Full Judgment Text
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CASE NO.:
Appeal (civil) 2202 of 2007
PETITIONER:
Bharat Petroleum Corpn. Ltd
RESPONDENT:
Maddula Ratnavalli & Ors
DATE OF JUDGMENT: 27/04/2007
BENCH:
S.B. Sinha & Markandey Katju
JUDGMENT:
J U D G M E N T
CIVIL APPEAL NO. 2202 OF 2007
[Arising out of SLP (C) No.10662 of 2006]
WITH
CIVIL APPEAL NO. OF 2007
[Arising out of SLP (C) No.18532 of 2006]
S.B. Sinha, J.
1. Leave granted.
2. Appellant is a Government company. The Parliament enacted
the Burmah Shell (Acquisition of Undertakings in India) Act, 1976 (The said
Act), inter alia, to provide for acquisition and transfer of the title, right and
interest in the "Burmah Shell Oil Storage and Distributing Company of
India Ltd." to Bharat Petroleum Corporation Limited. The said Act came
into force on 24.01.1976 which was the ’appointed day’ fixed within the
meaning of Section 2A(c) of the Act. By reason of Section 3 of the said Act
the right, title and interest of Burmah Shell stood transferred to and vested
in the Central Government. Section 5 of 1976 Act provides that the Central
Government shall be deemed to be the lessee or tenant under the
circumstances specified therein. Sub-section (2) of Section 5 which is
relevant for our purpose reads thus :
"On the expiry of the terms of any lease or tenancy
referred to in sub-section (1) such lease or tenancy shall
if so desired by the Central Government be renewed on
the same terms and conditions on which the lease or
tenancy was held by Burmah-Shell immediately the
appointed day."
3. It is not in dispute that the Central Government in exercise of
its power conferred upon it under section 7 of the said Act directed that the
undertaking of the Burmah-shell shall vest in the appellant herein which is a
Government company; the consequences, inter alia, wherefor is laid down
in sub-section (3) thereof which reads as under :
"The provisions of sub-section (2) of section 5 shall
apply to a lease or tenancy, which vests in a Government
company, as they apply to a lease or tenancy vested in
the Central Government and reference therein to the
"Central Government" shall be construed as a reference
to the Government company."
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4. Burmah-shell, the predecessor-in-interest of the appellant was a
lessee for a period of 30 years by virtue of a deed of lease which was
executed on or about 25.07.1959 by the respondent. The stipulated rent was
Rs.50/- per month. On expiry of the period of lease on 30.08.1985, the
appellant exercised its purported right of renewal by issuing a notice on or
about 24.05.1989 stating :
"On 1st August, 1977, another fresh certificate of
incorporation was issued under the same section of the
Companies Act, 1956, effecting the change in the name
of the Company from Bharat Refineries Ltd., to Bharat
Petroleum Corporation Ltd., which change as before does
not affect any rights or obligations of the Company.
This is to advise you that in terms of Section 5 and
Section 7(3) of the Burmah-Shell (Acquisition of
Undertaking in India) Act, 1976, extract of which is
enclosed for your reference, we desire to renew the lease
for a further period of 30 years commencing from
25.7.1989 on the same terms and conditions on which the
lessee abovementioned viz. Burmah-Shell Oil Storage &
Distributing Co. of India Ltd., held the lease immediately
before the appointed day viz. 24th January, 1976.
May we therefore, request you to let us know when it
will be convenient for you to have the lease registered on
terms similar to those existing in the current lease. On
receipt of your advice in this matter, we shall take further
action."
5. Respondents did not agree thereto. They, on the other hand, by
a letter dated 26.08.1990 stated that as the rent in respect of the said land has
not been paid and the provisions of the said Act have no application, the
tenancy shall stand terminated with effect from 24.09.1990. Appellant was
called upon to vacate and deliver possession of the said premises stating :
"Please therefore take notice that if you fail to vacate and
deliver vacant possession of the said property
immediately after 24.09.1990 paying damages for use
and occupation at Rs.5,000/- per month and the costs of
this notice to my clients, they will be constrained to file a
suit against you for appropriate reliefs and that you will
also be liable for all my client’s cost."
6. Despite service of the said notice, as the appellant did not
deliver vacant possession of the tenanted premises; a suit for eviction was
filed. In their written statement, the appellants averred:
"The allegations that the lease expired on 24.07.1989,
that the plaintiffs demanding delivery of vacant
possession and arrears of rent or damages, that the
plaintiffs require the plaint schedule property for their
bonafide use for construction of shops and carrying on
business are all absolutely false. The alleged requirement
of the plaintiffs is false and its an afterthought and made
to lend support of their claim for possession contrary to
the statutory renewal/protection available to this
defendant."
