HONOURABLE SRI JUSTICE P. NAVEEN RAO WRIT PETITION Nos.23248 of 2013, 24117 of 2013, 33041 of 2013 and 24949 of 2014 Date: 08.10.2014 W.P.No.23248 of 2013 Between :
Nimmakanti Rama Lingaiah, s/o. Kondaiah, Aged about 51 years, SC (Madiga), r/o. 16/1172, New Door No.16/1036/1, Masapeta, Kadapa Town and District, Andhra Pradesh … Petitioner and The District Collector, Kadapa, Kadapa District, Andhra Pradesh and another.
… Respondents The Court made the following:
HONOURABLE SRI JUSTICE P. NAVEEN RAO WRIT PETITION Nos.23248 of 2013, 24117 of 2013, 33041 of 2013 and 24949 of 2014 COMMON ORDER:
These writ petitions concern renewal of lease to nine shops located in the premises of Rajiv Gandhi Institute of Medical Sciences, Kadapa, Kadapa District and disposed of by common order.
2. Auctions were conducted on 11.06.2008 to let out 10 shops located in shopping complex of Rajiv Gandhi Institute of Medical Sciences, Kadapa (RIMS). The terms notified include payment of fixed rent of Rs.1500/- per shop by persons belonging to open category and Rs.1000/- by persons belonging to SC/ST and physically handicapped. Auction notice also prescribed payment of goodwill amount, which was non-refundable. For open category a minimum goodwill prescribed was Rs.50,000/- and Rs.30,000/- for the persons belonging to SC/ST and physically handicapped. The successful bidder is also required to pay in advance six months rent and caution deposit. In the auctions conducted on 11.06.2008, the successful bidders quoted a higher amount of non-refundable goodwill than what is prescribed. Accordingly, the successful bidders entered into lease agreement with RIMS. The lease agreement envisages five years as lease period. This lease can be renewed for further period of three years at the discretion of the competent authority subject to lessee paying the rentals and other charges regularly.
3. In May, 2013, the competent authority issued notices to the lessees to vacate the premises soon after they complete five years of tenure by clearing all the dues payable by them. Petitioners in W.P.No.33041 of 2013 instituted W.P.No.19771 of 2013 challenging the said notice. Petitioners have submitted a representation dated 17.06.2013 seeking renewal of lease. Writ Petition No.19771 of 2013 was disposed of by order dated 10.07.2013, directing the competent authority to consider the representation for renewal and pass appropriate orders. On 30.07.2013, another notice was issued to vacate the premises. On 07.08.2013, one more notice was issued. This time, the lessees were asked to attend before the Director of RIMS personally on 10.08.2013 to represent their grievances. Another notice was issued on 14.08.2013, directing the lessees to produce documentary proof of payment of rents regularly by appearing in person on 20.08.2013. Petitioners appeared and produced relevant material. On 04.11.2013, further notice was issued directing the petitioners to vacate the shops by 20.11.2013. It was stated that even though sufficient opportunity was afforded to the lessees, they have not produced documentary proof of payment of rents with penalty within a stipulated period and, therefore, they are held as defaulters. The notice also refers to orders passed by this Court in W.P.No.23248 of 2013, wherein this Court permitted to conduct auctions, but not to finalize the auctions for a period of two years. Liberty was granted to the petitioner to participate in the said auctions.
4. Challenging notice, dated 04.11.2013, W.P.No. 33041 of 2013 is instituted. By order dated 19.11.2013, this Court granted interim suspension of the said notice subject to the condition that the petitioners should clear all the arrears of amount due within a period of one week from the date of notifying the amounts of arrears due by the RIMS. On 13.12.2013 notice was issued in compliance of the interim orders dated 19.11.2013 notifying the amounts due from them and penalty thereof. On 18.12.2013 amounts were paid. They have also represented for continuation of the lease period. To complete the narration, tender notification was issued on 20.08.2014 notifying the tenders for the purpose of grant of lease to ten shops in the premises of RIMS.
