Supreme Court of India
RAKESH BIRANI (D) THROUGH LRS.versusPREM NARAIN SEHGAL & ANR.
- Citation
- 2018 INSC 253
- Decided
- 21 March 2018
- Disposal
- Appeal(s) allowed
Holding
The fifteen‑day period for depositing the balance amount under Rule 9(4) commences from the date of confirmation of sale, not from the date of the auction.
Summary
The auction of an immovable property was held on 14 February 2013, where the appellant was the highest bidder and paid the required earnest money and 25% of the sale price. The secured creditor confirmed the sale by letter on 27 February 2013, after which the appellant deposited the remaining 75% on 13 March 2013, within fifteen days of that confirmation. Lower tribunals set aside the sale, but the Supreme Court examined Rule 9 of the Security Interest (Enforcement) Rules, 2002, to determine whether the fifteen‑day period for the balance deposit starts from the auction date or from the date of confirmation. The Court held that Rule 9(4) makes it clear that the period begins on the date of confirmation of sale, and that forfeiture of the earlier 25% deposit only occurs if the balance is not paid within that period. Since the appellant complied with the rule, the sale certificate was valid and the auction could not be set aside. The appeal was allowed and the impugned orders were set aside.
Issues considered
- From which date does the fifteen‑day period for depositing the balance amount under Rule 9(4) of the Security Interest (Enforcement) Rules, 2002 commence – the date of the auction or the date of communication of confirmation of sale?
Legislation cited
Subjects
Security interestAuctionRule 9Securitisation ActBalance deposit periodSale certificateForfeitureEnforcement of security interest
Judgment
750 [2018]REPORTS
SUPREME COURT 3 S.C.R. 750 [2018] 3 S.C.R.
A RAKESH BIRANI (D) THROUGH LRS.
v.
PREM NARAIN SEHGAL & ANR.
(Civil Appeal No. 3156 of 2018)
B MARCH 21, 2018
[ARUN MISHRA AND UDAY UMESH LALIT, JJ.]
Security Interest (Enforcement) Rules, 2002: r.9 –
Interpretation of – Period of 15 days for making the deposit of
C remaining 75% whether would start from the date of communication
of confirmation of sale or from the date of auction – Held: r.9(2)
makes it clear that after confirmation by the secured creditor the
amount has to be deposited – r.9(3) also makes it clear that period
of 15 days has to be computed from the date of confirmation – It is
only after confirmation is made under rule 9(4) that the amount has
D to be deposited and on failure to deposit the amount, 25% amount
deposited earlier has to be forfeited and property has to be resold
– In the instant case, the provisions had been fully complied with by
the auction purchaser by making the deposit of 75% of the amount
from the date of confirmation of sale – Sale certificate was rightly
E issued to the auction purchaser – Auction could not have been set
aside.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3156
of 2018.
F From the Judgment and Order dated 06.05.2016 of the High Court
of Judicature at Allahabad in Special Appeal No. 955 of 2014.
Manohar Pratap, Raja V. Naik, Ms. Manju Jetley, Advs. for the
Appellants.
G Satyajit A. Desai, Vikram D. Chauhan, Rajesh Lalwali, Ms. Anagha
S. Desai, Rajesh Kumar-I, Gaurav Kumar Singh, Anant Gautam, Aakash
Sehrawat, V. Govinda Ramanan, Soumu Palit, Advs. for the
Respondents.
H
750
RAKESH BIRANI (D) THROUGH LRS. v. PREM NARAIN 751
SEHGAL & ANR.
The following Order of the Court was delivered: A
ORDER
1. Leave granted.
2. The auction purchaser has come up in this appeal against the
judgment and order passed by the Division Bench of the High Court
affirming the judgment passed by the Single Bench. B
3. The brief facts in the present case are that the auction of the
property was held on 14th February 2013. The appellant was the highest
bidder. He offered a bid of Rs.38.30 lakhs and deposited a sum of
Rs.3,80,500/- as earnest money on 1st February 2013. He further deposited
25% of the auction amount of Rs.5.80/- lakhs on 15th February 2013 and C
remaining amount of Rs.28,69,500/- on 13th March 2013. The auction
purchaser claimed that he was intimated regarding confirmation of sale
by the Authorised Officer of the secured creditor by letter dated
27th February 2013. As soon as he was intimated of the confirmation,
he further deposited the 75% of the auction amount on 13 th March 2013 D
within 15 days of confirmation of sale.
4. The owner and principal borrower whose property was sold in
auction questioned the same by way of filing a writ petition. The Writ
Petition (Civil) No.20653 of 2013 was filed by the respondent. The Division
Bench passed the order on 25th April 2013 that as the property has
E
already been auctioned, directed the respondent to file an appeal under
the provisions of Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002 (hereinafter referred to
as “the Act of 2002”). Thereafter, an appeal was filed that was registered
as S.A. No.113 of 2013. The Debts Recovery Tribunal, Allahabad vide
order dated 19th December 2013, has set aside the sale, the order was F
confirmed by the Debts Recovery Appellate Tribunal as well as by the
Single Judge and the Division Bench of the High Court. Hence, the
present appeal by the auction purchaser.
