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Judgment
The petitioner is before this Court assailing the
communications/orders dated 13.10.2015 and
03.11.2015 as at Annexures-L and M. By the said
communications, respondent No.1 has ordered that the
direction for payment of interest at 10% on the amount
paid by the petitioners towards voluntary retirement of
the employees of respondent No.3 is withdrawn and
pursuant to the same the communication is addressed
to inform the petitioner that the amount towards such
interest shall not be deducted from the lease rentals
payable by them. The petitioner therefore claims to be
aggrieved.
The petitioner, an integrated sugar
manufacturing company has taken on lease the sugar
factory of respondent No.3, since respondent No.3 due
to financial constraint was unable to run the sugar
factory and carry on with the crushing activity. The
Government of Karnataka had in that view taken a
policy decision to lease out the respondent No.3 on
Lease, Rehabilitate, Operate and Transfer (''LROT'' for
short) basis for a fixed period. In that view a tender
inviting the bids was floated and the petitioner being the
successful bidder was given the approval, pursuant to
which a lease agreement dated 18.02.2008 was entered
into between the petitioner and respondent No.3.
Though the said process was completed, the
petitioner contends that the respondent No.3 had not
disclosed certain material facts and information at the
time of entering into the lease deed. In that regard it is
contended that the Voluntary Retirement Scheme (''VRS''
for short) which had been announced and the amount
required to be paid as arrears to the workmen in that
regard had also not been disclosed, except for stating
that the amount payable is meager. However,
subsequently when the farmers and employees started
demanding the arrears of wages, the Co-operative
Minister of the Government of Karnataka convened a
meeting on 04.08.2008 wherein the petitioner is stated
to have brought to the knowledge of the Minister the
misrepresentation made by respondent No.3 at the time
of entering the lease deed. Hence, it was resolved in the
meeting that the petitioner would pay the amount of
Rs.770.34 lakhs and the Managing Board of respondent
No.3 had agreed to pay 10% interest on the advance
payment made by the petitioner and also permitted the
petitioner to deduct the said interest amount from the
payment of annual lease amount. The respondent No.2
is said to have directed respondent No.3 as well as the
petitioner to implement the resolution through its letter
dated 08.09.2008.
However, respondent No.3 has subsequently
refused to implement the proceedings due to which the
petitioner addressed the letter dated 11.08.2011 and
requested that the matter be placed before the State
Advisory Board so as to direct payment of 10% interest.
Though this was the position the Government of
Karnataka by the letter dated 10.11.2011 intimated
respondent No.2 that the petitioner is not entitled to
claim interest on the advance payment. Subsequently
when the issue was taken up by the petitioner, the
respondent No.1 addressed the letter dated 14.03.2013
to respondent No.2 and stated that there is no burden
to the Government and the parties can take an
independent decision. The petitioner contends that the
letters dated 16.03.2013 was addressed by respondent
No.1 to respondent No.2 to intimate that the
Government has agreed to recover 10% on the advance
payment. The meetings thereafter held is referred and
through the letter dated 03.11.2014 the respondent
No.2 had directed that the change be effected in the
lease deed as per the modalities. However,
subsequently by the impugned communications at
Annexures-L and M the decision to pay the interest
being withdrawn the petitioner claims to be aggrieved.
The respondents have filed their objections.
Respondents No.1 and 2 have at the outset contended
that the writ petition is not maintainable in view of the
arbitration clause contained in the lease deed. It is the
further contention of respondents No.1 and 2 that the
terms of lease are guided by the agreement dated
18.02.2008 to which they are not parties and any issues
arising thereunder cannot be treated as a liability of
these respondents. It is stated that since there was
unrest due to non-payment of the arrears of wages and
other dues to farmers, in order to ease the situation in
the meeting dated 04.08.2008 called by the Co-operative
Minister this issue was discussed since at this point the
petitioner had brought to the knowledge of the Minister
about the actual amount payable not being disclosed by
respondent No.3. It is in that light the deduction
towards interest was considered. Though that is the
position, the perusal of Clauses 46 and 47 of the lease
deed does not indicate the liability to pay any interest.
The respondents in that regard have referred to
the correspondences dated 30.08.2011, 10.11.2011,
09.10.2012 and 08.11.2012 as also letter dated
14.03.2013 to contend that the respondent No.1 had
referred to the term in the clause which does not entitle
payment of interest and also that the Government does
not have any role in the matter. Through the letter
dated 22.09.2014 they claim to have made it clear that
the terms of the agreement can be amended only if there
is mutual agreement between the parties to the
agreement. Despite all this, since the amount towards
interest was sought to be deducted the impugned letters
were issued.
