K. Ramamoorthy, J.
(1) The facts of the case present a situation which can be termed as suigeneris. So far as I could look up I could not lay my hands on any case which has resemblance to this case. This case poses a challenge to Lawyers and Judges and they have to be ready to meet the demands of changing times on account of Technological and Industrial Development in all fields of human endeavour, internal and international. This case also shows how the people for the purpose of offering services to the community in a variety of ways have to depend on the general principles of Contract and Specific Relief. The ambitions, aspirations, desires and angularities and the urge to achieve better things naturally create problems in the real functioning of the systems evolved by them and the people expect the Courts to solve them so that the systems brought about by them for doing something to the Society work smoothly and peacefully and persons concerned may act accordingly to law laid down by the Courts.
(2) I am happy to place on record my sincere appreciation of the able, incisive and effective arguments advanced by the learned Counsel for the parties. They have made a lot of research and a good deal of hard work had gone in. They put forward their respective view points with considerable skill and dexterity. I was greatly benefited by their consummate arguments. From the arguments advanced I could see that lawyers also felt the pinch, the facts posing a novel situation. They converted an insipid position into a very interesting and absorbing one. The learned Counsel for the parties argued the matter for a considerable length of time and the lengthy arguments served to fine tune the points that have arisen for consideration.
(3) India Habitat Centre, hereinafter referred to as the 'Centre', is stated to be located in Lodhi Estate for the purpose of promoting on no profit no loss basis a Habitat Centre for Organisations drawn from various sources for the benefit of the community and there are about 35 Members in the Centre. The Centre was allotted about 9" acres of land, a very large area for this purpose and it is stated that substantial constructions have been erected, spending about Rs. 45 crores. As various offices are located in the Complex, the Centre naturally had to make arrangements for services for persons who come to the office and also the officers and employees in the various offices in the defendant Centre. The Centre by itself could not apparently mobil is enough people to offer services to persons coming to the Complex and, therefore, they thought of having an independent body to do the service activities of the Centre. With this object in view, on the 21st of December, 1992 the defendant issued public notice inviting tenders for operation of the facilities at the defendant's Centre. This is the genesis of the present dispute.
(4) On 5.2.1993 the plaintiff wrote to the Centre stating that the plaintiff had not been able to inspect the basement and a detailed studies could not be carried out within a short time, therefore, the plaintiff would be sending the bid with these reservations. Now on 8.2.1993 the plaintiff submitted its bid to the Centre giving the details of the proposals for rendering the services. On 22.4.1993 a note was submitted to the President of the Centre with reference to this matter. In the note, it is stated "
"A meeting was organized on June 8, 1992 at the Vigyan Bhavan Annexe presided over by the then President of the Shri R.K. Bhargava where a presentation was made to the Hoteliers explaining the design of the complex and the nature of the operations. Subsequently after further discussions a set of literature was sent to each possible operator for these facilities requesting them to forward proposals to Ihc with regard to the running of these facilities and also make their offer as to the financial aspects in terms of the capital cost and profit sharing with IHC. The Governing Council constituted a Committee consisting of Shri K.K. Bhatnagar, Dr. R.K. Pachauri and Shri Vinay Jha to assess the offers and make appropriate recommendations in this matter."
(6) On the 6th of April, 1993 the Committee Members Mr. K.K. Bhatnagar, Dr. R.K. Pachauri and Mr. Vinay Jha recommended that the offer of the plaintiff should be accepted. They stated : Based on the presentation made, the Members of the Committee were of the unanimous opinion that it would be prudent to award this work to the group managing Broadway Hotel for the following reasons.
1.If given this work it would be their main project since the only other operation of the group is as mall hotel, restaurant in Delhi and Ihc would become their major project to which they would commit themselves fully. 2. Though at present the hotel run by them is a small one, the group had two big hotels in Kashmir before the trouble began there. Hence they have had the requisite experience.
3. Being a young professionally qualified and dynamic group with innovative new concepts it was felts that they would be ideal for a complex such as the Ihc which was a first in many fields, including Hi-Tech operations. 4. The Chief Executive of this group because of his association with Mahindra Owen (a subsidiary of Mahindra's) and their tie up with Day Inns of the Usa could be able to access international expertise at the appropriate level in project management and marketing. 5. Clearly their offer for profit sharing was the best offered and the group was prepared to back it up with a guarantee." 6. On 23.4.1993 a note was put up to the President of the defendant for approval for awarding the contract to the plaintiff. In the note it is stated that the major point to be covered is the agreement in clearing the maximum guarantee i.e. Rs. 4 lakhs in a full working year after the Centre is fully operational, both in terms of facilities and the membership. In the intervening period a satisfactory arrangement on a prorate basis could be worked out. In the note it is also stated that if the negotiations with the plaintiff do not fructify, then the defendant can have negotiations with the next officer i.e. NIRULAS. On 11.5.1993 it appears that the matter was discussed by the Members and the President. It was decided that the contract for providing service to be given to Hotel Broadway, the Director was directed to had detailed discussion with regard to : 1. Tariff. 2. Cost of Interiors/Design (at least 50%.) 3. Operating ground rules. 4. Opportunity Cost. 5. Guarantees. The Director was also directed to come back with a detailed agreement before the arrangement is finalised.
(7) On 17.5.1993 the defendant wrote to the plaintiff accepting the offer made by the plaintiff in the following terms :
"WE are happy to inform you that your offer tor the management and operation of facilities at Ihc has been accepted and it has been decided to award the work to you as per your offer, on the terms and conditions to be detailed out in a formal agreement which will be executed between your organisation and IHC. We should meet in the course of the next week and run through the entire gamut of operations, the pricing, the investments to be made by Ihc, your responsibilities for implementation of the project and its commissioning and the basis of the licence fee to be paid by you. You may go ahead and identify your interior designers who would have to interact with our prime consultants M/s. Stein Doshi & Bhalla to decide on the Scope of Work and the design parameters within which the work will be executed."
The plaintiff wrote to the defendant in the following terms :
"THIS is with reference to the discussions that the undersigned has had with you, your executive and the representatives of the prime architects over the past few weeks. We thought it pertinent to list out the various issues. The text of this letter consists of two parts and we would welcome your final comments on the same. Since we have already discussed most of these issues and their possible solutions, we shall submit all our recommendations within a couple of days. Please do let us know if you would require any further clarifications."
