Stone India Ltd. & Anr vs Board Of Trustees,Port Of Calcutta & Ors

writ petition challenging the newly added clause

permitting 25% increase in rent every ten years and the

huge amount on account of arrears of rent claimed by

the respondents from the appellants for the plots of land

leased to the appellants.

2. The appellants are assignees of two separate leases

under the respondents, Calcutta Port Trusts. The leases

were granted in respect of the Plots at Taratola Road.

These leases were granted by the respondents in the year

1947 for an initial period of 30 years. The lease deeds

contained identical provisions for two further renewals of

30 years each, at the option of the lessees. According to

the appellants the renewal clause in both the leases

provided that the renewal would be "at such rate of rent

to be fixed by the Commissioners in accordance with the

rates then prevailing for land in the neighbourhood of a 3

similar character and with and subject to the like

covenants, conditions and provisions as are in and by

these presents reserved and contained." According to the

appellants at the time of renewal the rent was liable to be

enhanced (taking into account neighbourhood rents), but

all other provisions of the original lease were to be

maintained.

3. The appellants expressed the desire for a renewal of

the leases for another 30 years, which expired on

30.6.1977. The respondents by communications dated

17.10.1977 and 29.12.1977 offered the appellants,

renewal of the leases of the Plots on similar terms and

conditions. However, the letters contained an identical

stipulation as follows:

"5. The renewal will be subject to the following conditions, besides other general conditions as embodied in the Trustees' standard lease from:-

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(iv) the lease will contain clause reserving to the Trustees the right to raise the rate of rent every 10 years during the initial period of the lease and also during the optional period of the lease upto 25% for the schedule rent prevailing at such time whichever is higher...."

4. At the same time the letters purported to enhance

the rent from the original sum of Rs.2,484.37 to

Rs.17,226.40(an increase by 700%). Appellants protested

against the unilateral illegal action of the respondents.

However, the appellants started to pay the enhanced

rent, under protest. The draft lease deeds which were

sent to the appellants on 15.11.1978 were not signed by

the appellants. On 20.1.1983, the respondents purported

to notify a schedule of rent charges specifying the rent to

be charged for plots of land in various localities. By letter

dated 23.7.1987, the appellants were informed about the

increase in rent under the lease deeds, upto the schedule

rate of rent, under the clause for enhancement of rent

every ten years.

5

5. The Notification dated 20.1.1983 and the letter

dated 23.7.1987 were challenged by the appellants by

way of writ petition under Article 226 of the Constitution

of India. The aforesaid writ petition remained pending in

the High Court till 30.8.2000.

6. We may notice here the submissions made before

the High Court. It was submitted that the notification

dated 20.1.1983 would not be applicable to the

appellants as the rights and obligations of the parties

were governed by the original renewal clause. Hence

communication dated 23.7.1987 was arbitrary and an

abuse of discretionary powers. It was claimed that the

increase in rent is arbitrary and violates Article 14 of the

Constitution of India. It was also pleaded that purported

increase of rent is whimsical. Therefore, a prayer was

made for recall of the notification dated 20.1.1983 and

notification dated 23.7.1987.

6

7. On the other hand, it was pleaded by the

respondent-Board of Trustees, Port of Calcutta that the

respondents had the power under Section 49 of the Major

Port Trusts Act, 1963, inter alia, to frame scale of rates

from time to time for use of the properties belonging to

the respondents- Port Trust of Calcutta. It was also

submitted on behalf of the respondents before the

learned Single Judge that the matter is essentially

contractual in nature. The appellants having voluntarily

entered into the lease agreements were bound to accept

the renewal on the stipulated conditions.

8. The appellants submitted before the learned Single

Judge that in view of the law laid down by the Supreme

Court in numerous judgments including the judgment in

the case of Ramana Dayaram Shetty vs. International

Airport Authority of India and Ors., AIR 1979 SC

1628, it was no longer permissible for the respondents to 7

submit that no writ would lie against the Port Trust in

contractual matters. It would also be against the ratio of

the law laid down by this Court in Jamshed Homusji

Wadia vs. Board of Trustees, Port of Mumbai and

another, (2004) 3 SCC 214.