The respondent No.3 has filed a separate
statement wherein a preliminary objection is raised
about the maintainability of the writ petition as it arises
out a contractual agreement dated 18.02.2008 entered
into between the petitioner and respondent No.3. The
Clause No.46 contained in the agreement is extracted
and it is contended that it expressly states that no
interest will be payable. This respondent also has
referred the very same correspondence to indicate that
the petitioner had been informed that they cannot claim
interest on the amount payable by them as per the
agreement. With regard to the meeting dated
04.08.2008 it is contended that the Managing Director
of respondent No.3 though shown to be present, he does
not have the authority to take a decision to alter the
terms of the agreement. The proceedings of the meeting
was never placed before the committee for ratification
nor did it translate into an alteration of the term in the
agreement. Thus certain observations relating to a
matter which was not on the agenda for the meeting
cannot bind the respondent No.3 is the contention.
Hence when the Board of respondent No.3 has not
agreed to pay interest at 10% and when it is not a part
of the contract and the Government has no role in the
matter even if any assurance is given, the same will not bind the parties to the agreement. Even in the absence
of the impugned communication the petitioner did not
have the right to deduct amount towards interest and as
such they cannot make out any grievance.
In the above background, I have heard
Sri Ravivarma Kumar, learned senior counsel along with
Sri. V.R.Sarathy, learned counsel for the petitioner,
Sri Jayakumar S.Patil, learned senior counsel along
with Sri. A.Mohammed Tahir, learned counsel for
respondent No.3, Sri.A.G.Shivanna, learned Addl.
Advocate General along with Sri. R.B. Sathyanarayana
Singh, learned Government Advocate for respondents
No.1 and 2 and perused the petition papers.
From the rival contentions urged in the
backdrop of the pleadings, it is seen that the
undisputed fact is that the rights of the petitioner and
the respondent No.3 would stem out of the lease deed
dated 18.08.2008 which is a bipartite agreement.
Among the several other terms and conditions agreed
therein, Clause No.46 is relating to the regulation of the payment which is to be made by the petitioner in the
manner as indicated therein regarding which the
petitioner is claiming interest at 10% presently. For
better appreciation of the issue, Clause Nos.45 and 46
are reproduced, which reads as hereunder;
"45. The Lessee shall avail services of all existing employees of the factory for the crushing season 2007-08 only and pay their salaries and allowances from the date of agreement till the closer of crushing season 2007-08. The Lessor as agreed to formulate the voluntary retirement schemes on the lines of Pandavapura SSK, in consultation with the Lessee, the employees unions and also with the approval of the Commissioner for Cane Development and Director of Sugar to reduce the existing staff strength. The Voluntary Retirement Scheme (VRS) shall be finalized and got approved before 31.05.2008 and implemented before start of the next crushing season during 2008-09 i.e., before 30.09.2008. the Lessor has also agreed to provide consent letters from their employees unions and also enter in to a Memorandum of Understanding for acceptance of Voluntary Retirement Scheme and settlement of arrears of salaries, wages etc.
The Lessor has agreed to work out the details of compensation, gratuity and other statutory payment to be payable to the employees those who
opt for VRS. The Lessee and the Lessor have agreed to bear the cost of compensation of VRS in the ratio of 30:70 towards Voluntary Retirement Scheme (VRS) settlement. Further the Lessee has also agreed to advance the share of the Lessor in respect of VRS settlement and gratuity payable by the Karkhane to the employees those who opt for VRS as and when required. This advance shall not bear any interest. The Lessee is entitled to deduct 50% of the lease rental from fifth year of the lease, towards the advance made by him for VRS settlement till the entire advance is recovered from the Lessor." (emphasis supplied)
In that situation, whether the proceedings
recorded in the meeting dated 04.08.2008 would create
any right in favour of the petitioner by over-riding the
terms agreed in the lease deed dated 18.08.2008 is the
moot question so as arrive at a conclusion, whether the
impugned communications will fall foul of the same?
The terms of the lease deed will disclose,
though the petitioner is presently contending that
certain aspects relating to the VRS to the employees had
been suppressed, the terms in the deed is explicit of
such VRS scheme existing and the amount in the ratio of 30:70 to be paid to such employees and it is also
agreed that the share payable by the respondent No.3- the Lessor will also be paid by the petitioner- the Lessee
and it would be deducted from the rent payable, in the
manner as indicated in the deed. It is explicitly clarified
therein that such payment will not bear any interest.
The petitioner therefore as a prudent businessman, with
open eyes has entered into such transaction. If any of
the terms are to be altered, no doubt it can be done in
accordance with law and it will take effect as provided
under Section 62 of the Contract Act. In the instant
case, there is no dispute to the fact that no other
contract has been executed between the parties to the
initial deed dated 18.02.2008.