Alongwith the letter the plaintiff also sent various details of the agreement. Part consisted of some salient features and assurances of Ihc relevant to Operating Agreement, 30 points are mentioned in Part I. In Part Ii the plaintiff had mentioned adverse effects of modifications. The plaintiffhad pointed out what will be the effect of modifications that may be made if the suggestions of the defendant are accepted. Therefore, the plaintiff hayed presented even as early as in June, 1993 the pros and cons of the points raised by the plaintiff,
(8) On 24.6.1993 the defendant wrote to the plaintiff in response to the letter dated 17.6.1993 and disclosed to the plaintiff that the defendant had applied his mind to the points raised by the plaintiff and the defendant had agreed to certain terms.
(9) On 28.6.1993 the plaintiff wrote to the defendant in reply to the letter dated 24.6.1993. The plaintiff again mentioned all the aspects of the matter and again put forth its view in the matter to the defendant.
(10) On 7.7.1993 the defendant wrote to all the allottee Institutions enclosing a questionnaire from the plaintiff who had been awarded the contract for managing the accommodation and other facilities such as Restaurant, Conference Centre etc. at the India Habitat Centre and the allottee members were requested to give all the required information.
(11) On 8.7.1993 the plaintiff wrote to the defendant giving its notes on the suggested Credit Policy as well as Import Policy notes with reference to the discussions going on the Project and die Operational Planning. The plaintiff had suggested for Introduction of CreditCardorCorporateMembersCreditFacilities and the Packed Food and if the Corporate Members did not pay, the ultimate responsibility will be that of the defendant to recover the money from the Corporate Members.
(12) On 8.7.1993 there was an agreement between the plaintiff and Casa Plus (A unit of Span Fashions Ltd.) for carrying out interior work and decorations.
(13) On 9.7.1993 Casa Plus wrote to the plaintiff that the agreement for the Project have been approved by the defendant and it is also stated in the letter that Casa Plus would raise all bills to the plaintiff and there shall be bifurcation of items in separate heads, as per the letter oftheplaintiffdated2.6.1993, and the defendant would make part of the payment and the defendant had also promised to release its portion of the payment within two days of the receipt of the bills from the plaintiff's office. On the same date, Casa Plus wrote to the plaintiff requesting for release of adhoc cpayment of Rs.2.51akhs and requested the plaintiff to release 37.5% of the value i.e. Rs. 93,750.00 and may debit the defendant 62.5% of the amount i.e. Rs. 1,56,250.00
(14) On 13.7.1993 the plaintiff wrote to the defendant enclosing photo copies of the letters from Casa Plus staling that the plaintiff had released its share and requested the defendant to release its share. The plaintiff also stated that Casa Plus have been working on a hectic pace keeping in view the schedules for opening that had been communicated to it.
(15) On 14.7.1993 the Architects Engineers Planners Consultants wrote to the defendant informing the defendant about the Back of the House space, the additional space required for rendering services effective and the Architect requested final directions as to how and to what extent additional facilities requested by the group are to be provided.
(16) On 16.7.1993 the defendant put up a note about the work done by Casa Plus and it was desired to release, on account, the payment of Rs. 1.50 lakhs to Casa Plus.
(17) On 20.7.1993 plaintiff wrote to the defendant regarding the Fitness Centre and also the Laundry.
(18) On 3.8.1993 the defendant wrote to Shri Mohit Gujral of M/s. Design Plus stating:
"THEfinishing works for the following areas are yet to be started and can be finalised as per your concepts. (a) Corridors in the guest house. (b) Public toilets. (e) Health club facility. (d) Changing rooms. (e) Ground floor lobby and (f) Restaurants."
(19) On 13.8.1993 the plaintiff wrote to the defendant, gave certain suggestions regarding the Project and for further explanation and clarification the plaintiff requested the defendant to have a joint meeting with the Architects and the Designer for the Conference Centre.
(20) On 1.10.1993 plaintiff wrote to the defendant mentioning about the augmentation and additions required for facilities already panned for. The plaintiff wrote :
"INthe absence of actual B.O.Qs and based upon rough parameters, as explained, we foresee a total interior cost of approximately Rs. 489 lakhs, and a cost in kitchen, health club and operating equipment of Rs. 230 lakhs. This cost is for over I lakhs square feet of area while the equipment cost is for 1.75 lakh square feet of area. In addition an extra Rs. 40 lakhs would be spent on external works, fencing and out-door furniture related to the central courtyards, and terraces in out area. This last expense head is one which you may already have budgeted for. M/s. Casa Plus may have already informed you about the cost of Cold Rooms and Refrigeration equipmentincluding deep freezers, ice cube machines, milk shake and ice cream machines and other imported chilled dispensers etc. Not knowing the duty structures applicable to us, the duties on all imported equipment have not been taken. Similarly not knowing the suppliers and the ratio for out of Delhi goods, we have not included freight, octroi or sales taxes for any equipment. Stainless steel prices for equipment have also been assumed at the current rate."
(21) On 8.10.1993 Mr. K.K. Bhatnagar, Chairman & Managing Director of Hudco issued a note to the Director that he had gone through the Draft Agreement between the plaintiff and the defendant and he was sending his comments on the same. He has suggested various things after seeing the Draft Agreement. He has suggested Schedule A to the Draft Agreement to be removed. He has also suggested that first full financial year should be defined. Therefore, that Mr. Bhatnagar had considered the Draft Agreement is clear from this.
(22) On 14.10.1993 the plaintiff wrote to the defendant pointing out that some extra space would be required and also suggested about Creche activities and Children's Restaurant.
(23) On 19.10.1993 the Director of the defendant sent a note to the Governing Council giving his points of view on various comments made by Mr. Bhatnagar, Chairman-cum-Managing Director of HUDCO. Therefore, all concerned had applied their minds to the provisions of the Agreement.
(24) On 26.10.1993 the defendant wrote to the plaintiff in the following terms:
"WE are pleased to advise you that as per our award dated May 17, 1993 regarding operation of the hospitality facilities at Ihc the final terms and conditions of your agreement with Ihc have been approved by the Subcommittee. It has also approved the budget and operational modalities as indicated by you. The area statement as presented in Schedule B has also been generally approved. Your request for the compensation of additional space for loss of committed food service space was accepted by the Committee who have referred the matter to the Building Committee for a decision. Since the signing of the formal agreement may take a few days, you may now take up the work on site without any further loss of time. As soon as you have worked out the details please let me have a schedule of completion. What emerges from this letter is the final terms and conditions have been approved by the Sub-Committee and the plaintiff may take the work as signing of the formal agreement may take a few days.
(25) Therefore, by writing this letter defendant had agreed in unmistakable term, the terms and conditions in the Draft Agreement which had been finalised by both the parties. It may be (sic.) noticed here itself that the terms and conditions approved by the defendant are not the terms and conditions suggested by the plain tiff alone and so much discussion had preceded the approval by the defendant.
