TaxTMI 
TaxTMI 
2003 (12) TMI 657
X X X X Extracts X X X X
X X X X Extracts X X X X
....te Hotel, M.I. Road, Jaipur and the other was a plot of land situated near Khasa Kothi known as the site of Food Craft Institute building on M.I. Road, Jaipur. In the present case we are concerned with the first property only. Respondent No. 1 issued advertisement for auction of Dr. Helligs Bungalow, which was scheduled to be held, according to the auction notification on 21.12.1994. In the advertisement the property was described as free hold, ceiling free, vacant, crest jewel property known as Dr. Helligs Bungalow (10,400 sq. yards). The permitted use of the property was shown as hotel/commercial complex/hotel cum-commercial complex. The terms and conditions for the auction were also provided in the advertisement. Condition Nos. 7,8,9,10,12 and 13 relate to the controversies involved in this litigation and are reproduced hereunder: "7. Land measuring 1,400 sq. mtr. shall be auctioned with the condition that the successful bidder shall have to surrender a strip of land measuring 6.2 sq. mtr. for the road widening/parking of commercial vehicle free of charges. He will be given the benefit in terms of FAR, which is calculated on the basis of original plot size. 8. Other parameters....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, Rajsthan, Jaipur (the amount of Rs. 20.00 lacs deposited as earnest money shall be allowed to be adjusted against this deposit of 10%). ii) 15% amount of the final bid will have to be deposited within 15 days from the date of acceptance, letter sent to the successful bidder by the Government of Rajathan. iii) 75% amount of the final bid will have to be deposited by successful bidder within 60 days of the notice for deposition of the full and final amount of the bid amount which the party shall be informed by the Government of Rajasthan. Failure to deposit it the aforesaid amount at any state, i.e., (I), (ii) and (iii) above will result in forfeiture of the amount already deposited by the successful bidder and hence cancellation of the bid." The payment was not made as per schedule given above. The entire sale consideration amounting to Rs. 19,56,76,000/- was paid on 16.5.1995. As there was a delay in making the payment as per schedule the appellants accepted their liability to pay interest for the delayed payment. A sum of Rs. 30,01,273/- towards interest for delayed payment was made. Last installment of Rs. 83,562.72 P. towards the amount of interest was paid by demand draf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct for exemption was processed. On 11.8.1997, the competent authority granted exemption to the appellants on certain conditions. It was stipulated that the exemption was being granted subject to the terms and conditions stated in the conveyance deed dated 7.1.1997 and that it could be used only for the purposes set out in the conveyance deed. It was also stipulated that for any construction on the land, plans will have to be submitted for sanction to the JMC and all the standards regarding construction shall be applicable as per the norms of the JMC. Another condition put was that the land would not be transferred or conveyed in any manner to any one without prior permission of the State Government except offering it as security to the financial institutions for raising loan. As this clause has given rise to the controversy on which lengthy arguments have been addressed, the same is reproduced below for reference: "5) That the sale, gift or any transfer of the plot will not be closed without prior approval of the State Government. But mortgaging the property to financial institution for taking loan without parting with the possession the State Government will have objection." On ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ances. On 22.10.1997 the Chief Secretary wrote to the Urban Development and Housing Department recommending the case of the appellants for grant of FAR 2.0 instead of FAR 1.75 in compliance with the conditions of the auction. As no decision was taken, the appellants filed S.B.Civil Writ Petition No. 195/98 against the State of Rajasthan, Jaipur Development Authority, Jaipur Municipal Corporation amongst others, who were officers of the State Government, claiming the following reliefs. "In the premises aforesaid the writ petition of the petitioner may kindly be allowed with costs and by an appropriate writ, order or direction, the Hon'ble Court may be pleased to: (a) declare that on account of the reasons set out herein and the order dated 9th September, 1997 passed by the Municipal Corporation, referring to approve maps upto 2.0 FAR the contract of sale of the property described in this petition vide sale deed dated 7th Jan., 1997 stands frustrated or has become impossible of performance or invalid rendering the sale deed dated 7th Jan., 1997 void. (b) declare that the Regulations of 1996 were not applicable to the petitioner and the same cannot be enforced against the petitione....