5. The main question that arises for our consideration in the appeal
is, from which date the period of fifteen days would start for making the G
deposit of remaining 75 percent; from the date of communication of
confirmation of sale or from the date of the auction. The aforesaid
dates are not in dispute. The decision depends upon the interpretation of
Rule 9 of Security Interest (Enforcement) Rules, 2002 (for short “the
2002 Rules). Rule 9 of the 2002 Rules reads as under:
H
752 SUPREME COURT REPORTS [2018] 3 S.C.R.
A “9. Time of sale, issues of sale certificate and delivery of
possession, etc.-
(1) No sale of immovable property under these rules, in the first
instance, shall take place before the expiry of thirty days from the
date on which the public notice of sale is published in newspapers
B as referred to in the proviso to sub-rule (6) of rule 8 or notice of
sale has been served to the borrower:
Provided further that if the sale of immovable property by any
one of the methods specified by sub-rule (5) of rule 8 fails and
sale is required to be conducted again, the authorised officer shall
C serve, affix and publish notice of sale of not less than fifteen days
to the borrower, for any subsequent sale.
(2) The sale shall be confirmed in favour of the purchaser who
has offered the highest sale price in his bid or tender or quotation
or offer to the authorised officer shall be subject to confirmation
by the secured creditor:
D
Provided further that if the authorised officer fails to obtain a
price higher than the reserve price, he may, with the consent of
the borrower and the secured creditor effect the sale at such
price.
(3) On every sale of immovable property, the purchaser shall
E
immediately, i.e., on the same day or not later than next working
day, as the case may be, pay a deposit of twenty five percent of
the amount of the sale price, which is inclusive of earnest money
deposited, if any, to the authorized officer conducting the sale and
in default of such deposit, the property shall be sold again.
F (4) The balance amount of purchase price payable shall be paid
by the purchaser to the authorised officer on or before the fifteenth
day of confirmation of the sale of the immovable property or such
extended period (as may be agreed upon in writing between the
purchaser and the secured creditor, in any case not exceeding
G three months).
(5) In default of payment within the period mentioned in sub-rule
(4), the deposit shall be forfeited (to the secured creditor) and the
property shall be resold and the defaulting purchaser shall forfeit
all claim to the property or to any part of the sum for such it may
be subsequently sold.
H
RAKESH BIRANI (D) THROUGH LRS. v. PREM NARAIN 753
SEHGAL & ANR.
(6) On confirmation of sale by the secured creditor and if the A
terms of payment have been complied with, the authorised officer
exercising the power of sale shall issue a certificate of sale of the
immovable property in favour of the purchaser in the form given
in Appendix V to these rules.
(7) Where the immovable property sold is subject to any B
encumbrances, the authorised officer may, if he thinks fit, allow
the purchaser to deposit with him the money required to discharge
the encumbrances and any interest due thereon together with such
additional amount that may be sufficient to meet the contingencies
or further cost, expenses and interest as may be determined by
him: C
(Provided that if after meeting the cost of removing encumbrances
and contingencies there is any surplus available out of the money
deposited by the purchaser such surplus shall be paid to the
purchaser within fifteen days from the date of finalisation of the
sale.) D
(8) On such deposit of money for discharge of the encumbrances,
the authorised officer shall issue or cause the purchaser to issue
notices to the persons interested in or entitled to the money
deposited with him and take steps to make the payment accordingly.
E
(9) The authorised officer shall deliver the property to the purchase
fee from encumbrances known to the secured creditor on deposit
of money as specified in sub-rule (7) above.
(10) The certificate of sale issued under sub-rule (6) shall
specifically mention that whether the purchaser has purchased F
the immovable secured asset free from any encumbrances known
to the secured creditor or not.”
6. The submission raised by learned counsel appearing on behalf
of the appellant was that Rule 9(4) of the 2002 Rules provided that the
amount has to be deposited only after confirmation. Rule 9(2) also
G
contemplates confirmation of the bid. Learned counsel has also taken
us through Rule 9(5) so as to contend that in default of the payment
within the period mentioned in sub-rule (4), the deposit made shall be
forfeited. The forfeiture is only to follow as consequence of non-deposit
of 75 percent of amount after confirmation of sale. Learned counsel
H
754 SUPREME COURT REPORTS [2018] 3 S.C.R.
A has also relied upon the provisions of Rule 9(6) to submit that after
confirmation of sale, in case, terms of sale have been complied with only
then sale certificate is issued. In this case, sale certificate has been
issued by the owner in favour of the auction purchaser. Thus, the High
Court has erred in law in interpreting the rule 9 of the rules of 2002 to
mean that date of the auction is also the date of its confirmation.
B
7. On the other hand, learned counsel appearing on behalf of the
borrower-respondent No.1 contends that it is apparent from Rule 9(2)
that there is confirmation of sale as soon as highest bid is accepted by
the authorised officer, within fifteen days, the deposit of 75% of the
amount is to be made, failing which the only course is the forfeiture of
C the remaining 25% of the amount that has been deposited and the property
has to be resold.
8. In order to comprehend the rival submissions, it is necessary to
ponder as to intendment of Rule 9 of the 2002 Rules which deals with
the time of sale, issues of sale certificate and delivery of possession, etc.
D Public notice of sale is to be published in the newspaper and only after
thirty days thereafter, the sale of immovable property can take place.