(26) Subsequently, the matter was considered by the Governing Council in its meeting on 26.11.1993 and the plaintiff had commenced work as per the terms and conditions approved by the defendant and the defendant had also spent money as per the terms and conditions and work was going on in the site under the control of the defendant and strictly in accordance with the directions of the defendant.
(27) On 5.4.1994 the plaintiff and the defendant signed a Memorandum of Understanding regarding the summary of salient points of the terms already agreed to and being given effect to and a Memorandum would be substituted by a detailed formal agreement which would begiven effect to from the date of award of the licence. In paragraph 3 of the Memorandum, it is stated :
"WHEREASin accordance with the said award and mutually agreed terms the licensee has assiduously and extensively commenced and is carrying on licensed operations at the said property."
And in paragraph 4, it is stated : Whereas the formal agreement imbibing the said mutually agreed final terms and conditions of the said licence is pending formal execution." In Clause I it is stated ;
"(1)That the licensor has entered into a licence with the licensee to run, conduct, manage, operate etc., the said property for a period of 20 years extendible on mutually agreeable terms. Some of the salient terms of the said licence agreement are as briefly recorded herein."
Almost all terms of the contract are touched upon in this Memorandum.
(28) On the same day the Director gave to the plaintiff a copy of the terms and conditions approved by the Sub-Committee of the defendant, as borne out by the letter dated 26.10.1993. Elaborate terms are mentioned and they were all being subject matter of the detailed discussion.
(29) The defendant has also issued a certificate on 25.5.1994 confirming that the plaintiff had been awarded the licence to operate the hospitality facility at the defendant premises as per the lay out attached to the said certificate.
(30) The defendant wrote on 24.6.1994 to M/s. Stein Doshi & Bhalla about this contract. In August, 1994 in the Journal issued by the defendant called 'HA BITALK' which is termed as news letter, wherein it is stated :
"THEcontract for design and management of facilities of the Centre has been awarded to Old World Hospitality Pvt. Ltd. The Group have been in the hospitality business for over three decades, and will now be responsible for the efficient functioning of the host of facilities at the Centre."
(31) In that news letters, the letter to the members given by the plaintiff is also published. In the first paragraph it is stated as follows :
"OLDWorld Hospitality Pvt. Ltd. (OWH) has moved into its site office, temporarily located in the East Court, opposite the Amphitheatre. We are working towards meeting our ambitious deadline of December, 1994, when some of the facilities would be made available to you. Thereafter, we hope to commence operations of the other facilities."
The plaintiff also had been writing to the defendant about the operations. The plaintiff had also pointed out that the Conference by International Poul try Association was to be held and in April, 1995 the plaintiff sent the licence fee. On 4.5.1995 the defendant wrote to the Manager, Bank of Baroda in the following terms :
"THEManager Bank of Baroda Parliament Street New Delhi. Dear Sir, This is with reference to the Bank loan requested by our licensee, M/s. Old World Hospitality Private Ltd. We are enclosing a copy of the agreement between us which is the official copy. Construction activities at the Centre had been suspended last year since certain aspects of the project were being reviewed. Work has resumed in November, 1995 and the Centre is targeting opening later this year. The delay must have quite naturally led to escalation all round and increased the costs of the licensee. This letter is thus being furnished to you at their behest to request you to look at their case favourably."
(32) The Reserve Bank of India on 13.6.1995 gave to the plaintiff licence to deal in the foreign exchange, which reads as under :
"LICENCETo Deal In foreign Exchange In exercise of the powers conferred under Section 7 of the Foreign Exchange Regulation Act, 1973 (46th of 1973), Reserve Bank of India hereby authorise M/s. Old World Hospitality (P) Ltd., Habitat Centre, Lodi Road, New Delhi- 110003, to purchase Foreign Currency Note/coins and traveller cheques as per terms and conditions notified by the Reserve Bank of India from time to time and as also stated in the enclosure hereto. Terms of the Reserve Bank of India under the powers granted to it under Section 7 of Foreign Exchange Regulation Act, 1973 (46th of 1973) (a) The business of foreign exchange will be conducted within the time spedfied in Foreign Note/Letter for R.L.M. and by strictly complying with the revised instructions. (b) The licencewill bevalid upto 12.6.1998 and if application isnotmade for its renewal minimum two months in advance from its expiry date, its validity will be expired automatically. (e) If minimum prescribed American Dollar 5,000.00 or other foreign exchange equivalent thereto is not earned at the close of every year on 12.6.1998, the renewal of the licence will not be done. (d) This licence will be cancelled in the public interest, if so considered. (e) If licence issued to you under Section 32 of Foreign Exchange Act, 1973 is cancelled for any reason, the licence will automatically be treated as cancelled. (f) In the case of G.S.A., the business of foreign exchange conversion will be limited for issue of tickets for only that Airline for which you are the G.S. Agent and nor for any other purpose. (g) For making any changes whatsoever in the constitution of your firm, prior permission from the Foreign Exchange Control Deptt. is necessary."
(33) On 18.7.1995 the defendant wrote the following to the Commissioner of Excise, Delhi Administration
"THIS is to submit that India Habitat Centre has been formed to develop an integrated physical environment in which various professionals and institutions dealing with different facets of the habitat are located. The Centre provides a conducive atmosphere for their attempts to resolve habitat related problems in a coordinated manner. Spread over nine acres in the heart of New Delhi, the Centre has a built up area of approximately 10 million sq. ft. It incorporates innovative new technologies in building management systems, conference systems, communications and energy conservation, creating probably the most intelligent building in the country. Several leading corporate entities and non profit organisations, sharing a common concern for the habitat, have come together to participate in this exating venture of institution building and have evolved a unique equation of synergy within this complex. The India Habitat Centre is now home not only to these offices and research organisations but also houses a club for about 8,000 distinguished members, and their spouses, India's most comprehensive convention Centre as well as several restaurants and performance venues for cultural activities. The design and operation of the hospitality facilities, have been entrusted to M/s. Old World Hospitality Pvt. Ltd. As stated above the Centre houses a Club and a few restaurants. Needless to say, we shall be requiring Bar Licences for the Club and Restaurants where not only members but a large number of foreigners shall be visiting every now and then, who would be adding a great deal to the valuable foreign exchange earnings. It has been brought to our notice that as per Delhi Excise Laws Bar Licence can be issued only if the address at which it is issued in 75 mts. away from educational institutions. Incidentally, we have a couple of institutions near our Centre i.e. Bal Bharti, Air Force School and Diwan Chand Arya Senior Secondary School, which are much less than the specified distance of 75 mts. As such Bar Licences would require a special dispensation from you. There exits precedences in this institutional area itself of such licences being given like the India International Centre, the Oberoi Hotel next to the Blind School and a Mosque and so many other instances. With the responsible and respectable membership profile that India Habitat Centre has, we can assure you that such a dispensation would never be abused. As the Club and restaurants are slated for opening shortly, we request you to accord the required dispensation so that there is no delay for issuance of Bar licences as and when we apply."
