Introduction:
The interplay between writ jurisdiction of high courts and private contracts involving the State or the instrumentalities of the State becomes complex when a party to the contract seeks a contractual relief from the high courts by way of a writ petition. The nuances are further enhanced based on the specific facts and circumstances of the case, the nature of parties involved, the nature of rights and obligations involved, and so on.
A question of similar tenor is whether the writ jurisdiction of the high courts can be exercised to amend the terms of a subsisting lease deed, validly registered under the provisions of the Indian Registration Act, 1908 (“Registration Act”). This question arose before the Hon’ble Supreme Court of India (“Supreme Court”) in the case of Gwalior Development Authority and Anr. v. Bhanu Pratap Singh[1] (“GDA v. Bhanu Pratap”). The division bench of the Supreme Court, by way of a recent judgment dated April 19, 2023, has answered in the negative.
In this article, we have analysed the position of the law, governing the above subject matter, through the lens of GDA v. Bhanu Pratap.
Facts:
Gwalior Development Authority (“GDA”) invited bids for grant of leases of different plots, including a plot with the area of land admeasuring 27,887.50 square meters (“Proposed Plot”),under its transport city scheme. Mr. Bhanu Pratap Singh (“Bhanu Pratap”), being the highest bidder of the Proposed Plot, was issued a letter of allotment by the GDA, whereby he was directed to deposit the entire bid amount before October 31, 1999, in lieu of the said allotment. The letter of allotment, among others, contained a rider that failing to deposit the bid amount in terms thereof would result in forfeiture of the security deposit paid by the winner of the bid (Bhanu Pratap in this case). Bhanu Pratap failed to deposit the bid amount in terms of the conditions laid down in the bid document and the letter of allotment, and only managed to deposit the entire bid amount on August 25, 2005, instead of October 31, 1999.
It may be noted that the GDA did not take any action for the delay in payment of the bid amount, either by cancelling the allotment or forfeiting the security amount deposited by Bhanu Pratap. Instead, on March 29, 2006, a lease deed was executed between GDA and Bhanu Pratap (“Lease Deed”), without demur, in respect of a reduced plot admeasuring 18,262.89 square meters (“Leased Plot”) as opposed to the entire Proposed Plot.Pursuant to the execution, the Lease Deed was duly registered under the provisions of Section 17 of the Registration Act.
Three years passed when Bhanu Pratap approached the High Court of Madhya Pradesh at Gwalior in 2009 under Article 226 of the Constitution of India (“Constitution”), seeking a writ of mandamus against GDA to execute the lease deed for the remaining area of 9,625.50 square meters, in addition to the Lease Deed already executed, as was promised under the bid document.
The High Court allowed the said writ petition and directed (i) GDA to execute the lease deed in favor of Bhanu Pratap for the remaining plot admeasuring 9,625.50 square meters; and (ii) Bhanu Pratap to make payment of interest, as may be determined by the GDA, on the delayed payment of instalment amounts.[2]
The above order (“Impugned Order”) was challenged by the GDA before the Supreme Court by way of a Civil Appeal inter alia on the ground that the auction proceedings in relation to the Proposed Plot culminated with the execution of the Lease Deed and the transaction attained finality upon execution of the Lease Deed since ‘…the lease deed was duly executed between the parties without demur, and with the consent of the parties…’.[3]
GDA’s primary submissions before the Supreme Court were that (i) the execution of the Lease Deed without demur was a pure business/ commercial transaction entered into by the parties with open eyesand consequently, there was no justification available to invoke the jurisdiction under Article 226 of the Constitutionwith a prayer to execute another lease deed for the remaining area,and(ii) a direction to execute the lease deed for the remaining area of land, i.e. 9625.50 sq. meters, without any consideration amounts to amendment in the instrument, which was duly registered and an amendment in the instrument was not permissible in law even under the jurisdiction of the High Court under Article 226 of the Constitution.[4]
In defence, Bhanu Pratap submitted that once the GDA had floated a tender for the Proposed Plot, his bid was accepted by the GDA and the last instalment was accepted on August 25, 2005, there was no justification available with the GDA to segregate and sever the land which was put to auction into two parcels. Per Bhanu Pratap, the very execution of the Lease Deed excluding the remaining area of the Proposed Plot, and not taking any further action for allotment of the said remaining area had compelled him to invoke the jurisdiction of the High Court by filing a petition under Article 226 of the Constitution and GDA being a public Authority and a State within the meaning of Article 12 of the Constitution, is always expected to act fairly even in business/ commercial transactions.[5]
Analysis and Conclusion:
The Supreme Court observed that there was no reasonable justification for the GDA to extend such undue indulgence to Bhanu Pratap while accepting the bid amount up to August 25, 2005, which ought to have been deposited by October 31, 1999. The Supreme Court opined that this was not only violative of Article 14 of the Constitution, but also a clear abuse of discretion by GDA. Notwithstanding the above, the Supreme Court observed that whenever there is such a commercial transaction, it is to be examined purely on commercial principles as envisaged under the contract.