If that be the position, the meeting dated
04.08.2008 is seen to be convened to discuss the issue
relating to the Government providing security for the
amount invested by the Co-operative Bank in the
respondent No.3. In that view, the Managing Director of
respondent No. 3 was also present. In the said meeting
the issue on hand is also referred and it is stated that
10% interest will be payable and the proceedings is
signed by the Minister alone. Such consideration has
not translated into an agreement between the parties
nor has it been made a part of the initial deed by
altering it. The payment of the amount to the
employees opting for VRS was not a new issue that
arose subsequent to the parties executing the lease deed
dated 18.02.2008, but formed a part of the agreement
and also the mode and manner in which it would be
paid and recovered is also contained in the deed. The
same could not have been altered in a casual manner as
it is sought to be made out. Even if it is the grievance of
the petitioner that they have been made to incur the
quantum of amount for which they had not bargained
for if according to them all details on this aspect had
not been disclosed, it is a matter of inter se dispute
relating to the terms of the contract between the parties
which will have to be resolved in the manner as
provided under the deed.
The Minister having participated in the
meeting and merely because it was discussed and the
proceedings are recorded, it cannot bind respondent
No.3 nor can it be considered as the promise held out
by the Government, to pay the petitioner. The
documents produced at Annexures-R1 to R9 along with
the objection statement of respondents No.1 and 2 will
disclose that the Government was clear in its stand
which ultimately resulted in the issue of the impugned
communications dated 13.10.2015 (Annexure-L) and
dated 03.11.2015 (Annexure-M) when the petitioner
unilaterally deducted the interest component also from
the lease amount payable.
The learned senior counsel for the petitioner
has relied on the decisions in the case of M/s. Motilal
Padampat Sugar Mills -vs- State of U.P . [(1979) 2
SCC 409]; in the case of Manuelsons Hotels Private
Limited -vs- State of Kerala [(2016) 6 SCC 766]
relating to the principle of estoppel and in the case of
Southern Petrochemical Industries -vs- Electricity
Inspector & ETIO [(2007) 5 SCC 447] on the issue
relating to legitimate expectation. Having carefully
perused the said cases, it is clear that the said decisions
cannot be made applicable to the present case since as
already indicated above the parties are governed by the
contract where under the terms are regulated. The
petitioner, even as per the terms was required to pay the
proportion of the VRS amount payable by the
respondent No.3, that too with the clear understanding
that interest is not payable. In such event an entity
who is not a party to the contract holding out any
assurance contrary to the terms agreed between the
parties by itself is not valid so as to raise any
expectation much less legitimate expectation and to
contend estoppel.
The learned senior counsel for the petitioner
has further contended that the impugned
communications are not sustainable as it is issued
without compliance of the principles of natural
justice as no notice was issued. In that regard,
the decisions in the case of S.L.Kapoor -vs- Jagmohan
and others [(1980) 4 SCC 379]; in the case of
Sahara India (Firm), Lucknow -vs- Commissioner of
Income Tax, Central-I and another [(2008) 14 SCC
151] and in the case of Associate Builders -vs- Delhi
Development Authority [(2015) 3 SCC 49] are relied
upon. Having perused the said decisions, I am of the
opinion that the same will not assist the petitioner in
the instant facts. Firstly, in the instant facts this Court
is not examining the matter in the context of an
administrative action, but is essentially a contractual
matter. Secondly, though the impugned letter dated
13.10.2015 employs the word withdrawal, the same
does not withdraw any benefit available under the
agreement entered into between parties or otherwise. It
refers only to the modalities that had been suggested
being withdrawn which in any event was not binding on
the parties. Thirdly, the impugned communication is
not by a party to the lease deed who could neither
confer any additional benefits or withdraw the benefits
which are agreed to between the parties without the
consent of both the parties to the deed. In that view, in
the instant facts when the matter was governed by a
contract, the issue of notice will only be an empty
formality nor was it required to be complied. The same
therefore has not violated any existing right of the
petitioner. However, as already indicated above if there
are any inter se disputes relating to the terms of the
deed or the performance of the terms agreed between
the parties, certainly it will be open for the petitioner to
avail the appropriate remedy in accordance with law.
The contentions in that regard are left open and any of
the observations contained herein shall not prejudice
the parties. The forum concerned shall consider all
aspects based on the material and evidence available
before it.
In the result, the challenge to the
communications dated 13.10.2015 and 03.11.2015 at
Annexures-L and M fails. The petition is disposed of
leaving it open to avail other remedies if open to the
petitioner in accordance with law. No costs.