(34) 0N21.8.1995 the plaintiff wrote to the defendant giving a brief sketch of the bookings of the Conferences in the premises in the years 1995, 1996 and 1997. For September, 1996 for the 20th World Poultry Cong. the plaintiff had accepted for arrangements and the approximate revenue that would be earned was mentioned as Rs. 75 lakhs. In November, 1977 the International Bar Association had decided to have the International Law Conference and the approximate revenue is mentioned as Rs. 30 lakhs. The defendant was well aware of it.
(35) In the Habitalks news letter for August, 1995 mention is made about the hospitality facilities given by the plaintiff in the premises and also inviting members for placing orders for baked guddies and other iterns like cake, pastries. In the news letter' HABITALK' for the month of September, 1995, the defendant had commended the plaintiff and the following would show how the defendant had said about the plaintiff:
"ASIndia's most recent and comprehensive Convention Centre, Ihc offers over a dozen seminar rooms, most of which have built-in-audio-visual facilities. The 600 seater auditorium, provided with a computer controlled conference system and simultaneous interpretation system, is comparable to the best in the country. A permanently dedicated secretariat and documentation centre will take care of all the conference needs. Integral to conference needs are banquet, cultural and entertainment requirements. Habitat world at India Habitat Centre is well equipped to provide all related services. The cultural venues are capable of hand ling music and dance recitals, theatre or any other type of performance. The dates scheduled for the opening of the conference, banquet and cultural venues re: Lecture Seminar and Conference Halls in November, 1995 Exhibition Hall in November, 1995 Auditorium and Basement Theater in December, 1995. When you want have an bash, do call us, as outdoor parties have commenced. We invite you to see the venues and make your bookings with the Conference & Events office. Old World Hospitality at 469-1920/21. For Diwali Owh is offering an array of gifts. A special display of the entire range including cakes and chocolates has been put together to help you reach a decision. You may visit us to place your orders with a prior appointment at the numbers listed above."
(35) The plaintiff had been requesting the defendant to do things as per the terms and conditions of the agreement and the defendant also had been obliging with the request acting in accordance with the terms and conditions of the agreement and the defendant has spent about 1.29 lakhs to wards various items to be done for doing the services in the premises by the plaintiff.
(36) About the budget estimates also, there was correspondence between the plaintiff and the defendant and all these proposals were not from the plaintiff alone, a few proposals had emanated from the defendant also. So far as actual expenditure is concerned, naturally it will vary depending upon the cost at the time of the expenditure and the defendant has not said anywhere that the plaintiff had gone beyond the terms of the agreement, with reference to what the plaintiff had done thus far i.e. September, 1995.
(37) On 16.10.1995 the defendant wrote to the plaintiff stating that the defendant is constrained to discontinue the arrangements with immediate effect and requested the plaintiff to withdraw its staff and the facilities for operating in the premises of the defendant. The grounds set are :
(1)The plaintiff has allowed to providesome services on an ad-hoc basis pending finalisation and all detailed terms and conditions were to be worked out; (2) The plaintiff was permitted to operate catering and supply food and beverages on an ad-hoc basis; (3) The requisitions and demands of the plaintiff have changed frequently. The initial capital cost to be incurred by the defendant had one from Rs. 3.54 crores to Rs. 20.63 crores, which is exponential and unacceptable; (4) Operational area to be ear-rnar ked by the defendant for the opera tions for the plaintiff have substantially enhanced; (5) The defendant is asked to fulfilll several conditions and assurances not envisaged under the original offer document; (6) Inspite of the increase in the capital cost, the minimum return which is stated to be gross remains off Rs. 4 crores and the defendant is expected to incur lot of expenditure with the prospect of negative net return; (7) There is been complete change in the terms and conditions; (8) The Designer Consultants were paid by the defendant on the advice off the plaintiff; (9) There was no concluded contract, no detailed arrangements have been worked out and the ad-hoc arrangement has not worked properly and satisfactorily; (10) The demands made by the plaintiff are exorbitant, unusual, unreasonable and excessive; (11) The defendant is a non-profit, non-Governmental Organisation which acts as a nodal centre to promote research and awareness of Habitat and uncertain ad-hoc arrangement cannot be permitted to continue; (12) The original offer made by the plaintiff has undergone sea change in so many major aspects which would alter the basic character of the bid; (13) The terms are unreasonable, non specific and not acceptable to the defendant; (14) The plaintiff had committed breach in view of the excessive and unreasonable demand upon the defendant which are materially at variance with the original bid. (15) The plaintiff was asked to vacate the premises within/days from the date of this letter.
(38) The plaintiff presented the plaint on 18.10.1995 and has prayed for the following reliefs:
"(A)pass a decree of declaration declaring that there exists a valid, binding and concluded contract between the plaintiff and the defendantas evidenced by the letter dated 17th May, 1993, the letter dated 26th October, 1993, the finalised terms and conditions as certified by the defendant on 5th April, 1994 and the Memorandum dated 5th April, 1994; (b) pass a decree of declaration that the said letter of October 16,1995 of the defendant is illegal, invalid, non-est and of no effect whatsoever; (e) pass a decree of permanent injunction restraining the defendant, its officers, servants and agents from in any manner interfering with or creating hindrances in the functioning of the plaintiff under and in pursuance of the contract between the parties or permitting any other agency to operate in the property and facility awarded to the plaintiff; (d) pass a decree of permanent injunction restraining the defendant, its officers, servants and agents from in any manner whatsoever taking possession of capital goods, equipment and supplies in the possession of the plaintiff and from dispossessing the plaintiff from the portion/ property of the premises occupied by the plaintiff pursuant to the contract between the parties."
The plaintiff also filed an application under Order 39, Rules I and 2 read with Section 151 of the Code of Civil Procedure. On 19th of October, 1995 an ad-interim injunction was granted by this Court. The defendant filed the reply and also the various documents. The plaintiff also filed documents alongwith rejoinder.
(39) The learned Senior Counsel Mr. D.D. Thakur submitted that there was a concluded contract between the plaintiff and the defendant with reference to the operation by the plaintiff providing facilities to the members and invitees, who come to the Complex. The terms and conditions were completely discussed and they were accepted by the defendant after due deliberations and circumspection taking into account all aspects of the matter. The defendant, as a matter of fact, regarding the, financial implications of e contract had consulted its auditors who had given a detailed report expressing the view that the contract is beneficial to the defendant. The defendant had also consulted its lawyers who had also opined that the contract was legal.