In doing so, the Supreme Court resonated with the submissions made by the GDA and opined that the Lease Deed for land admeasuring 18262.89 sq. meters was executed between the parties and registered under the Registration Act, without demur, on March 29, 2006, and the transaction stood concluded after the execution thereof. The Supreme Court further said that since the Lease Deed was to be compulsorily registered under Section 17 of the Registration Act, 1908, it was nowhere open to be altered or amended even by the High Court in exercise of its jurisdiction under Article 226 of the Constitution.[6]
In other words, the Supreme Court is of the view that once a lease transaction is concluded by execution of a lease deed and the said lease deed is duly registered under law, the transaction attains finality, and it is not open to either party to amend the commercial understanding of the transaction by invoking writ jurisdiction of the constitutional courts.
The observations made by the Supreme Court in the instant case are in consonance with the precedents governing this subject matter. Illustratively, in the case of State of Gujarat and Ors. v. Meghji Pethraj Shah Charitable Trust and Ors.[7],it has been unequivocally held by the Supreme Court that if the matter is governed by a contract, a writ petition is not maintainable since it is a public law remedy and is not available in the field of private law. Where there is an agreement in between private parties or a private party and the State, and the agreement is non-statutory in nature, no relief is available under Article 226 of the Constitution.
Similarly, Delhi High Court, in its recent judgment dated April 10, 2023, in MEP Infrastructure Developers Ltd. v. South Delhi Municipal Corporation and Ors.[8], had concurred with this position and opined thatin the case of contracts entered into between the state and an individual/ entity pursuant to the floating of tenders, the mutual rights and liabilities of the parties are governed by the terms of the contracts and the laws relating to the contracts. There is no compulsion on anyone to enter into these contracts and it is voluntary on both sides.Therefore,no relief can be entertained under Article 226 of the Constitution.
In view of the foregoing, it is an accepted position that the courts must not ordinarily exercise their jurisdiction under Article 226 of the Constitution in contractual matters between the State and private parties or solely between private parties. Having said that, it is important to bear in mind that this position is not set in stone and there may be exceptions that warrant invocation of writ jurisdiction in contractual matters as well. Illustratively, when instrumentalities of the State act completely contrary to the parameters of Article 14 of the Constitution or the action of the State is arbitrary and discriminatory, then the writ courts may interfere by exercising jurisdiction under Article 226 of the Constitution. In the absence of such exceptional circumstances, the commercial wisdom of the parties in a contract is supreme and cannot be interfered or modified with.
For further information, please contact:
Ashish Jain, Partner, Cyril Amarchand Mangaldas
ashish.jain@cyrilshroff.com
[1] Gwalior Development Authority and Anr. v. Bhanu Pratap Singh, 2023 SCC Online SC 450.
[2] Judgment dated April 21, 2011, delivered by High Court of Madhya Pradesh at Gwalior in Writ Petition No. 2792 of 2009.
[3] Para 10 read with Para 11, GDA v. Bhanu Pratap.
[4] Ibid.
[5] Para 14, GDA v. Bhanu Pratap.
[6] Para 18. GDA v. Bhanu Pratap.
[7] 1994 (3) SCC 552.
[8] 2023 SCC Online Del 2088.