Under Rule 9(2) of the 2002 Rules, the sale is required to be confirmed
in favour of the purchaser who has offered the highest sale price to the
authorised officer and shall be subject to confirmation by the secured
E creditor. The proviso makes it clear that sale under the said Rule would
be confirmed if the amount offered and the whole price is not less than
the reserved price as specified in Rule 9(5). It is apparent that Rule 9(1)
does not deal with the confirmation by the authorised officer. It only
provides confirmation by the secured creditor. Rule 9(3) makes it clear
that on every sale of immovable property, the purchaser on the same
F day or not later than next working day, has to make a deposit of twenty-
five percent of the amount of the sale price, which is inclusive of earnest
money deposited if any. Rule 9(4) makes it clear that balance amount of
the purchase price payable shall be paid by the purchaser to the authorized
officer on or before the fifteenth day of “confirmation of sale of the
G immovable property” or such extended period as may be agreed upon in
writing between the purchaser and the secured creditor. Thus, Rule
9(2) makes it clear that after confirmation by the secured creditor the
amount has to be deposited. Rule 9(3) also makes it clear that period of
fifteen days has to be computed from the date of confirmation. In this
case, confirmation has been made and communicated on 27th February
H
RAKESH BIRANI (D) THROUGH LRS. v. PREM NARAIN 755
SEHGAL & ANR.
2013 and within fifteen days thereof i.e. on 13th March 2013, the amount A
of seventy-five percent had been deposited. Thereafter, sale certificate
has been issued under Rule 9(6). Rule 9(5) also makes it clear that in
default of payment within the period mentioned in sub-rule 9(4), the
deposit shall be forfeited. There cannot be any forfeiture of the amount
of 25 percent in deposit until and unless the sale is confirmed by the
B
secured creditor and there is a default of payment of 75 percent of the
amount. The interpretation made by the High Court thus cannot be
accepted.
9. If we read the provisions otherwise then we find even before
the confirmation of sale within fifteen days, the amount would be forfeited
by the authorised officer who may decide not to confirm the sale that C
would be a result not contemplated in Rule 9(2), 9(4) and 9(5) which
fortify our conclusion that it is only after the confirmation is made under
Rule 9(4) that amount has to be deposited and on failure to deposit the
amount, twenty-five percent amount has to be forfeited and property
has to be resold. The provisions of Rule 9(6) also fortifies our conclusion, D
inasmuch as it is the expression used that on confirmation of sale by the
secured creditor and “if the term of payment has been complied with”
sale certificate is issued otherwise the forfeiture takes place, this
compliance has to be only after the confirmation of sale and not before
it. Thus, various provisions of Rule 9 makes it clear that interpretation
made by Debts Recovery Tribunal and Debts Recovery Appellate E
Tribunal and as affirmed by the High Court cannot be said to be correct.
10. Thus, we find that the provisions had been fully complied with
by the auction purchaser as he has complied with the provisions of Rule
9 by making a deposit of 75 percent of the amount from the date of
confirmation of sale. The sale certificate was rightly issued in favour of F
auction purchaser. Thus, the auction could not have been set aside. Since
the sale certificate has been issued, let the possession be delivered in
accordance with law, as expeditiously as possible.
11. The appeal is allowed and the impugned orders are set aside.
No order as to costs. G
Devika Gujral Appeal allowed.
H
756 [2018]REPORTS
SUPREME COURT 3 S.C.R. 756 [2018] 3 S.C.R.
A STATE OF HIMACHAL PRADESH
v.
RAVINDER KUMAR SANKHAYAN (DEAD) AND ORS.
(Civil Appeal No. 3392 of 2006)
B MARCH 28, 2018
[DIPAK MISRA, CJI AND A. M. KHANWILKAR, J.]
Constitution of India – Art. 226 – Judicial review – Scope of
– PIL filed by respondent No.1 before High Court alleging that the
property owned and possessed by Municipal Corporation, Shimla
C
was leased out to Himachal Pradesh Tourism Development
Corporation (HPTDC) at a rate much lower than the prevailing
market rate, without conducting auction or resorting to tender
process – While considering the prayer for various interim reliefs
sought by the writ petitioner, High Court proceeded to pass order
D dtd. 24th May, 2005 directing Municipal Corporation to issue public
advertisement for leasing out the subject property – In continuation
of the said order, High Court passed another order dtd. 5th July,
2005 – Held: Interim order dtd. 24th May, 2005, transcends beyond
the relief claimed by the writ petitioner and more so, it is a mandatory
order passed at an interlocutory stage without recording any just
E
and tangible reasons therefor – High Court did not even advert to
the efficacy of subsisting contract between the Municipal
Corporation and HPTDC – Contract between the Municipal
Corporation and HPTDC or the rental policy of the State, as
applicable to the Municipal Corporation, was not challenged much
F less quashed by High Court – Without deciding on the issue of
validity of the subsisting contractual terms and conditions between
the Municipal Corporation and HPTDC, High Court could not and
should not have ventured to pass order dtd. 24th May, 2005 – Order
dated 5 th July, 2005 is only a consequential order which must,
therefore, meet the same fate – Interim orders passed by High Court
G
were in complete disregard of the scope of judicial review and are
set aside – Writ petition which is still pending for final decision
before High Court is disposed of – Himachal Pradesh Municipal
Corporation Act, 1994 – s.157 – Constitution of India – Art.226 –
PIL.
H
756
STATE OF HIMACHAL PRADESH v. RAVINDER KUMAR 757
SANKHAYAN (DEAD) AND ORS.