(40) The letter dated 16th of October, 1995 is wholly arbitrary, in violation of the terms and conditions of the contract, issued on extraneous considerations and quite contrary to the terms of the agreement and, therefore, it is null and void. The contract is for a period of 20 years. The plaintiff had made elaborate arrangements and had engaged several persons who are specially trained for the Hotel Management and providing facilities of such a magnitude and the plaintiff had committed itself to a long term arrangement leaving out the other business endeavours that may be tried and if the defendant is allowed to withdraw from the contract in the way in which it has been done, the plaintiff would be put to irreparable loss and the loss cannot be quantified in terms of money and this is a case where it could not be said that the plaintiff could be compensated adequately by awarding damages. If injunction is granted and the plaintiff is permitted to operate the facilities in the Complex, the defendant would not be put to any prejudice; the Management of the defendant is made by Government officials and as a matter of fact the land had been assigned by the Government for the purpose of the Habitat Centre and the defendant is more or less a Government Organisation and if there is change in the personnel, the same hostile attitude would not be there and the functioning of the operations would be normal and smooth. The letter dated 16.10.1995 had been issued on the basis of a report from a Committee called 'Malhotra Committee' whose constitutions had not been disclosed and the report was made available to the Court only after Mr. Bhatnagar and Mr. Vinay Jha were examined by this Court on 16.3.1996 and the report of Malhotra Committee cannot at all be relied on by the defendant and it had been constituted just for the purpose of securing an opinion by the officers now in management.
(41) Dr. Singhvi, learned Senior Counsel, appearing for the defendant contended that:
(1)There was no concluded contract between the parties; (2) There was only an ad-hoc arrangement; (3) There was mutual mistake of critical matters of facts which would make the contract void in law; (4) The arrangement is void for uncertainty under Section 29 of the Contract Act, 1872; (5) The alleged contract is vitiated by fraud is ab initio void under Section 17 of the Control Act; (6) The alleged contract has been procured by misrepresentation and, therefore, it comes within the mischievous of Section 18 of the Contract Act; (7) That the agreement was never approved by the Government Council of the defendant; (8) The whole basis of the negotiations and with which the plaintiff has always been inwhole hearted agreement, is that every cup, plate and saucer; every chair, table and sofa; every bulb, switch and lamp; and every carpet, curtain and napkin belongs to the defendant and the plaintiff could not and cannot bring anything to the premises and the plaintiff's presence is permissive; (9) The plaintiff cannot claimany right under Section 60 of the Easements Act, 1882 and there has been no licence coupled with interest in this case; (10) A perusal of the Annexures A & B filed alongwith the reply would show thatthe defendantwould be releasing every year and at the end of the 20th year the loss that will be occasioned to the defendant would be enormous. In Annexures A and B various details have been given. It is not necessary to set out at this stage; (11) The plaintiff has not asked for any specific performance and under Section 14 of the Specific Relief Act, 1963 the plaintiff could not be entitled to the relief of specific performance because the matter involves supervision by Court in respect of minute details of providing facilities and various expenditure to be made by the defendant and such a thing cannot be subject matter of specific relief. (12) Inasmuchas, the plaintiff cannot have therelief of specific performance. The plaintiff cannot ask for interim injunction by virtue of Section 41 of the Specific Relief Act, 1963; (13) "The suit by the plaintiff is barred under Section 34 of the Specific Relief Act; (14) The provisions of the alleged contract are unconscionable, one sided giving unfair advantage to the plaintiff and cannot be specifically enforced; (15) The plaintiff fraudulently induced the defendant to proceed with negotiations of the alleged licence agreement; (16) The balance of convenience is in favour of the defendant."
(42) The two principal points for consideration are :
(1)whether there was a concluded contract between the parties? and (2) whether the applicant-plaintiff can seek the relief that the contract is subsisting and seek to injunct the defendant from enforcing the letter dated 16.10.1995.
(43) For the purposes of deciding whether there has been a concluded contract between the parties, we have to see the correspondence between the parties culminating in the Memorandum dated 5.4.1994 and the construction of the Memorandum and also the Draft Agreement which was certified on 5.4.1994 by the defendant. Before going into the Memorandum and the Draft Agreement, I may allude to the pleadings in this behalf. In the plaint it is stated that by letter dated 17.5.1993 the defendant had accepted the terms and decided to award the work to the applicant-plaintiff. By letter dated 26.10.1993 the defendant confirmed its approval for the final detailed terms and conditions as well as the budgets which had been approved by the same Committee of the defendant. The following would establish that the defendant accepted the terms and conditions ;-
"(A)the defendant's letter dated 26.10.1993 conveying approval of final terms and conditions by the Sub-Committee of defendant and asking the plaintiff to proceed with the work; (b) the certified copy of the detailed terms and conditions certified by the then Director of the defendant on 5.4.1994; (e) Memorandum of Understanding dated 5th April, 1994 between plaintiff and the defendant; (d) letter dated 4.5.1995 from the defendant to the Bank of Baroda under cover of which the defendant enclosed the said detailed terms and conditions of the agreement referring to it as the official copy." The plaintiff also had stated pursuant to the letter from the defendant the plaintiff was put in possession of the property and the parties had acted upon the agreement. In paragraph Ii of the plaint, the following facts are given to appreciate the case of the plaintiff: (a) Physical possession of the property, all areas, offices, etc. at the Centre was handed over to the plaintiff by the defendants in early 1994. (b) Office equipment and all other assets including operating equipment and supplies for the plaintiff's office kitchen, canteen at site was purchased and provided by the defendant in terms of Clause 20 of the detailed terms and conditions. (e) Defendant issued a certificate dated 25.5.1994 to the plaintiff confirming award of the contract to the plaintiff to enable the plaintiff to obtain permissions, licences etc. from various Government Agencies to manage and operate hospitality facility at India Habitat Centre. (d) Defendant has paid a sum in excess of Rs.65 lacs so far to the various consultants, engaged by the plaintiff for interior decoration, kitchen facility planning and service planning in terms of Clause 14 of the terms and conditions. (e) Defendant has paid a sum of Rs. 12,150.00 as security deposit to the Gas Agency M/s. Cactus Lily Enterprises towards availability of gas cylinders and connections to the plaintiff in terms of Clause 8 of the terms and conditions. (f) Defendant took insurance for assets purchased by it and provided to the plaintiff in terms of Clause 13 of the terms and conditions. (g) Defendant awarded contracts to the Contractors for civil, electrical, plumbing, interior, equipment etc. as per specification and design provided by the plaintiff in terms of Clause 20. A list of the contracts awarded by the defendant is given in Annexure-A hereto. (h) Defendant has borne all the expenses relating to electricity for the areas under the possession and operations of the plaintiff in terms of Clause 19 of the terms and conditions. (i) In August,1994 the plaintiff started operations of the project canteen to cater to the office goers to the India Habitat Centre Complex and visitors. (j) From August, 1994 the plaintiff has been providing meals at conferences and banquets held by the institutional members in the said complex. The plaintiff has also been providing packed meals to the offices in the said complex. (k) The plaintiff has paid compensation for the period ending 31.3.1995 of Rs. 33,967.04 to the defendant on 7.4.1995 vide cheque No. 800326 dated 1.4.1995 which was duly encashed by the defendant. This payment was made in terms of Clause 5 of the terms and conditions. (1) On 3.4.1995 the defendant in terms of Clause 7.1 of the terms and conditions took stock of inventory of the assets provided by it to the plaintiff. (m) In terms of Clause 25 of the terms and conditions, the defendant paid the plaintiff's participation fee for participating in South Asia Travel and Trade Exchange (SATTE) for marketing of conference and other facilities in the Habitat Centre for two years running. (n) In terms of Clause 21 of the terms and conditions, the defendant has provided telephone lines at the site office of the plaintiff."