7. By reason of a judgment dated 30.12.1999, the learned Senior
Civil Judge, Anakapalle, Andhra Pradesh dismissed the said suit in view of
the provisions of the 1976 Act holding that the appellant had a right to
continue to occupy the leasehold as a tenant on the same terms and
conditions on which the tenancy was granted. An appeal preferred
thereagainst, however, was allowed by the First Appellate Court opining:-
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"In the above decision, it was held that the words "if so
desired means if so needed", and it is quite likely that
immediately after the undertakings were taken over by
the Central Government, it could not be possible to
obtain suitable alternative premises, for continuing
business activities of the undertakings of the Caltex
(India) and therefore, the Central Government has to be
armed with the power to get the leases and tenancies
renewed or continued after their expiry under sub-section
(3). So the power under sec.7(3) for renewing or
continuing by the Act of Parliament, and as per the Act,
the defendant company got right to renew the lease on
the same terms and conditions for a further period of 30
years. He further deposed that they exercised their
option to renew the lease by a letter dt. 24.5.1989. Thus,
D.W. has not explained or given reasons to show that the
need for renewal of lease for a further period of 30 years.
In the chief-examination he stated that there is a bridge
viz., Sarda Bridge near lease hold premises, and bridge
was closed due to heavy traffic and the traffic was
diverted to bye-pass road, and therefore, the rental value
of the lease hold premises is reduced. At page-4 he
admitted that Subramanyam and others are the retail
dealers of Bharat Petroleum Corporation and after
closure of the bridge the sale of petroleum products are
decreased as heavy traffic was effected. He stated that
the local trade was continuing.
It is, therefore, clear from the above admission of D.W.1
that due to the closure of the bridge near the schedule
premises, the highway traffic is being diverted through
the bye-pass road. It is thus clear from the above
evidence that there is no need for renewal of the lease.
There is no allegation in the written statement that the
defendant needs the premises. Therefore, it is clear from
the pleadings, as well as the evidence of DW.1 that there
is no need for renewal of lease. By virtue of the above
provision as of right, the defendant-corporation is not
entitled for renewal of lease for a further period of 30
years. It is against the spirit of the above decisions. The
learned Senior Civil Judge, has lost sight of the above
aspects and erroneously held that the defendant
Corporation as of right, by virtue of the above provisions,
is entitled for renewal of the lease. Thus the finding of
the lower court that Ex.A.1 quit notice is invalid is
erroneous.
The object of the Act is to prove better service to the
public and the same can be achieved only when the outlet
is situated at a place where there will be more vehicular
traffic but the vehicular traffic at the schedule premises is
completely closed, and the same has been diverted into
the bye-pass road. Therefore, the defendant cannot serve
the public, as it was earlier by continuing petrol bunk in
the schedule premises. By taking shelter under the above
technicality, the retailer of the defendant-Corporation
Subramanayam and others cannot be allowed to squat on
the property for a poultry (sic paltry) monthly rent of
Rs.50/-."
8. A Second Appeal preferred thereagainst by the appellant has
been dismissed by the High Court of Andhra Pradesh holding :
"\005In this case, it is an admitted fact that for 17 long
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years during the pendency of this lis, neither the
appellant paid the rents nor deposited to the credit of the
suit to prove their bona fides that there is a bona fide
requirement, apart from their legal right to have renewal
automatically under sections 5(2) and 7(3) of the Act.
Further, it is in the evidence that as soon as the by-pass
road had come up in Anakapalle, the diesel component of
the petrol bunk was closed and the business of the
appellant-company was decreased to a considerable
extent. This all shows that since the rent was only
Rs.50/- per month as agreed under Ex.B1 lease deed and
the appellant though not having much business at the
present place, just they want to enjoy the suit land for
another 30 years in the guise of sections 5(2) and 7(3) of
the Act, just for a rent of Rs.50/- per month. During the
pendency of the lis, the appellant has not come forward
with any proposal to enhance the rent. In fact, appellant
did not deposit even that meager rent of Rs.50/- per
month for 17 long years. Therefore, it cannot be said that
the appellant acted fairly. The renewal was actuated by
unfair and unreasonable motives. As such, it cannot be
said that in the guise of section 5(2) of the Act, the
appellant is entitled for automatic renewal.
In view of the above discussion, whether mere expressing
desire for renewal or not furnishing reasons for renewal
is necessary to be examined in this case. May be, in
Bharat Petroleum Corporation Ltd. Vs. P. Kesavan
(supra), the point did not arise for consideration directly,
and only as a general discussion, the Apex Court held
that in view of sections 5(2) and 7(3) of the Act, renewal
is automatic. Further, whether sections 5(2) and 7(3) of
the Act are to be given a restrictive meaning to construe
that with an intention to protect the interest of the
Government of India under the Act, the automatic
renewal was contemplated of those leases, which were
expired around that time i.e. 1976 also need not be gone
into in this case. The very conduct of the appellant is
nauseating and does not inspire the confidence of the
Court to show any indulgence. No substantial question
of law arises for consideration under section 100 of the
Civil Procedure Code. The Second Appeal is devoid of
merit and liable to be dismissed."