9. On the other hand counsel for the respondents

submitted that the matter is covered against the

appellants by a judgment of the Division Bench of the

Calcutta High Court in The Board of Trustees for the

Port of Calcutta & Anr. vs. Brooke Bond India Ltd.

and Anr.(dated 21.08.1997 being matter No.2419 of

1986). According to the respondents the said judgment

which also pertains to the Port of Calcutta had

specifically held that the parties are squarely governed by

the explicit terms and conditions in the contract. If it is

provided that at the end of 10 years the landlord would

be at liberty to raise the rent either at the rate of 25% of 8

the rent originally fixed or as per the schedule of the rent

as notified at the relevant time, the action of the Board

would be legally justified. The Division Bench had even

gone so far as to say that even an opportunity of hearing

would not be necessary to be given to the lessee.

10. Learned Single Judge, upon consideration of the

above submissions, held that the appellants voluntarily

entered into the lease/licences with the respondents.

Therefore, the matter is purely contractual. Therefore, the

appellants are not entitled to seek redress under Article

226 of the Constitution for any breach of the covenants

contained in the lease agreements. It is also held that

the Major Port Trust Act, 1963 is applicable to all major

Ports. Sections 48 and 49 of the Act empower the Port

authorities to fix/refix the rate of rent, which has been

duly sanctioned by the Central Government. It is also

held that this type of case comes within the purview of a 9

matter of policy and it should be left to the authorities

and the High Court will not make an investigation into

fixation of rent. The learned Single Judge also held that

the enhanced rent is neither arbitrary nor unreasonable.

These findings were upheld by the Division Bench.

11. These findings have been challenged in this appeal

by the appellants.

12. It is submitted before us by Mr. Bhaskar Gupta,

learned senior counsel appearing for the appellants, that

both the learned Single Judge as well as the Division

Bench have not adverted to the primary challenge of the

appellants. According to the learned counsel the lease

was executed in the year 1947. At that time the Major

Port Trust had not been enacted. Therefore, no reliance

could have been placed on any notification issued under

Section 49. Notifications dated 20.1.1983 and the

communication dated 23.7.1987 cannot be made 10

applicable to the appellants. The rights of the appellants

qua the demised lands were given by the lease deeds

validly executed between the parties. The respondents

had quite illegally through letters dated 17.10.1977 and

29.12.1977 purported to add an additional clause to the

lease deeds providing for enhancement of rent as

contained in clause 5(iv) of the aforesaid letters. The

appellants objected to the arbitrary enhancement

through letters dated 4.11.1977 and 21.1.1978. It is for

this reason that draft lease which was sent for signatures

of the appellants on 15.11.1978 was not signed by the

appellants. Even thereafter the Port Trust purported to

increase the rent firstly on 23.7.1987 and secondly on

17.1.1988. The arrears are being claimed on the basis of

illegal enhancement. Learned counsel submitted that the

renewal of the lease at the expiry of 30 years period was

automatic. It was a unilateral act of the appellant and

consent of the lessor was wholly unnecessary. At the time 11

of renewal the respondent-Board was at liberty to refix

the rent as stipulated in the original lease deeds. Learned

counsel also submitted that Clause 5 sub-clause (iv) in

the two letters cannot be made applicable to the

appellants. There has to be strict compliance with the

provisions of the lease deeds which do not provide any

periodic increase in rent at the interval of every 10 years.

Learned senior counsel further submitted that the

renewal clause in the lease deeds clearly provides that

the lessee shall be entitled to seek renewal for a period of

30 years. The clause further provides for a further period

of 30 years at such rates of rent to be fixed by the

Commissioners. This clause only entitles the

Commissioner to fix the new rent by taking into account

the prevailing rate in the locality. Such fixation has to be

for 30 years. There can be no further revisions at interval

of every 10 years. Learned counsel also submitted the

finding of the learned Single Judge that no writ would be 12

maintainable in contractual matters is against the settled

law by the Supreme Court in a catena of judgments. He

has made reference to a number of judgments in support

of the submission that action of the respondents had to

conform to the mandate of Article 14 of the Constitution

of India. It could not be arbitrary. According to him the

20.1.1983 Notification is being made applicable to the

appellant without legal sanction as the rights of

appellants are entirely covered under the lease deeds.

13. On the other hand, Mr. Parag P. Tripathi, learned

Additional Solicitor General submitted that the

appellants have now argued a wholly new case which was

not argued before the High Court. He has submitted that

in any event the writ petition ought to have been

dismissed at the threshold only on the ground of delay

and latches. The cause of action, if any, arose to the

appellant in the year 1977 when the letters dated 13

17.10.1977 and 29.12.1977 were sent to them. But the

writ petition was not filed till 17th of February, 1988.