Allowing the appeals, the Court A
th
HELD: 1.1 The interim order passed on 24 May, 2005,
transcends beyond the relief claimed by the writ petitioner and
more so, is a mandatory order passed at an interlocutory stage
without recording any just and tangible reasons therefor. The
High Court did not even advert to the efficacy of the subsisting B
contract between the Municipal Corporation and HPTDC. It was
nobody’s case that HPTDC was in unauthorized occupation of
the subject properties. At best, the High Court felt that the agreed
lease rent payable by HPTDC in respect of subject properties
was on the lower side, which inevitably progenerated financial
loss to the Municipal Corporation. Before recording such a C
finding, it was necessary for the High Court to first authoritatively
hold that HPTDC was not legally entitled to remain in occupation
of the subject premises. Notably, the contract between the
Municipal Corporation and HPTDC or the rental policy of the
State, as applicable to the Municipal Corporation, was not D
challenged much less quashed by the High Court. Even the
decision of the Municipal Corporation recorded in its meeting
held on 28th March, 2005, was neither been challenged nor been
quashed by the High Court. [Paras 8, 9] [766-H; 767-A-D]
1.2 It is unfathomable as to how the High Court could have E
passed the order dated 24th May, 2005, to straightway direct the
Municipal Corporation to issue tender notice. There is no
indication in the order passed by the High Court on 24th May,
2005, of having quashed the subsisting contract between
Municipal Corporation and HPTDC. Without deciding on the
issue of validity of the subsisting contractual terms and conditions F
between the Municipal Corporation and HPTDC, the High Court
could not and should not have ventured to pass the order, such
as dated 24th May, 2005. The order dated 5th July, 2005 is only a
consequential order which must, therefore, meet the same fate.
The interim orders passed by the High Court were in complete G
disregard of the scope of judicial review. It is also in complete
disregard of Section 157 of the Himachal Pradesh Municipal
Corporation Act, 1994, which mandates the procedure for grant
of lease. First, the proposal should be recommended by the
Municipal Corporation; and second, the agreement can be
H
758 SUPREME COURT REPORTS [2018] 3 S.C.R.
A executed by the Municipal Corporation only after grant of prior
sanction by the Government for leasing out the property. The
writ petitioner had not even prayed for quashing of the subsisting
contract between the Municipal Corporation and HPTDC in
respect of the subject properties. The gravamen of the reliefs
claimed in the writ petition was to direct the Municipal
B
Corporation to lease out the subject premises on the basis of the
prevailing market rent. Such relief could be entertained only after
the subject premises were to be vacated by HPTDC upon expiry
or termination of the subsisting contract between HPTDC and
the Municipal Corporation. [Paras 10-12] [767-G-H; 768-A-C,
C E-F]
1.3 The only relief that could have received the attention
of the High Court was to direct the Municipal Corporation to
recover its outstanding legal dues from various governmental
authorities and individuals. However, the emphasis in the writ
D petition in this behalf is only with regard to the dues recoverable
from HPTDC in respect of the subject premises. Assuming that
there are outstanding dues payable by HPTDC to the Municipal
Corporation, that matter could be resolved with the intervention
of the State. In that, if HPTDC is financially incapable of settling
the claim/demand of the Municipal Corporation, the State may
E have to provide financial assistance to HPTDC to the extent
necessary, failing which the Municipal Corporation will be left
with no other option but to take recourse to statutory remedies
for recovery of its dues from HPTDC in relation to the subject
premises. Since the State has also come up in appeal against the
F decision of the High Court, it must take initiative to find out a
suitable solution in accordance with law, expeditiously and within
a reasonable time, failing which it may be open to the Municipal
Corporation to resort to recovery proceedings against HPTDC
and including eviction of HPTDC from the suit premises
consequent to termination of the contract inter partes.
G [Paras 13, 14] [768-F-H; 769-A-B]
2. Since the tender process in which the impleaded
respondent, N & S Resorts had participated (and gave the highest
offer) was subject to the outcome of the pending legal proceedings,
no right would accrue to it in the stated premises except to get
H refund of the amount paid as earnest money for participating in
STATE OF HIMACHAL PRADESH v. RAVINDER KUMAR 759
SANKHAYAN (DEAD) AND ORS.
the Court directed tender process. The amount so paid by the A
impleaded respondent shall be refunded to it, with interest at the
rate of 9% p.a. (equivalent to the bank rate for fixed deposits
prevailing at the time the deposit was made) from the date of
deposit till its realization. [Para 15] [769-E-F]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3392 B
of 2006.
From the Judgment and Order dated 05.07.2005 of the High Court
of Himachal Pradesh at Shimla in CWP No. 555 of 2004
WITH
Civil Appeal Nos. 3393 and 3394 of 2006. C
J. S. Attri, Sr. Adv., Naresh K. Sharma, Varinder Kumar Sharma,
Sanjay Jain, Anil Nag, Ms. Tarannum Cheema, Hiral Gupta, Davinder
Singh, Advs. for the appearing parties.
The Judgment of the Court was delivered by
D
A. M. KHANWILKAR, J. 1. These appeals emanate from the
judgment and interim orders dated 24th May, 2005 and 5th July, 2005
passed by the High Court of Himachal Pradesh at Shimla in Civil Writ
Petition No.555 of 2004, during the pendency of the said writ petition.