9. Appellant is, thus, before us.
10. Before embarking upon the rival contentions of the parties we
may, however, notice that the decree passed by the Appellate Court as
affirmed by the High Court was put to execution by the respondents on
04.06.2006. Indisputably, the decree has been executed and the respondent
has been put in possession of the decretal premises.
11. Mr. Sudhir Chandra, learned Senior Counsel appearing on
behalf of the appellant submitted that the appellant, by reason of Section
5(2) read with Section 7(3) of the 1976 Act, had an unbridlled statutory right
to exercise its option for renewal of the lease which in terms thereof would
be deemed to have been renewed for another term of 30 years from
25.07.1989 and in that view of the matter the impugned judgment cannot be
sustained.
12. Mr. Aman Lekhi, learned Senior Counsel appearing on behalf
of the respondents, on the other hand, submitted that an action on the part of
the appellant should conform to the doctrine of fairness and in that view of
the matter, the impugned judgment cannot be interfered with.
13. Appellant-company is a ’State’ within the meaning of Article
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12 of the Constitution of India. It is, therefore, enjoined with a duty to act
fairly and reasonably. Just because it has been conferred with a statutory
power, the same by itself would not mean that exercise thereof in any
manner whatsoever will meet the requirements of law. The statute uses the
words "if so desired by the Central Government". Such a desire cannot be
based upon a subjective satisfaction. It must be based on objective criteria.
Indisputably, the 1976 Act is a special statute. It overrides the provisions of
Section 107 of Transfer of Property Act. The action of the State, however,
must be judged on the touchstone of reasonableness. Learned counsel for
both the parties have relied upon a 3 Judge Bench decision of this Court in
Bharat Petroleum Corporation Ltd. v. P. Kesavan & Anr. [(2004) 9 SCC
772] wherein this Court held :
"The said Act is a special statute vis-‘-vis the Transfer of
Property Act which is a general statute. By reason of the
provisions of the said Act, the right, title and interest of
Burmah Shell vested in the Central Government and
consequently in the appellant Company. A lease of
immovable property is also an asset and/or right in an
immovable property. The leasehold right, thus, held by
Burmah Shell vested in the appellant. By reason of sub-
section (2) of Section 5 of the Act, a right of renewal was
created in the appellant in terms whereof in the event of
exercise of its option, the existing lease was renewed for
a further term on the same terms and conditions. As
noticed hereinbefore, Section 11 of the Act provides for a
non obstante clause."
14. Whereas submission of Mr. Sudhir Chandra, learned Senior
counsel is that the Court can interfere with the ’desire’ expressed by the
Government company only when it is actuated by any malice or ill-will but
not when the same was either unfair or unreasonable. In fine, the contention
is that the State in a matter of this nature is required to act fairly.
15. We do not see any incongruity in the said decision. A
judgment, as is well known, must be read in its entirety. It must be
construed reasonably and if necessary, in the light of the constitutional and
statutory provisions.
16. An executive action must be informed by reason. An unfair
executive action can only survive for a potent reason. An action which is
simply unfair or unreasonable would not be sustained. Objective satisfaction
must be the basis for an executive action. Even subjective satisfaction on
the part of a State is liable to judicial review. The ’State’ acting whether as a
’landlord’ or a ’tenant’ is required to act bona fide and not arbitrarily, when
the same is likely to affect prejudicially the right of others.
17. In Amarnath Ashram Trust Society & Anr. v. Governor of U.P.
& Ors. [(1998) 1 SCC 591], it was held :
"\005Thus the decision of the Government to withdraw
from acquisition was based upon a misconception of the
correct legal position. Such a decision has to be regarded
as arbitrary and not bona fide. Particularly in a case
where as a result of a decision taken by the Government
the other party is likely to be prejudicially affected, the
Government has to exercise its power bona fide and not
arbitrarily. Even though Section 48 of the Act confers
upon the State wide discretion it does not permit it to act
in an arbitrary manner..."
18. We are, however, not oblivious of the legal principle that only
because a statute causes hardship, the same may not be declared ultra vires.
(Dura Lex Sed Lex). We may, in this regard, notice certain principles :
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19. In Raghunath Rai Bareja and Anr. v. Punjab National Bank and
Ors. [2006 (13) SCALE 511], it is stated :
"Learned counsel for the respondent-Bank submitted that
it will be very unfair if the appellant who is a guarantor
of the loan, and director of the Company which took the
loan, avoids paying the debt. While we fully agree with
the learned counsel that equity is wholly in favour of the
respondent-Bank, since obviously a Bank should be
allowed to recover its debts, we must, however, state that
it is well settled that when there is a conflict between law
and equity, it is the law which has to prevail, in
accordance with the Latin maxim ’dura lex sed lex’,
which means ’the law is hard, but it is the law’. Equity
can only supplement the law, but it cannot supplant or
override it."