Even otherwise, according to him, the 10 years

enhancement on 23.7.1987 was pursuant to the draft

lease which had been sent to the appellants on

15.11.1978. He has sought to justify the action of the

respondents. According to him the enhancement in rent

after a period of every 10 years was necessary to put the

appellants lease hold rights at par with other lease

holders of the property belonging to the Port Trust. Since,

other lease holders are paying lease rental at the

schedule rate as fixed under various Notifications issued

by the Port Trust the increase in the rent was necessary

to bring the appellants at par with the schedule rates.

Therefore, the action of the respondents is reasonable

and can be justified even under Article 14 of the

Constitution of India. The lease rent has been fixed by

the Commissioner in terms of clause 13 of the lease 14

deeds which provide as under:

"13. Any statutory powers hereafter conferred upon the Commissioners shall apply to the premises and shall be deemed to be incorporated in these presents."

According to Mr. Tripathi by virtue of the aforesaid clause

the various notifications issued by the Port Trust

enhancing the rent periodically are deemed to be

incorporated in the lease deeds. Therefore, the proviso

relied upon by the appellants containing the original

renewal clause has to be read along with clause 13. This

would necessarily lead to a conclusion that the

Notification dated 20.1.1983 would be applicable to the

appellant. In fact, the land belonging to the appellants

find mention at Serial Nos.16 and 17 of the schedule

attached to the Notification. Therefore, the writ petition

had been rightly dismissed by the learned Single Judge.

The Division Bench upheld the findings recorded by the 15

learned Single Judge. Therefore, the order in appeal did

not call for any interference.

14. The learned Single Judge seems to have dismissed

the writ petitions for three reasons, viz :-

1) The matter is purely contractual in nature.

Therefore in view of the law laid down by this Court in the case of Radhakrishna Aggarwal v. State of Bihar, ATP 1977 SC 1496 and also in Bareilly Development Authority v. Ajai Pal Singh 1989 (2) SCC 116, no relief could be granted under Article 226 of the Constitution.

2) The Port Authorities are empowered to fix and enhance the rent under Sections 48 and 49 of the Major Port Trust Act, 1963.

3) What rent is to be fixed is a policy decision. Even otherwise the Court will not interfere in the absence of proven mala fides.

The Division Bench simply upheld the aforesaid findings

of the learned Single Judge.

15. Upon consideration of the entire matter, we are of

the opinion that issues which were not agitated before the

High Court either before the learned Single Judge or 16

before the Division Bench are sought to be agitated in this

Court for the first time. In the peculiar facts and

circumstances of this case, it would be in the interest of

justice to remand the matter back to the learned Single

Judge of the High Court to re-determine the controversy

between the parties after giving due opportunity to the

parties to place on record any further material in support of

their respective submissions. In view of the above the

appeal is allowed. The judgments of the learned Single

Judge dated 30.8.2000 and Division Bench dated

5.2.2004 are set aside. The matter is remanded back to

the learned Single Judge of the High Court for a fresh

decision on merits.

16. At this stage we are informed by Mr. Bhaskar Gupta

that the respondents have started eviction proceedings

against the appellants due to the expiry of lease and

non-payment of the enhanced rent. In our opinion,

it would be inappropriate to grant any stay in those 17

proceedings. However, the appellants are at liberty to

make necessary application before the appropriate court

for appropriate relief in the second writ petition. The

application if any made, shall be decided on merit. We

may also notice here that as an interim measure by the order

dated 5.8.2005 this Court had directed that pending disposal

of the appeal, the appellants will pay to the respondents a

sum of Rs.50,000/- and deposit a sum of Rs.50,000/- per

month towards the rent without prejudice to the contentions

of either party. The aforesaid amount has been deposited

regularly with the Registry of this Court. We permit the

respondents to withdraw the aforesaid amount. The

respondents have also been in receipt of Rs.50,000/- per

month which was directed to be paid by the appellant during

the pendency of the appeal. However, in view of the remand

and in view of the huge amount in arrears (though according

to Mr. Gupta, there are no arrears) we direct that the

appellants shall pay at least a sum of Rs. 2 lakhs per month

during the pendency of the proceedings before the High Court 18

subject to any further revision that may be made by the

High Court, in any future orders.

17. With the aforesaid observations, the matter is

remanded back to the learned Single Judge for deciding

the writ petition on merits. We request the learned Single

Judge of the High Court to decide the writ petition finally

within a period of six months from the date of receipt of a

copy of this order.

..............................

..........J (TARUN CHATTERJEE)

.........................................J (SURINDER SINGH NIJJAR)

NEW DELHI, DECEMBER 07, 2009.