(44) In reply to the application for injunction, the defendant has stated that there is no concluded contract between the parties. The parties were only negotiating. There has been no agreement on capital costs. In paragraph 2(a) the defendant stated:
"(A)'Capital costs' on interiors and equipment was quoted by the plaintiff in its Bid at Rs. 379.98 Lacs in the aggregate. During negotiations, it was thereafter increased by the plaintiff to Rs. 7.59 crores (vide document dated October 1st, 1993); increased to Rs. 10.98 crores (vide document dated October 1st, 1993); then increased to Rs. 13.25 crores (vide document dated May 11, 1994); increased again to Rs. 17.42 crores (vide document dated May 27,1994) and increased again to Rs. 20.62 crores (vide document dated August 5, 1995) over a period of two years. The defendant has never greed to this 600% increase in "capital cost' and this enormous and wholly unreasonable escalation leaves no room for doubt that there is no concluded contract between parties. Annexed herewith and marked Annexure-A is a table demonstrating the manner in which the plaintiff has gone back on its Bid and raised the 'capital cost' to 6 times its original offer."
(45) According to the defendant the details stated in Annexure-A to the reply would show that the plaintiff itself had gone back on its bid and the capital costs had been raised by six times from its original offer. According to the defendant, the Annexure-B filed alongwith the reply would show how the plaintiff has repudiated its own bid and sought to negotiate a position by which the defendant would be put to enormous and wholly unsustainable annual burden. It is not stated in the reply and what is the basis on which these Annexures-A & B had been prepared and how these figures would show without anything more that what is stated in Annexures-A & B be accepted. The suit is barred under Section 41 of the Specific Relief Act, 1963. There has been mutual mistake. The Governing Council did not agree with the Draft Agreement. Therefore, according to the defendant there was no concluded contract.
(46) The fact that plaintiff was put in possession of the site and so many other things have been done pursuant to, what is called by the defendant at the stage of negotiation is not disputed. I shall start from the Memorandum of Understanding dated 5.4.1994 as that is admitted by the defendant and from there I can sometime later go to the document which is disputed by the defendant. This memorandum is dated 5.4.1994. Even in the preamble portion it is stated that the defendant has granted the award of the licence to the plaintiff in terms of the letter dated 17.5.1993 in accordance with the mutually agreed terms and conditions, by the Sub Committee as borne out of the letter dated 26.10.1993. It is also stated that "whereas in accordance with the said award and mutually agreed terms the licencee has assiduously and extensively commenced and is carrying on licensed operations at the said property". About the agreement, it is stated "whereas the formal agreement imbibing the said mutually agreed final terms and conditions of the said licence is pending formal execution". Therefore, the parties had agreed to the terms and only the agreement was to be executed formally. In Clause I the period is mentioned as 20 years and it is also extendable on mutually agreeable terms. The defendant should provideall capital equipment, furniture fixtures, fumishings and equipment initially and at all times during the licensed period for the purposes of the licensed operations by the plaintiff. The compensation payable by the plaintiff to the defendant is mentioned in Clause Iii, which is as under:
"(3)Licensor's compensation. During the Licence period, licencee shall pay to licensor : (i) For the period of commissioning i.e. prior to first financial year. (a) An amount equal to 8% of Gross Operating Revenue (GOR) upto Gor of Rs. 5 Crores. (b) An amount equal to 15% of Gor to the extent it exceeds Rs. 5 Crores. (ii) from the first full financial year being the year during which for entire year there was complete commissioning of the said property. (a) An amount computed at 60% of Gor to the extent the same consists of room & hall rentals and (b) An amount computed at 14% of Gor to the extent the same consists of Food & Beverages. Or A minimum guarantees compensation at Rs. 4 Crores per annum for a full financial year, whichever is higher. However, Gor shall mean revenues related to Room, Hall rental & F & B excluding or net of sums received by way of taxes, levies, charges, interest earned. Bank charges of collection against credit cards, service charges, franchise fee, club membership fee, travel agents commission, refunds made to customers, Mod sales, scrap, corkage, Misc. charges, etc. as agreed and listed in formal agreement."
In Clause 4 what are the operations to be carried on are mentioned in the following terms:
"THATthe licencee shall carry on licensed operations at the said property consisting of club/hotel, restaurants, bars, night club, conference halls and banquet halls, amphitheatre, auditorium, etc. in accordance with acceptable standards keeping in view the noble ideas of the licensor."
The fact that the defendant has handed over physical possession of the property to the plaintiff for carrying on the operations is also mentioned. In Clause 9 it is agreed that the operating expenses shall be met by the licensor and licencee in the manner as has been mutually agreed. Therefore, the terms and conditions had been agreed is admitted.
(47) Clause 8 reads as follows:
"THATthe licensor shall be responsible for all sanitation, cleaning, janitorial, utilities, horticulture, greenery and landscaping, etc. of the said property."