Civil Appeal No.3392 of 2006 has been filed by the State of Himachal
Pradesh (for short “the State”) against the judgment and order dated 5th E
July, 2005, whereas the other two appeals, i.e. Civil Appeal Nos.3393 &
3394 of 2006 have been filed by the Himachal Pradesh Tourism
Development Corporation (for short “ HPTDC”) against the judgment
and orders dated 24th May, 2005 and 5th July, 2005, respectively.
2. The stated writ petition was filed by the original respondent F
No.1, who died during the pendency of the proceedings in this Court. He
claimed to be a public spirited person. He was aggrieved by the acts of
commission and omission of the Municipal Corporation, Shimla, whereby
the property owned and possessed by the Municipal Corporation was
leased out to HPTDC at a rate much lower than the prevailing market
rate, without conducting auction or resorting to tender process. G
Additionally, the Municipal Corporation had failed to recover the municipal
taxes from HPTDC, including the rental/lease money, which was quite
substantial, causing loss to the Municipal Corporation. This is the crux
of the grievance made in the aforementioned writ petition, for which
following reliefs were claimed: H
760 SUPREME COURT REPORTS [2018] 3 S.C.R.
A “(I) Respondents may kindly be restrained from allotting the above
mentioned stall to H.P.M.C. which is loss-making venture in
public interest, or in the alternative quash the said allotment
to the respondent No.3 and disposed of the same in
accordance with law and direct the respondents to demolish
the illegal structures.
B
(II) Respondent Municipal Corporation be directed to recover its
outstanding legal dues from various governmental authorities
and individuals.
(III) The respondent Municipal Corporation be directed to reject
C its leased out properties to a realistic revision of (monthly
lease amounts) monthly rentals.
(IV) The respondents may kindly be directed to produce the entire
records pertaining to this case for the kind perusal of this
Hon’ble Court.
D (V) Any other writ, order or direction deemed fit and proper in
the facts and circumstances mentioned herein above may
very kindly be passed in favour of the petitioner and against
the respondents.
(VI) Cost of the writ petition may kindly be granted throughout in
E favour of the petitioner.”
3. The Municipal Corporation as well as the State resisted the
said writ petition, by filing affidavits. The State asserted that the land in
question is owned by the Government of Himachal Pradesh. The entry
in the revenue record indicates that the possession of the property was
F with the Municipal Corporation since 1977. Be that as it may, the property
known as “Goofa”, situated at the Ridge in Shimla Town, was let out to
HPTDC. A lease document was executed on 2nd January, 1978 stipulating
the terms and conditions of the lease. The differences between the
Municipal Corporation and HPTDC regarding the rent were resolved in
terms of the award passed by the Secretary (LSG) to the Government
G
of Himachal Pradesh. The Municipal Corporation and HPTDC were
bound by the said award, whereunder enhanced rent in respect of the
subject properties was specified. The Municipal Corporation in its meeting
held on 20th July, 1988, had taken a decision regarding the increase of
rent payable by HPTDC. The thrust of the stand taken by the State was
H
STATE OF HIMACHAL PRADESH v. RAVINDER KUMAR 761
SANKHAYAN (DEAD) AND ORS. [A.M. KHANWILKAR, J.]
that HPTDC, being a State Corporation, was obliged to engage in A
promoting tourism within the State and in terms of the tourism policy of
the State, the directions given by the State were required to be carried
out by HPTDC. The possession of the subject premises by the HPTDC
cannot be equated with a private lease or occupation by a private
individual, as the activities of the HPTDC were to effectuate the larger
B
public interest and tourism within the State. Significantly, the lease
agreement between HPTDC and the Municipal Corporation was still
subsisting.
4. Despite the opposition to the writ petition by the State authorities,
the High Court, while considering the prayer for interim relief sought by
the writ petitioner for issuing directions to the Municipal Corporation to C
file a list of properties owned and possessed by the Municipal Corporation
and also to place on record its outstanding legal dues of payment by the
various Government authorities and individuals, including the monthly
rental values for which the properties have been leased out by the
Municipal Corporation, proceeded to pass an order on 24th May, 2005, D
without considering the cardinal aspects such as that there is a subsisting
agreement between HPTDC and Municipal Corporation in respect of
the subject premises. Being swayed away by the submission made by
the intervener – applicant, whose application was allowed on the same
date, that he was willing to offer a monthly lease amount of Rs.2,50,000/
- (annual amount of Rs.30 lakhs), the High Court opined that the E
difference between the lease rent payable by HPTDC and the offer
made by the intervener was quite substantial, for which reason the
Municipal Corporation should issue public advertisement for leasing out
the subject property. The High Court passed the following order:
“ORDER F
CWP No.555/2004.
24.05.2005 Present: Mr. B.C. Negi Advocate, for the petitioner.
Mr. M.S. Chandel, Advocate General, with Mr. J.K. Verma, Dy.
A.G. for respondent No.1. G
Mr. Ajay Mohan Goel, Advocate, for respondent No.2.
Mr. Shrawan Dogra, Advocate, for respondent No.3.
Mrs. Ranjana Parmar, Advocate, for respondent No.4.
Mr. Ankush D. Sood, Advocate for respondent No.5. H
762 SUPREME COURT REPORTS [2018] 3 S.C.R.
A CMP No.1043/2005.
Learned counsel for all the parties submit that they have no
objection to this application being allowed to the limited and the
only extent of the applicant herein being permitted to intervene in
the proceedings. We order accordingly. The other prayers made
B in the application are declined.
The application is disposed of.
