereby set aside. The appeals are allowed. The writ petition stands
dismissed. Cost ofRs.5 lakhs is directed to be paid by Mesco to IDCO
within a period of two months from today.
Kalpana K. Tripathy Appeals allowed.
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