Therefore, the fact that parties had agreed to the terms and conditions and they also commenced acting on the basis of the terms and conditions agreed and everything must going on without any kind of hitch. Right from 1992 when the bid was called for upto 16.10.1995 the parties had been conforming to the terms and conditions agreed by them. Now a look up of the Draft Agreement as chracterised by the defendant would show the attitude of the parties on the date of the execution of this memorandum. As I had said earlier a copy of the agreement certified by the defendant was given to the plaintiff on 5.4.1994. There are 40 clauses in the agreement besides details mentioned in Schedules A to G. Under Clause 2 the appointed day is stated to be commencing from the 17th of May, 1992. Agreement date is stated to be the date of execution of this agreement. Clause 2.10 gives what is gross operating revenue. Clause 2.11 provides pro-rata deduction and compensation. Underclauses the period of licence ismentionedas20years. Clause 4 reads "This Agreement will not beterminated save and except as provided herein and will come to an end automatically on the expiry of the period of this agreement and extensions thereof". Clause 5 provides the amount payable by the plaintiff to the defendant. Clause 6 mentions about the consent to be given by the parties for the efficacious operations. On the basis of this, these were done by the plaintiff for the purpose of commencing the operations and consent was given by the defendant and that is not disputed. I have also extracted the correspondence between the parties wherein there have been consent by the defendant in unmistakable terms. Clause 7 speaks about the assets of the parties and Clause 10 mentions the duties and responsibilities of the plaintiff. Clause 11 mentions the duties and responsibilities of the defendant. Clause 12 provides for replacement and purchase of capital goods and upkeep/maintenance. Clause 13 refers to insurance. Clause 14 speaks of the sharing of the cost of interior design. Clause 15 refers to room service. Clause 16 mentions regulated lunch hours. Clause 17 speaks of security and valet parking. Clause 18 speaks of credit policy. Clause 19 refers to operating expenses and Clause 20 speaks of service areas to be provided by the defendant. Clause 21 speaks of Telephone, Telex and Fax. Clause 22 speaks of Food & Beverage supply. Clause 23 refers to provision of operating supplies, room given and for stock PAR. Clause 24 refers to packed food. Clause 25 refers to advertisement, promotion and entertainment. Clause 26 speaks of Tariffs. Clause 27 speaks of Imports. Clause 28 refers to compulsory acquisition, expropriation, condemnation. Clause 29 is the termination clause. Clause 30 speaks of force majeure. Clause 31 speaks of consequences of termination due to force majeure, etc. Clause 32 speaks of mutual interest of the parties. Clause 33 speaks of waiver. Clause 34 refers to partial invalidity and it reads as follows:
"INthe event that any article mentioned in this Agreement is/are held to be void or not valid or not enforceable, the said Article shall be deemed not to have been a part of this Agreement and the existence of such an Artide(s) shall not invalidate or nullify its Agreement as the Licence hereby granted is irrevocable for the duration of this Agreement and shall continue to be in force uninterrupted and be binding on the parties hereto."
Clause 35 speaks of notice. The parties had also agreed about the jural relationship between the parties. Clause 36 speaks of that relationship in the following terms:
"36.Relations between the Parties. 36.1. Nothing contained herein shall be construed as establishing or creating arelationship of master and servant, partnership, joint venture, principal and agent between the parties hereto, but the relationship between the parties hereto shall be a strictly principal to principal relationship and nothing contained herein shall be construed as a sale, lease, transfer or disposal and/ or creating any interest in the said property in favour of the Licensee, the grant herein being only that of a license by the Licensor to the Licensee subject to the terms and conditions specifically stated herein. 36.2. Neither party hereto shall be liable for the debts or obligations of the other party hereto except as where expressly provided as herein." Clause 37 speaks of construction of agreement. Clause 38 is confidentiality clause. Clause 39 is an arbitration clause. Clause 40 is jurisdiction. The Schedules A to G give the complete details about the services and other particulars necessary for the operations by the plaintiff.
(48) The argument on behalf of the defendant is that there has been no concluded contract. But a perusal of the Memorandum dated 5.4.1994 and the 'Draft Agreement' would show that the contract is 'symbiotic' containing not only reciprocal obligations, complete duties and responsibilities and parties had agreed and come to a complete understanding about the operations by the plaintiff. The further argument is that there has been no consent by the defendant. Section 2-H of the Contract Act states an agreement enforceable in law is a contract. Section 13 of the Contract Act defines consent "Two or more persons are said to consent when they agreed upon the same thing in the same sense". It is axiomatic that a contract is complete as a contract as soon as the parties have reached an agreement as to what to each of the essential terms is or with certainty be ascertained. It is an elementary principle:
"IDCERTUM Est Quod Certum Reddi POTAST; Sed Id Magis Certum Est Quod De Semet Ipso Est Certum - that is certain which can be made certain, but that is most certain which is certain on the face of it. Nobody can dispute the proposition that a fair agreement to negotiate has no legal content. But that is not the position here, for a considerable length of time j the parties had acted on the terms and conditions and nowhere it is stated by the defendant that the plaintiff acted beyond the terms of the agreement except staling that the bargain is not beneficial to the defendant. That is a different aspect which will be dealt with in the course of this judgment. "There is an interesting case in Nicolen Ltd. v. Simmonds, 1953 (1) Aer 882, a decision by the Court of Appeal in England. There the contract was for the sale of 3,000 tons steel reinforcing bars. The seller broke his contract. The buyer claimed damages. The defense by the seller was that there was no contract at all. The seller expressed his acceptance in the following terms:
"WHEREany agreement with the usual conditions of acceptance apply."
The Court took the view that the words 'usual conditions of acceptance' are meaningless. The Court observed that "a clause which is meaningless can often be ignored while still leaving the contract good; whereas a clause which has yet to be agreed may mean that there is no contract at all, because the parties have not agreed on all the essential terms."
(49) The Court indicated a test to find out the intention, that on a true construction of the document essential terms are yet to be agreed then there is no contract, but if vague and uncertain words can be ignored without impairing the efficacy of the other terms the parties can be said to have had consensus ad-idem with reference to material terms. The Court of Appeal eventually held "in the present case there was nothing yet to be agreed. There was nothing left to further negotiation. All that happened was that the parties agreed that the usual conditions of acceptance apply. That clause was so vague and uncertain as to be incapable of any precise meaning. It is clearly severable from the rest of the contract. It can be rejected without impairing the sense or reasonableness of the contract as a whole and it should be so rejected. A contract could be held good and the clause ignored. The parties themselves treated the contract as subsisting. They regarded it creating binding obligations between them; and it will be most unfortunate if the law should say otherwise. You would find faults by scanning their contracts to find some meaningless clause on which to ride free".
(50) In the instant case, everything had been done and there was no scope for any further negotiations and therefore, it cannot be said that there was no concluded contract. The principle applicable is that where you have proposal or agreement made in writing expressed to be subject to a formal contract being prepared, it means what it says; it is subject to and is dependent upon a formal contract being prepared. When it is not expressly stated to be subject of a formal contract it becomes a question of construction whether the parties intended that the terms agreed on are merely be put into form, or whether they should be subject to a new agreement, the terms of which are not expressed in detail. If th orinciple is applied to the facts in the instant case, there is no room for any argumer that the parties had not come to a concluded contract.