CWP No.555/2004.
In CMP No.1043/2005 we have ordered today that the applicant
C therein be allowed to intervene in these proceedings. In that
application, the applicant has offered to take the property, Ashiana
and Goofa Restaurants situated at the Ridge, Shimla on a monthly
lease amount of Rs.2,50,000/-/- (annual lease amount of Rs.30
lacs). This offer of the aforesaid applicant is against the present
lease money of Rs.2,86,992/- per annum which works out to
D Rs.23,916/- per month as is being paid by H.P. Tourism
Development Corporation. As per the Statement of Accounts filed
by respondent No.2 HPTDC actually it has been in arrears with
respect to the payment of aforesaid lease amount also at the
aforesaid rate and the amount of arrears, has been worked out at
E Rs.18,50,361/- as on 31st March, 2005.
What, therefore, clearly emerges is that as against the aforesaid
annual amount of Rs.2,86,992/- being paid by HPTDC to Shimla
Municipal Corporation, for the same property a party before us
has offered to pay Rs.30,00,000.00 per annum which is more than
F ten times the aforesaid amount. This is just one party offering to
pay the aforesaid amount. We are sure that there is a strong
possibility, actually bright prospects, of many more parties coming
forward to take the property on lease and offer lease money even
higher, much higher, than what the intervener has offered to pay.
With a view thus to attract the best offers and to ensure that the
G
property is given on lease/license basis which will be in best public
interest and also in the interest of Corporation, we direct respondent
No.2 to publish and also in the interest of Corporation, we direct
respondent No.2 to publish advertisements in three leading
newspapers within ten days from today inviting offers from
H
STATE OF HIMACHAL PRADESH v. RAVINDER KUMAR 763
SANKHAYAN (DEAD) AND ORS. [A.M. KHANWILKAR, J.]
interested parties for obtaining the aforesaid property on lease/ A
license basis. In the advertisements so published, respondent No.2
shall ensure that the last date of receipt of offers is not later than
30th June, 2005.
With a view to attracting the best offers, it shall be desirable
that the property is offered on a long term lease/license basis. B
Also while issuing the advertisement, respondent No.2 shall ensure
that for the benefit of prospective bidders, it fully describes and
specifically defines the exact details of the property sought to be
leased/licensed.
H.P. Tourism Development Corporation and the intervener C
herein, both are at liberty to respond to the invitation of respondent
No.2 in the aforesaid advertisement and to submit their respective
offers. The submission of offers by the HPTDC and by the
intervener shall be without prejudice to their rights and contentions
in this case. It is, however, also specifically made clear that if
they both, or anyone of them, fails to offer in response to the D
aforesaid invitation to offer, they shall be doing so entirely at their
own risk and responsibility.
On the next date the Commissioner, Municipal Corporation shall
file his affidavit informing this Court the details of the offers received
and the action proposed thereupon. E
List on 4th July, 2005. Copy Dasti.”
5. This interim order passed by the High Court has been assailed
by HPTDC by way of Civil Appeal No.3393 of 2006. Pursuant to the
aforementioned interim order passed by the High Court, the Municipal F
Corporation issued Tender Notice on 9th June, 2005, inviting offers from
the interested parties. The impleaded respondent N & S Resorts gave
the highest offer of rent of Rs.6,51,000/- per month (annual rent of
Rs.78,12,000/-). In continuation of the aforementioned order, the High
Court proceeded to pass another interim order on 5th July, 2005 which
reads thus: G
“As a sequel to, and in compliance with the directions contained
in our order dated 24th May, 2005 the Commissioner, Municipal
Corporation, Shimla has filed his affidavit which has been affirmed
on 1st July, 2005. In his affidavit the Commissioner has informed
H
764 SUPREME COURT REPORTS [2018] 3 S.C.R.
A us that the Corporation had issued a tender notice on 2nd June,
2005 whereby sealed tenders were invited for leasing out the
property in question for a period of 25 years on monthly rental
basis. In response to the said tender notice, the following five
parties submitted their tenders and offered the rates (per months)
as shown against the name of each one of them:-
B
1. N & S Resorts, Rs.6,51,000.00
The Mall, Shimla
2. RA 3 & Co. Rs.4,80,000.00
48/1, The Mall Shimla
C Ashiana Restaurant,
Chhota Shimla.
3. The Pillancle Service Rs.4,75,251.00
Co. Jasmine Villa, Top
Floor, Near CPRI,
D Shimla-1.
4. Mahavir & Co. Rs.4,11,000.00
Lower Bazar, Shimla
5. Ascot Hotels & Resorts Rs.2,75,000.00
Ltd.
E As per the aforesaid affidavit, as well as the aforesaid statement
of offers and also as per the comparative statement of tenders
filed as Annexure R-2/B to the aforesaid affidavit, it clearly
transpires that M/s. N&S Resorts, The Mall, Shimla has offered
the highest rate of Rs.6,51,000/- per month. The Committee
F constituted by the Corporation, as is evidently clear from the perusal
of Annexure R-2/B, has also recommended that the offer of M/s
N&S, The Mall Shimla may be accepted.