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd the consequent sale deed dated 7.1.1997 were null and void having no legal sanctity. The contract was frustrated. All consequent actions taken by either of the parties pursuant to the auction and the sale deed were invalidated and the appellants were declared entitled to be restituted to the original position as it existed prior to the date of auction and execution of the sale deed. Consequently, the respondents were directed to refund to the appellants, the payments received by the respective respondents, pursuant to any term of the auction dated 21.12.1994 which included the entire sale considerations as mentioned in the sale deed dated 7.1.1997 along with all other payments made to the respondents by the appellants towards stamp duty, registration charges, land and building taxes etc. with interest @ 18% per annum calculated from the date of receipt of such amount by the respective respondents till the date of actual refund to the appellants. It was also directed that the JMC shall refund all payments made by the appellants towards building map approval charges, additional constructed area charges, licence fee, inspection charges, etc. along with interest @ 18% per annum from....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to briefly refer to the question regarding the maintainability of the writ petition in contractual matters. Challenging the finding recorded by the Division Bench regarding the maintainability of the writ petition it was contended on behalf of the appellants that there is no absolute bar to the maintainability of the writ petition in contractual matters. Maintainability or otherwise in contractual matters is but an aspect of the existence of equally efficacious alternative remedy. The power to entertain a writ petition under Article 226 even in contractual matters is plenary but actual exercise of jurisdiction in a particular case would be discretionary and such discretion in turn is exercisable on sound judicial principles. This Court in appropriate cases has entertained the writ petitions in contractual matters and interfered to grant the relief deemed fit keeping in view the facts of the case. No cause can be adjudicated without reference to some facts and mere enquiry into facts, as those emerging from a limited set of admitted facts does not in any manner act as a bar to the exercise of writ jurisdiction. In the present case the entire case centers around roughly 25 undispute....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rse. At the present stage of the proceedings the alternative remedy of filing the suit would not be efficacious. This Court in a number of cases, even after recording a finding that the writ petition was not maintainable and that the High Court ought not to have entertained it, has declined to interfere on the ground of nonmaintainability where it is found, that the matter has been pending for long and/or the High Court has already entertained the writ petition [albeit wrongly] and/or when to send the writ petitioner back would cause grave delay or harassment. In such cases this Court has proceeded to decide the dispute on merits. For this, we may refer to a recent decision of this Court in Kerala State Electricity Board & Anr. Vs. Kurien E. Kalathil & Ors., 2000 (6) SCC 293, in which this Court observed: "12. Ordinarily, in view of the aforesaid conclusions on the first contention, we would have allowed the appeal and directed dismissal of the writ petition (OP No. 283 of 1995) without examining the second contention. However, despite holding that the disputes in question could not be agitated in a writ petition and thus the High Court wrongly assumed jurisdiction in the facts of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch misrepresentation by the Government in the auction notice. The contract could not be said to have been made by the consent of the parties under Section 10 and became voidable at the option of the appellants under Section 19 of the Indian Contract Act. That the contract was frustrated and incapable of being performed in terms of Section 56 of the Indian Contract Act. That the appellants have almost come to ruination because of the action of the respondents in as much as they have invested huge sums of money after borrowing from the Bank at high rates of interest without any return for the last so many years. As against this the case put forth on behalf of the respondents is that there was no misrepresentation as alleged. On the date on which the contract was entered into, i.e., the date on which auction went in favour of the appellantss there was no misrepresentation even as alleged by the appellants since the FAR on that date was 2.0. The FAR was changed by virtue of change in law, which could not have been envisaged at the time the contract was entered into. The delay in the execution of the conveyance deed was pre-dominantly on account of causes attributable to the appellants.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that date was 2.0. The FAR was changed by virtue of change in the law. As per term No. 5 of the auction notice the successful bidder was required to deposit 10% of the final bid on the spot in cash or through Demand Draft in favour of the Director of Estate, Rajsthan. 