5. Challenging the said tender notification, petitioners in W.P.No.33041 of 2013 instituted W.P.No.24949 of 2014.
6. W.P.No.23249 of 2013 is instituted by the lessee of shop no.2 challenging the notice dated 30.07.2013 directing the petitioner to vacate the shop no.2 on completion of five years of lease period and sought further relief to grant lease for a further period of three years from 10.08.2013. On 08.08.2013, this Court directed by way of interim relief permitting to conduct auctions, but not to finalize the auctions for a period of two weeks. Petitioner was also granted liberty to participate in the auction. By order dated 28.8.2014, this Court directed not to finalize the tender process. The petitioner in W.P.No.23248 of 2013 earlier filed W.P.No.24117 of 2013 seeking to issue writ of mandamus to declare the action of the respondents in not following the G.O.Ms.No.120 Municipal Administration and Urban Development (JI) Department, dated 31.05.2011 and not implementing the orders of the Division Bench of this Court in W.P.No.6354 of 2009 dated 25.08.2009 and consequently to continue the petitioner as lessee of shop No.2.
7. Heard Sri V.R. Reddy Kovvuri, counsel for the petitioners in W.P.Nos.33041 of 2013 and 24949 of 2014, Sri Venkata Raghu Mannepalli, counsel for the petitioner in W.P.No.23248 of 2013 and W.P.No.24117 of 2013 and learned Government Pleader for Medical and Health for the State of Andhra Pradesh for the respondents.
8. Learned counsel for the petitioners Sri V.R.Reddy submitted that at the time of entering into lease agreement with the respondent institution, petitioners were assured of grant of renewal of lease for further period of three years after completion of five years lease period and the renewal has to be granted as a matter of course. Petitioners have paid the lease amounts regularly within a due date specified. Learned counsel further submits that some times the lease amounts were received by the concerned authority by cash and they did not issue acknowledgments of payment of lease amount. Believing the version given by the officers, petitioners did not insist for giving of acknowledgements. Petitioners are not well educated persons and did not have knowledge of compulsorily obtaining the acknowledgements. The alleged arrears relate to the year 2009, earlier to the dates mentioned in the notice dated 13.12.2013 and after, the amounts were paid and there is no dispute about such payment. No demand was made for payment of arrears till 13.12.2013. For no fault of the petitioners it is alleged that petitioners are in default and on that ground refused to grant renewal.
Allegation of non-payment of arrears is invented only to deny renewal of lease to petitioners. Learned counsel further submitted that petitioners have paid huge goodwill amount with fond hope that the lease would be automatically extended for further period of three years. Petitioners would not have paid such huge amount as goodwill amount, which is non refundable, for five years if they were told that the lease would not be extended. Petitioners came from low income group. They are eking out their livelihood on these leased shops and spent huge money when the lease was granted which they could not recoup for the last five years and if the lease is not extended to them, grave prejudice would be caused to them. Learned counsel further contended that though a specific direction was issued by this Court in W.P.No.19771 of 2013 to consider the application submitted by the petitioners for grant of renewal of lease, no orders are passed as directed by this court. Without considering the representation of the petitioners and examining the desirability of granting of lease, going for fresh auction and directing the petitioners to vacate the premises is ex facie illegal. Learned counsel placed heavy reliance on clause-1 of lease agreement. In terms of the said clause, if the leaseholder is not defaulter in payment of lease amount, lessee is entitled for renewal of lease.
9. Learned counsel Sri M.Venkata Raghu Mannepalli for petitioner in W.P.No.23248 of 2013 and W.P.No.24117 of 2013, has adopted the submissions made by the learned counsel Sri V.R.Reddy Kovvuri. He further contended that petitioner is the person belonging to Schedule Caste category and with a great difficulty he secured the lease for one shop and he has paid goodwill of Rs.2,80,000/-, which was beyond his means and being schedule caste, he is entitled to renewal of lease as a matter of course.
10. Learned counsel further contended that Government issued orders in G.O.Ms.No.120, dated 31.05.2011 as a consequence to the judgment rendered by this Court in W.P.No.6354 of 2009 dated 25.08.2009 and batch. The said G.O., envisages renewal of lease period for every three years but not exceeding 25 years. He, therefore, contends that as petitioner has completed only five years of lease period, petitioner is entitled for renewal as a matter of course and not complying the provisions of G.O.Ms.No.120, is illegal.