In our order dated 24th May, 2005 we had clearly recounted that
with respect to the same property H.P. Tourism Development
G Corporation had been paying the annual lease money of
Rs.2,86,992/- which actually worked out to Rs.23,916/- which is
presently being paid by H.P. Tourism Development Corporation,
the aforesaid M/s N&S Resorts has now offered the monthly
lease money of Rs.6,51,000/- , almost twenty eight-twenty nine
times of what is being paid by HPTDC. We have no doubt in our
H minds that the aforesaid offer by PTDC. We have no doubt in our
STATE OF HIMACHAL PRADESH v. RAVINDER KUMAR 765
SANKHAYAN (DEAD) AND ORS. [A.M. KHANWILKAR, J.]
minds that the aforesaid offer by M/s. N&S Resorts is in best A
public interest. We are also convinced that H.P. Tourism
Development Corporation did not have any legal, contractual or
statutory right to continue occupying the premises in question for
any indefinite period.
Apart from the fact that the HPTDC does not have any B
contractual or statutory right to continue occupying the premises
in question for any indefinite period, merely because the HPTDC
is a Government owned Corporation, does not mean that, in law, it
should have any preferential right of holding on to the occupation
of the property despite it paying a very meager amount as lease
money. Related to this issue is also the question of pure commercial C
nature of the property. The property in question is a Restaurant,
situated at perhaps the most prime location of Shimla town. The
Restaurant is to be run on pure commercial lines and has to serve
the best public interest. Therefore, viewed from every angle, it
cannot be said that merely because the HPTDC is a government D
owned Corporation, it should be treated differently than others in
the matter of allotment of property on lease. We feel that in such
like matters whichever party pays the highest price should be
held entitled to the grant of lease.
It may also be worthwhile to recount that at one stage, we had E
an occasion to go through the accounts of HPTDC for the last
few years and we found that in every year the HPTDC has been
incurring losses, year after year, as far as the running of this
particular Restaurant in question is concerned. Not only that,
actually at one stage the HPTDC was in such a precarious position
that it had not even paid the arrears of rent to the Corporation for F
almost a decade or so. In this background, therefore, burdening
the HPTDC with the running of this restaurant and at the same
time depriving the Municipal Corporation of its legitimate right of
leasing out the property for the highest available rent, would be
against the principles of natural justice. G
In the best interest of the Corporation as well as in best public
interest, therefore, we approve of the recommendation of the
Committee constituted by the Corporation and direct the
Corporation to lease out the premises in question in favour of the
highest bidder. All the consequences accordingly shall also follow H
766 SUPREME COURT REPORTS [2018] 3 S.C.R.
A including the consequence of H.P. Tourism Development
Corporation being asked to vacate the premises without any loss
of time. Actually from today onwards for whatever period the
H.P. Tourism Development Corporation continues to remain in
occupation of the premises, it shall be its obligation to pay to the
Municipal Corporation the monthly lease amount at the rate as
B
has now been offered by M/s N&S Resorts for the period that it
remains in occupation.
We also wish to observe and direct that the Municipal
Corporation, Shimla shall ensure, before leasing out the property
to M/s. N&S Resorts, that the interests of the Corporation are
C fully secured and protected in so far as ensuring the payment of
the lease money to the Corporation by M/s. N&S Resorts is
concerned. It may, therefore, insist on receiving advance payment
from the aforesaid party or security or taking such other steps.
The purpose, of course, is to ensure that the lease money being
D offered by the aforesaid party is paid to the Corporation regularly
and without any delay.
List after three months. On the next date, the Commissioner
shall file his latest affidavit giving us the status report in compliance
to the aforesaid directions.
E CMP NO.1341 of 2005
All the parties in this petition may file reply to this application in
four weeks.”
6. Even this interim order has been assailed before this Court by
F way of Civil Appeal No.3392 of 2006 by the State and by way of Civil
Appeal No.3394 of 2006 by HPTDC. During the pendency of these
appeals, the operation of the impugned judgment passed by the High
Court has been stayed by this Court.
7. We have heard Mr. J.S. Attri, learned senior counsel appearing
for the State of Himachal Pradesh and Mr. Varinder Kumar Sharma
G
and Ms. Tarannum Cheema, learned counsels appearing for the
respondents.
8. After perusing the reliefs claimed in the writ petition, purportedly
public interest litigation and the application for interim relief filed by the
writ petitioner, it is perceptible that the interim order passed on 24th May,
H
STATE OF HIMACHAL PRADESH v. RAVINDER KUMAR 767
SANKHAYAN (DEAD) AND ORS. [A.M. KHANWILKAR, J.]
2005, transcends beyond the relief claimed by the writ petitioner and A
more so, is a mandatory order passed at an interlocutory stage without
recording any just and tangible reasons therefor. We say so because the
High Court has not even adverted to the efficacy of the subsisting contract
between the Municipal Corporation and HPTDC. It was nobody’s case
that HPTDC was in unauthorized occupation of the subject properties.
B
At best, the High Court felt that the agreed lease rent payable by HPTDC
in respect of subject properties was on the lower side, which inevitably
progenerated financial loss to the Municipal Corporation. Before
recording such a finding, it was necessary for the High Court to first
authoritatively hold that HPTDC was not legally entitled to remain in
occupation of the subject premises. C
9. Notably, the contract between the Municipal Corporation and
HPTDC or the rental policy of the State, as applicable to the Municipal
Corporation, has not been challenged much less quashed by the High
Court. Even the decision of the Municipal Corporation recorded in its
meeting held on 28th March, 2005, has neither been challenged nor been D
quashed by the High Court. The said resolution records as under:
“The following decisions were taken:-
1. It has been agreed that HPTDC will pay 10% increase in the
rent after every three years as per policy. The enhancement will
be applicable and shall be calculated w.e.f. 1.11.1990 as the rent E
of Ashiana Restaurant was fixed at Rs.13,500/- vide Govt. order
dated 24.11.1987, accordingly the first increase of 10% will be
due w.e.f. 1.11.1990.