20. A statute, however, must be construed justly. An unjust law is
no law at all (Lex injusta non est lex).
21. In Kailash Chand & Anr. v. Dharam Dass [(2005) 5 SCC 375],
Lahoti, C.J. opined :
"We find it difficult to accept the construction placed on
the third proviso, in para 14 of the judgment in Molar
Mal case. In Rakesh Wadhawan v. Jagdamba Industrial
Corpn. this Court has held that a statute can never be
exhaustive. The legislature is incapable of contemplating
all possible situations which may arise in future litigation
and in myriad circumstances. The scope is always there
for the court to interpret the law with pragmatism and
consistently with the demands of varying situations. The
construction placed by the court on statutory provisions
has to be meaningful. The legislative intent has to be
found out and effectuated.
Law is part of the social reality.
(See Law in the Scientific Era by Justice Markandey
Katju, 2000 Edn., p. 33.)
Though law and justice are not synonymous terms they
have a close relationship, as pointed out by the American
jurist Rawls. Since one of the aims of the law is to
provide order and peace in society, and since order and
peace cannot last long if it is based on injustice, it
follows that a legal system that cannot meet the demands
of justice will not survive long. As Rawls says: Laws and
institutions no matter how efficient and well arranged,
must be reformed or abolished if they are unjust. (ibid., p.
72.)
Clearly, law cannot be so interpreted as would cause
oppression or be unjust."
22. The Parliament moreover is presumed to have enacted a
reasonable statute (see Breyer, Stephen (2005): Active Liberty: Interpreting
Our Democratic Constitution, Knopf (Chapter on Statutory Interpretation -
pg. 99 for "Reasonable Legislator Presumption" ).
23. We may also notice that recently in M/s. Ispat Industries Ltd. v.
Commissioner of Customs, Mumbai [2006 (9) SCALE 652], one of us
(Katju, J.) stated :
"In this connection, it may be mentioned that according
to the theory of the eminent positivist jurist Kelsen (The
Pure Theory of Law) in every legal system there is a
hierarchy of laws, and whenever there is conflict between
a norm in a higher layer in this hierarchy and a norm in a
lower layer the norm in the higher layer will prevail (see
Kelsen’s ’The General Theory of Law and State’)."
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24. With that we may add that a statutory order or discretion
exercised by a statutory authority must also be tested on the anvil of the
constitutional scheme.
25. This Court number of times has laid emphasis on reasonable
action on the part of the State even as a landlord. [See M/s. Dwarkadas
Marfatia & Sons v. Board of Trustees of the Port of Bombay [(1989) 3 SCC
293] and in contractual matters \026 Noble Resoources Ltd. v. State of Orissa &
Anr. [(2006) 10 SCC 236] and State of Karnataka & Anr. v. All India
Manufacturers Organisation & Ors. [(2006) 4 SCC 683].
26. Reasonableness and non-arbitrariness are the hallmarks of an
action by the State. Judged from any angle, the action on the part of the
appellant does not satisfy the test of fairness or unreasonableness. It being
wholly arbitrary cannot be sustained.
27. In any event, when two views are possible, a view which
satisfies the constitutional rights or requirements, must be preferred.
28. In M.L. Kamra v. Chairman-cum-Managing Director, New
India Assurance Co. Ltd. & Anr. [(1992) 2 SCC 36], this Court held :
"The Court ought not to interpret the statutory provisions,
unless compelled by their language, in such a manner as
would involve its unconstitutionality, since the legislature
or the rule making authority is presumed to enact a law
which does not contravene or violate the constitutional
provisions. Therefore, there is a presumption in favour of
constitutionality of a legislation or statutory rule unless
ex facie it violates the fundamental rights guaranteed
under Part III of the Constitution. If the provisions of a
law or the rule is construed in such a way as would make
it consistent with the Constitution and another
interpretation would render the provision or the rule
unconstitutional, the Court would lean in favour of the
former construction.
29. Right of property although is not a fundamental right,
nonetheless remains a constitutional right and any expropriatory legislation
must be construed strictly. [See Hindustan Petroleum Corporation Ltd. v.
Darius Shahpur Chennai & Ors. [(2005) 7 SCC 627]].
30. In the instant case, the concurrent finding of fact is that the
desire of the appellant was not bona fide. In any event, possession of the
lease holding has already been delivered. Respondents have received
possession after a long struggle. It is, therefore not a case where we should
interfere with the impugned judgment particularly in view of the finding of
fact arrived at by the courts below.
31. For the aforementioned reasons, these appeals are dismissed
with costs. Counsel’s fee assessed at Rs. 50,000/-.