11. Learned Government Pleader for Medical and Health submitted that clause -1 of lease agreement is enabling provision and it is not automatic that on completion of five years renewal to be granted even if lessee is not in arrears. He further contended that petitioners are defaulters in payment of lease amount and, therefore, even according to clause-1 of the lease agreement, they are not entitled to ask for renewal. He further submitted that many shop holders have sublet the premises without consent of RIMS and such action was contrary to the lease agreement. The lessees have collected huge rent from those persons. The premises is not maintained in hygienic conditions. In violation of the lease agreement, products which are not authorized were sold. Many lease holders have converted the shops into the restaurants. They have also found in one shop lessee selling liquor etc., which is totally prohibited. The shop owners are charging exorbitant amounts on the items sold by them. The patients and their attendants have complained of very high charges and un-hygienic conditions. The conducting of business has been adversely reported in the daily newspapers also. In those circumstances, the 2nd respondent felt it not desirable to grant renewal of lease and has gone for open auction to award fresh leases.
12. To appreciate rival contentions, it is useful to extract the relevant clauses of lease agreement.
1. The term of the lease is for five years. If the lease holder is not a defaulter, the hospital development committee is competent to renew lease for a period of three years at a time on enhancement of rent by 33.1/3%. Defaulter lease holder will not be granted extension of lease.
2. The entire good will amount which was paid to the society by the lease holder will not be paid back even if the lease holder vacates the premises in the midst of lease period or after completion of the lease period.
3. The monthly rent of Rs,.1500/- (Rupees one thousand five hundred only) / Rs.1000/- (Rupees one thousand only) shall be paid on or before 10th of every month by way of demand draft.
8. Lease holder shall not sub-lease or transfer the lease to any other person without the prior permission of the hospital development committee. Must obtain permission from hospital development society.
10. Lease holder has to keep the shop rooms in hygienic condition.
13. A close reading of the clause-1 of the lease agreement would show that renewal is not automatic. It is for the competent authority to grant renewal to existing lease holder or to go for fresh auction. When discretion is vested in the competent authority, it is permissible for the competent authority to refuse renewal for valid reasons. The lessee is governed by the terms of lease agreement. When the lease agreement specified that the lease is for a period of five years and the renewal is not automatic, no right is vested in the lessee to demand renewal of lease as a matter of course. This Court in exercise of power of judicial review cannot hold that the action of the RIMS in not granting renewal is illegal when discretion is vested in such authority. Moreover, no material is placed before this Court to contend that such decision not to grant renewal is vitiated on account of a personal prejudices or preferences or ill-motive.
14. Notice dated 14.12.2013 indicates that the lessees defaulted in payment of rents for various periods mentioned therein, ranging from one month to six months. The notice also mention the months, in which the arrears were due. The petitioners have not filed any material to show that the lease amounts were paid regularly by way of demand draft and that they are not in arrears. Notice dated 04.11.2014 which is impugned in W.P.No.33041 of 2013, specifically alleges that lessees have not produced documentary proof of payment of rents along with penalty even though lessees were given sufficient opportunity to produce the same. Inspite of granting sufficient opportunity, lessees failed to satisfy that there were no arrears and rents were paid regularly. Thus, the allegation of respondent authorities that petitioners have defaulted in payment of rent cannot be said as baseless.
15. Apart from the allegation that petitioners were defaulters, it is also alleged that shop keepers were resorting to subletting, selling prohibited items, not maintaining hygienic conditions, charging exorbitant prices etc. The issues narrated in the counter-affidavit point out that the lessees violated terms of the lease agreement on various aspects. While exercising discretion these factors may weigh with the competent authority. Consideration of such aspects cannot be said as extraneous to the decision not to grant renewal. As no right is vested in the lessee to insist for renewal, lessee need not be involved in the decision making process. In fact, insofar as default in payment of lease amount lessees were put on notice. It cannot be said that there is no justification to reject renewal of lease and go for fresh auctions.
16. The scope of judicial review in tenders / contract matters is very limited.
17. In Raunaq International Ltd. Vs. I.V.R. Construction Ltd. and
[1]
others , Supreme Court held as under:
“When a writ petition is filed in the High Court challenging the award of a contract by a public authority or the State, the court must be satisfied that there is some element of public interest involved in entertaining such a petition.”
18. In Tata Cellular v. Union of India
[2]
, Supreme Court listed out the points on which writ court can interfere in contractual matters.
77. The duty of the court is to confine itself to the question of legality. Its concern should be:
1. Whether a decision-making authority exceeded its powers?
2. Committed an error of law,
3. committed a breach of the rules of natural justice,
4. reached a decision which no reasonable tribunal would have reached or,
5. abused its powers.
Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under:
(i) Illegality : This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it.
(ii) Irrationality, namely, Wednesbury unreasonableness.
(iii) Procedural impropriety.
The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. v. Secretary of State for the Home Department, ex Brind28, Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, “consider whether something has gone wrong of a nature and degree which requires its intervention”.
…… …….
81. Two other facets of irrationality may be mentioned.
(1) It is open to the court to review the decision-maker’s evaluation of the facts. The court will intervene where the facts taken as a whole could not logically warrant the conclusion of the decision-maker. If the weight of facts pointing to one course of action is overwhelming, then a decision the other way, cannot be upheld. Thus, in Emma Hotels Ltd. v. Secretary of State for Environment34, the Secretary of State referred to a number of factors which led him to the conclusion that a non-resident’s bar in a hotel was operated in such a way that the bar was not an incident of the hotel use for planning purposes, but constituted a separate use. The Divisional Court analysed the factors which led the Secretary of State to that conclusion and, having done so, set it aside. Donaldson, L.J. said that he could not see on what basis the Secretary of State had reached his conclusion.
(2) A decision would be regarded as unreasonable if it is impartial and unequal in its operation as between different classes. On this basis in R. v. Barnet London Borough Council, ex p Johnson35 the condition imposed by a local authority prohibiting participation by those affiliated with political parties at events to be held in the authority’s parks was struck down.
94. The principles deducible from the above are:
(1) The modern trend points to judicial restraint in administrative action.
(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.
(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.
(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.
(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.
[3]
19. I n A ir India Ltd. V. Cochin International Airport Ltd. , Supreme Court held that award of contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount are commercial considerations.
20. In Michigan Rubber (India) Limited vs. State of Karnataka [4] and others , after reviewing the decisions on the principles of tender process and awarding of contracts, Supreme court culled out the principles governing the contracts. The principles that are culled out are enumerated in para 23 of the judgment:
“23. From the above decisions, the following principles emerge:
(a) The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts which in the bounds of reasonableness, it would be legitimate to take into consideration the national priorities;
(b) fixation of a value of the tender is entirely within the purview of the executive and the courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by courts is very limited;
© in the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of the tendering authority is found to be malicious and a misuse of its statutory powers, interference by courts is not warranted;
(d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and
(e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by court is very restrictive since no person can claim a fundamental right to carry on business with the Government.
21. The writ Court can interfere in tender process and contract matters only if the court finds that the decision made by the competent authority is so arbitrary and irrational that no responsible authority acting reasonably and in accordance with relevant law could have come to such decision and that such decision affect the public interest. The parameters laid down in the above decisions are not satisfied in this case. Discretion is vested in RIMS to renew or not to renew the lease granted to petitioners. Certainly fresh auctions would yield better rental value and goodwill than one obtaining in the year 2008. As compared to individual interest of these petitioners, it is in larger public interest to resort to fresh auctions. It may be desirable to incorporate more stringent clauses to discipline the lessees. Renewal of lease should not be automatic but be on exception. Five years is a long period for a lessee to carry on his business effectively. The lessee is aware of tenure of lease. He cannot grumble now to contend that he assumed that renewal of lease is automatic. In the facts of this case, it cannot be said that the decision to go for fresh auctions is vitiated on account of arbitrary exercise of power and cannot be classified as irrational warranting interference by this court in exercise of power of judicial review.
22. Thus, I see no merit in the writ petitions. Accordingly, these writ petitions are dismissed. Petitioners are directed to vacate the shops and hand over vacant possession to the 2nd respondent within a period of three weeks from today. The respondent-RIMS is entitled to finalize the fresh agreements and to hand over possession of the shops to the new lessees. No costs.
Miscellaneous petitions if any in these writ petitions shall stand closed.
JUSTICE P.NAVEEN RAO Date: 08.10.2014 Kkm Oval:
HON’BLE SRI JUSTICE P.NAVEEN RAO WRIT PETITION Nos.23248 of 2013, 24117 of 2013, 33041 of 2013 and 24949 of 2014 Date: 08-10-2014 kkm
[1] (1991) 1 SCC 492
[2] (1994) 6 SCC 651
[3] (2000) 2 SCC 617.
[4] (2012) 8 SCC 216