15% of the amount of the final bid was required to be deposited within 15 days from the date of acceptance and the remaining 75% of the amount of the final bid was to be deposited by successful bidder within 60 days of the notice for deposit of the said bid amount on being informed by the Respondent. Failure to deposit the amount as per the above stipulation could result in forfeiture of the amount already deposited by the successful bidder and result in cancellation of the bid. The appellants did not deposit the amount as per schedule of payment set out in the auction notice. The entire sale consideration amounting to Rs. 19,56,76,000/- was paid on 16.5.1995. A sum of Rs. 30,01,273/- towards interest for delayed payment (to the payment of which the appellants agreed) was also paid. The last payment of Rs. 83,562.72 P. towards amount of interest was made by demand draft dated 26.09.1995. The cost and expenses for regi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a couple of remedies, i.e., to either rescind the contract or seek restitution or to affirm the contract without prejudice to their right to seek damages by way of restitution for the loss caused by the misrepresentation. It is apparent that the appellants did not rescind the contract or seek restitution by way of damages. Instead they affirmed the contract which is clear from the fact that they immediately commenced construction on the land even though the building plans were on FAR 1.75. Affirmation of the contract and proceeding with the construction clearly indicates that the appellants did not rescind the contract nor reserved their right to seek restitution by award of damages; or seek restitution rather they affirmed the contract and went ahead with it. It was then argued that the appellants had to start construction immediately as a very strict stipulation was contained in the auction notice (Condition No. 9). It was also represented in the sale deed that construction work on the plot should be commenced within one year from the date of handing over the possession of the land and the construction of building should be completed within 3 years. The extension beyond 3 years....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... contract voidable at the option of the party whose consent was so caused. The latter may, if he thinks fit, insist that the contract shall be performed and that he shall be put in the position in which he would have been if the representations made had been true. According to Section 2 clause (i), an agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract. It is not necessary for us to record a clear finding whether there was a misrepresentation on the part of the respondents or not. Suffice it to observe that a voidable contract confers the right of election on the party affected to exercise its option to avoid the legal relations created by the contract or to stand by the contract and insist on its performance. However, his election to stand by the contract once exercised would have the effect of ratification of the contract with the knowledge of misrepresentation on the part of the other party and that would extinguish its power of avoidance. In the very nature of the right conferred on the party affected, the law expects it to exercise its option promptly and communicate the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s as to the applicability of Urban Ceiling Law and FAR as provided by the bye-laws, both being the laws in force in India. Here again, the vitiating effect of alleged mistake shall stand obliterated no sooner it is found that the appellants have, in spite of the so-called mistake being discovered, yet, chosen to stand by the contract, ratifying the same by their conduct and went ahead to exercise the rights which accrued to them under the same contract which they are pleading to be vitiated by the mistake. The doctrine of frustration, as applicable in India in contracts stands, codified in Section 56 of the Contract Act. It provides : 56. An agreement to do an act impossible in itself is void. A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere is a clear distinction between a completed conveyance and an executory contract, and events which discharge a contract do not invalidate a concluded transfer". In the auction notice it was represented that the land in question was freehold as well as ceiling free. The Ceiling Act does not apply to the Government lands. It is admitted before us, that the government was aware (though it may have had the intention right from the beginning to exempt the land from the Ceiling Act) that the land which was being auctioned was not exempted from ceiling and the exemption could only be granted after the transfer of the land to a private person. The appellants received a notice under Section 38 of the Ceiling Act informing that they own excess land in Jaipur City as prescribed under Section 4 of the Urban Land Ceiling Act and had not submitted their return under Section 6 read with Section 15 within the prescribed period. Appellants were directed to appear before the competent authority on 17.04.1997 to explain why action should not be taken against them under Section 38 of the Act. Soon after the receipt of the said letter, the appellants applied for exemption under the Act which was gra....