Orissa Industrial Infrastructure Development Corporation v. MESCO Kalinga Steel Ltd. and Ors. - (Supreme Court) (14 Feb 2017)

Renewal of lease is a privilege and if a tenant wishes to claim privilege, he must do so strictly within the time limited for the purpose

MANU/SC/0154/2017

Property

Appeals have been preferred by Orissa Industrial Infrastructure Development Corporation ('IDCO') and also by Jindal Stainless Ltd. aggrieved by impugned judgment passed by High Court of Orissa, thereby directing IDCO to lease out 825.68 acres of land and to enter into a lease agreement with M/s. Mesco Kalinga Steel Ltd. High Court has held that since IDCO has not complied with Clause 18 contained in the policy decision dated 25th January, 1995 as 3 months' notice has not been given, it was not open to resume possession otherwise than in due course of law.

Allotment letter itself contemplated the execution of the lease deed as a condition precedent. As per Section 33(1) and 33(3) of Orissa Industrial Infrastructure Development Corporation Act, 1980 it was necessary to execute lease deed as the Corporation could dispose of land only in manner as provided in law and otherwise also it was so stipulated in the Government order itself. Thus, due to neglect of Mesco, transaction became void and it was not necessary to serve three months' notice to remedy breach. However, in facts of case for several years the breach was not remedied after communication dated 27th October, 1997 till July, 2003.

In instant case, it is apparent that possession had been enjoyed by Mesco without execution of the lease deed. Conduct of IDCO was also not diligent. Notice was served in year 1997 for resumption but thereafter up to July, 2003 nothing was done by either 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 1997 and 2003 except a vague submission was made that it was mired in certain litigations which fact has not been even pleaded. Thus, no explanation, good, bad or otherwise has been placed on record for inaction on the part of Mesco. 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.

IDCO is a statutory authority and it can act only on 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 would not be permissible to hold that relationship of lessor and lessee came into being.

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 IDCO 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 of Mesco itself. 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 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 the same principle to instant case, it is apparent that the conduct of Mesco was unfair and unpardonable. Conduct disentitled it from indulgence by Court in any manner. No equitable consideration was available with Mesco to invoke the writ jurisdiction for the reliefs sought. Relief granted is not permissible as per law.

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 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 Court in Raj Kishore (Dead) by L.Rs. v. Prem Singh and Ors. It is apparent that when several acts are to be done in a stated manner and in stipulated time and none of them has been performed, as in 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.

Submission on behalf of Mesco that IDCO is bound by promissory estoppels is unworthy of acceptance. It is not the case of Mesco that there was any assurance given to it on basis of which it has acted upon. 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 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 lease deed, asked Mesco to do anything. In Mumbai International Airport Private Ltd. v. Golden Chariot Airport and Anr., it was held that even if oral assurance of execution of licence is proved, such assurance cannot bind the statutory body. In facts of the instant case, 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, High Court could not have issued the impugned direction.

In instant case, on basis of MOU or allotment letter, no right has accrued to Mesco, and it having failed to perform its mandatory part, MOU/offer became void and unenforceable. IDCO was fully justified in resuming the land. High Court mis-adventured 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 and a writ is not issued 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. Resultantly, impugned order passed by High Court is set aside.

Relevant : Raj Kishore (Dead) by L.Rs. v. Prem Singh and Ors. MANU/SC/1046/2010: (2011) 1 SCC 657, Mumbai International Airport Private Ltd. v. Golden Chariot Airport and Anr. MANU/SC/0746/2010: (2010) 10 SCC 422

Tags : LAND RESUMPTION DIRECTION VALIDITY