2. HPTDC also agreed to enhance the rent as per policy of the
Municipal Corporation from time to time in future. F
The decisions taken in the meeting were also discussed with the
MD, HPTDC, Shimla, who also agreed and gave his consent to
settle/enhance the rent as per policy of the Municipal Corporation,
Shimla.”
G
10. It is unfathomable as to how the High Court could have passed
the order dated 24th May, 2005, to straightway direct the Municipal
Corporation to issue tender notice. There is no indication in the order
passed by the High Court on 24th May, 2005, of having quashed the
subsisting contract between Municipal Corporation and HPTDC. As
H
768 SUPREME COURT REPORTS [2018] 3 S.C.R.
A aforesaid, without deciding on the issue of validity of the subsisting
contractual terms and conditions between the Municipal Corporation
and HPTDC, the High Court could not and should not have ventured to
pass the order, such as dated 24th May, 2005.
11. The order dated 5th July, 2005 is only a consequential order
B which must, therefore, meet the same fate. We hold that the interim
orders passed by the High Court were in complete disregard of the
scope of judicial review. Further, a mandatory order has been passed at
an interlocutory stage by the High Court without even bothering to
examine the efficacy of the subsisting contractual obligations of the
Municipal Corporation and HPTDC. It is also in complete disregard of
C Section 157 of the Himachal Pradesh Municipal Corporation Act, 1994,
which mandates the procedure for grant of lease. First, the proposal
should be recommended by the Municipal Corporation; and second, the
agreement can be executed by the Municipal Corporation only after
grant of prior sanction by the Government for leasing out the property. It
D is not necessary for us to examine the stand of the State that the Municipal
Corporation can moot a proposal for grant of sanction for leasing out,
only in respect of the property owned by the Corporation.
12. Suffice it to observe that the writ petitioner had not even prayed
for quashing of the subsisting contract between the Municipal Corporation
E and HPTDC in respect of the subject properties. The gravamen of the
reliefs claimed in the writ petition is to direct the Municipal Corporation
to lease out the subject premises on the basis of the prevailing market
rent. Such relief could be entertained only after the subject premises
were to be vacated by HPTDC upon expiry or termination of the
subsisting contract between HPTDC and the Municipal Corporation.
F
13. In our opinion, the only relief that could have received the
attention of the High Court was to direct the Municipal Corporation to
recover its outstanding legal dues from various governmental authorities
and individuals, namely, prayer clause (II) of the writ petition. However,
the emphasis in the writ petition in this behalf is only with regard to the
G dues recoverable from HPTDC in respect of the subject premises.
Assuming that there are outstanding dues payable by HPTDC to the
Municipal Corporation, that matter could be resolved with the intervention
of the State. In that, if HPTDC is financially incapable of settling the
claim/demand of the Municipal Corporation, the State may have to
H
STATE OF HIMACHAL PRADESH v. RAVINDER KUMAR 769
SANKHAYAN (DEAD) AND ORS. [A.M. KHANWILKAR, J.]
provide financial assistance to HPTDC to the extent necessary, failing A
which the Municipal Corporation will be left with no other option but to
take recourse to statutory remedies for recovery of its dues from HPTDC
in relation to the subject premises. Since the State has also come up in
appeal against the decision of the High Court, it must take initiative to
find out a suitable solution in accordance with law, expeditiously and
B
within a reasonable time, failing which it may be open to the Municipal
Corporation to resort to recovery proceedings against HPTDC and
including eviction of HPTDC from the suit premises consequent to
termination of the contract inter partes.
14. In light of these observations, nothing would survive for
consideration in the writ petition as filed before the High Court, which is C
still pending for final decision. As a result, besides setting aside the
impugned judgment and orders dated 24th May, 2005 and 5th July, 2005,
respectively, we are inclined to dispose of the said writ petition with the
aforementioned observations. Thus, the Writ Petition No.555 of 2004,
filed in the High Court of Himachal Pradesh at Shimla, be deemed to D
have been disposed of accordingly.
15. The only other issue that remains to be addressed is about the
amount of earnest money paid by the impleaded respondent N & S
Resorts by way of banker’s cheque dated 27th June, 2005 in the sum of
Rs.10 lakhs. Since the tender process in which the impleaded respondent E
had participated, was subject to the outcome of the pending legal
proceedings, no right would accrue to it in the stated premises except to
get refund of the amount paid as earnest money for participating in the
Court directed tender process. The amount so paid by the impleaded
respondent shall be refunded to it, with interest at the rate of 9% per
annum (equivalent to the bank rate for fixed deposits prevailing at the F
time the deposit was made) from the date of deposit till its realization.
The Municipal Corporation shall forthwith refund such amount to the
impleaded respondent N & S Resorts but not later than twelve weeks
from today, failing which the Municipal Corporation shall be liable to pay
interest at the rate of 12% per annum from the date of deposit till the G
date of its realization.
16. We, accordingly, allow these appeals in the above terms, with
no order as to costs.
Divya Pandey Appeals allowed. H
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