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... abated. Reference may be made to a decision of this Court in Pandit Madan Swaroop Shrotiya Public Charitable Trust vs, State of U.P. & Others, 2000 (6) SCC 325. So far as the order dated 11th August, 1997 under the Ceiling Act is concerned, the stand taken by the State through out has been that it is not going to enforce any of those conditions. It was so submitted by the learned Advocate General while appearing for the State of Rajasthan before the High Court. The aforesaid fact is admitted by the appellants themselves in their memo of appeal [Ground (u)]. Even today, the stand of the State is that it is not going to enforce any of those conditions as imposed under the exemption order. This apart the process for obtaining exemption from land ceiling did not in any manner affect the appellants for the reason that their plans were sanctioned even before the question was raised as to the application of the Urban Land Ceiling Act to the property. The appellants as per their letter, couched as representation, dated 10.10.1997 had started digging for the basement in February, 1997 immediately upon the sanction of building plans. The process of construction began immediately. Thus, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e enforceable even in violation of law which may be in force. FAR was a matter of law and the FAR was fixed either by the JDA or JMC in exercise of its statutory powers. The contract when entered into, the FAR approved by JDA was 2 and its subsequent reduction in 1996 to 1.75 would not invalidate the contract or by treating as a breach of the contract nor can it be treated by the Government. In reply to the contention raised on behalf of the State Government that the appellants having failed to rescind the contract immediately on coming to know of the breach or misrepresentation by the government, it could not exercise their right of rescinding the contract under Section 39 or avoiding under Section 19 of the Contract Act later on, it was submitted on behalf of the appellants that this contention of the State Government was devoid of any force. According to the appellants the legal right to avoid a contract or rescind the contract can be waived but there is no principle of law which requires the exercise of the right of repudiation of the contract to be done immediately on coming to know about the misrepresentation or breach of contract. It was open to the aggrieved party to persu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from out of only the prize money deposited, the State was well within its rights to repudiate not only due to continuing wrongs or defaults but taking into account the past conduct and violations also despite the fact that those draws have been completed by declaration or disbursement of prize amounts by the State from out of its own funds. The conclusion to the contrary that the State has committed breach of the contract is nothing but sheer perversity and contradiction in terms." In our view, this decision has no application to the facts of the present case. In the said case the appellants therein was appointed as "organising agent" for lotteries of the Respondent State. Subsequently, disputes arose which led to termination of the agency by the State. Appellants therein got an arbitrator appointed under Section 8 of the Arbitration Act, 1940. Claims and counter-claims were filed and evidence adduced by the parties before the Arbitrator. Arbitrator made its award determining the amount payable by the State to the appellants at Rs. 37,75,00,000/- and the amount payable by the appellants to the State by way of counter-claim at Rs. 4,61,35,242/-. District Judge made the award the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere continuing with the defaults in an executory contract. The principle laid down in the said case would not be applicable to the facts of the present case. Reliance was also placed on M/s Motilal Padampat Sugar Mills Co.Ltd. vs. State of U.P. & Others [1979 (2) SCC 409]. In this case the point which fell for consideration was whether the assurance given by respondent No.4 (Chief Secretary or advisor to the Government) on behalf of the State of U.P. that the appellants would be exempt from payment of sales tax for a period of three years from the date of commencement of production could be enforced against the State government. On behalf of the respondent-State, plea of waiver by the appellants were raised. The Court rejected this plea of waiver. It was held that waiver is essentially a question of fact and it must be properly pleaded and proved which the State had failed to do. It was also held that waiver means abandonment of a right and it may be either express or implied from conduct, but its basic requirement is that it must be 'an intentional act with knowledge'. On facts it was found that there was no waiver and the court observed: "Now in the present case there is nothin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tation as to the character of the document and fraudulent misrepresentation as to the contents thereof it was argued that in the case of former the transaction is void while in the case of latter it is merely voidable. It was also urged that the appellants could avoid the transaction at any time. In our view, this judgment is of no assistance to the appellants as on facts we have found that the default committed by the respondent-State, if any, stood condoned by the appellants. In either case, we find that the appellants are not entitled to any relief in the realm of the law of contracts. In spite of having acquired knowledge of the true facts assuming that there was any mistake or misrepresentation to begin with and having learnt that the title which was sought to be conferred on them by the respondents was not such full title as they had contemplated it to be, they proceeded to have the sale deed executed and registered in their favour, seeking extensions of time and paying interest for the period of delay in payment. The contract stood accomplished into a demise and the transaction ended. It is writ large that the appellants had elected to stand by the contract by digging the la....