(51) In Storer v. Manchester City Council, 1994 (1) Weekly Law Reports 1403, the Court of Appeal had occasion to consider the question whether there was concluded contract on the facts of that case. The plaintiff Mr. Storer was a tenant of the defendant Council. The Council had offered to sell him the freehold dwelling house and premises. The plaintiff had unconditionally accepted theoffer by signing the document and returning it to the Town Planning and the Council failed to complete the sale and refused to convey the dwelling house and premises to him. Therefore, he came forward claiming the relief of specific performance. The defense by the Council was that the Council never agreed to sell the premises. Lord Denning held rejecting the contention on behalf of the Council :
"A.further point was taken. It was said that the town clerk had not actually signed the form of agreement. No matter. He had signed a letter of March 9, 1971, and that was sufficient. It was a note or memorandum sufficient to satisfy the statute. The final point was this : Mr. Francis said that the town clerk did not intend to be bound by the letter of March 9, 1971. He intended that the Corporation should not be bound except on exchange. There is nothing in this point. In contracts you do not look into the actual intent in a man's mind. You look at what he said and did. A contract is formed when there is, to all outward appearances, a contract. A man cannot get out of a contract by saying: "I did not intend to contract" if by his words he has done so. His intention is to be found only in the outward expression which his letters convey. If they show a concluded contract, that is enough. It seems to me that the Judge was quite right in holding that there was a binding contractin this case, even though there was no exchange. It is a proper case for specific performance."
(52) The learned Author P.S. Atiyah in his book on Introduction To The Law Of Contract has expressed the view that law is more inclined to enforce rights arising from what people have done (executed transactions) than from what they have agreed (executory transactions). The learned Author also expressed the view at page 168 that there must be an express agreement to show that the parties have dropped their intention to make purely non-binding arrangements. At page 190 the Author opines that the definition between a term of the contract and a mere representation depends on the intentions of the parties and once this intention has been ascertained the Courts then apply the rules relating to contractual terms or to representations as the case may prove. In Anson's Law of Contract, 26th Edn. 1984, it is posited that an agreement may also be inferred from conduct alone; the intention of the parties is a matter of inference from their conduct and the inference is more or less easily drawn according to the circumstances of the case. The Author has also expressed the view : "It is important however to note that the tests of a person's intention is not a subjective but an objective one; that is to say, the intention which the law will attribute to him is always that which his conduct bars when reasonably construed and not necessarily that which was present in his own mind. Thus, a person maybe held to have made an offer even though he did not appreciate that he was making one, or if the offer was made under a mistake, if his words or conduct, without reasonably construed, amounted to an offer, provided that the offered neither knew nor could reasonably have known of the misunderstanding at the time when he accepted the offer.
(53) In Chitty on Contracts, 27th Edn. 1994 Vol. I, the statement of the law in paras 2.092 and 2.094 is very instructive. The same are as under :
"2.092Agreement not incomplete merely because further agreement is required. Because the Courts are "reluctant to hold void for uncertainty any provision that was intended to have legal effect", they may sometimes give effect even to an agreement which provides for further terms "to be agreed". This was the position in Foley v. Classique Coaches Ltd. ( 2 K.B.I). The plaintiff owned a petrol-filling station and adjoining land. He sold the land to the defendants on condition that they should enter into an agreement to buy petrol for the purpose of their motor-coach business exclusively from him. This agreement was duly executed, but the defendants broke it, and argued that it was incomplete because it provided that the petrol should be bought "at a price to be agreed by the parties from time to time". The Court of Appeal rejected this argument and held that,in default of agreement, a reasonable price must be paid. May & Butchery. R. ( 2 K.B. 17n) was distinguished on a number of grounds; the agreement in Foley's case was contained in a stamped document; it was believed by both parties to be binding and had been acted upon for a number of years; it contained an arbitration clause in a somewhat unusual form which was construed to apply "to any failure to agree as to the price" ( 2 K.B. 1); and it formed part of a larger bargain under which the defendants had acquired the land at a price which was no doubt based on the assumption that they would be bound to buy all their petrol from the plaintiff. While none of these factors in itself is conclusive, their cumulative effect seems to be sufficient to distinguish the two cases. 2.094. Criteria or machinery laid down in the agreement.-The Courts have less difficulty in upholding agreements which lay down criteria for determining matters which are left open. For example, in Hillas & Co. Ltd. v. Arcos Ltd. ( 147 L.T. 503] an option to buy timber was held binding even though it did not specify the price, since it provided for the calculation of the price by reference to the official price list. Similarly, an option to renew a lease "at a rent to be fixed having regard to the market value of the premises" has been held binding as it provided a criterion (though not a very precise one) for resolving the uncertainty. Even a provision that hire under a charter party was in certain specified events to be "equitably decreased by an amount to be mutually agreed" has been held (by reason of its reference to what was equitable)"to provide a sufficient criterion to enable the appropriat ereduction. to be determined"."
Alternatively, the agreement may provide machinery for resolving matters originally left open. Perhaps the most striking illustration of this possibility is provided by cases in which such matters are to be resolved by the decision of one party; for example a term, by which interest rates are expressed to be variable on notification by the creditor, is perfectly valid. Similarly, an arbitration clause can validly provide for the arbitration to take place at one of two or more places to be selected, by one of the parties. Agreements are a fortiori not incomplete merely because they provide that outstanding points shall be determined by arbitration or by the decision of a third party; though the Sale of Goods Act, 1979 provides that if the third party "cannot or does not make the valuation, the agreement is avoided ". An agreement is not, however, ineffective merely because such machinery fails to work. Thus in Sudbrook Trading Estate Ltd. v. Eggleton ( I A.C. 493) a lease gave a tenant an option to purchase the premises "at such price as may be agreed upon by two valuers, one to be nominated by" each party. The landlord having refused to appoint a valuer, the House of Lords held that the option did not fail for uncertainty. It amounted, on its true construction, to an agreement to sell at a reasonable price to be determined by valuers. The stipulation that each party should nominate one of the valuers was merely "subsidiary and inessential"; and where the agreed machinery is of this character, the Court can, on its failure to operate, substitute other machinery; for example, the Court can itself fix the price with the aid of expert evidence. This is so not only where the agreed machinery fails because of one party's refusal to operate it, but also where it fails for some other reason, such as the refusal of a designated valuer to make the valuation.
(54) In Pagnan S.P.A. v. FeedProducts Ltd., 1987 (2) Lloyd's Law Reports 601, the Court of Appeal observed that there may be some cases where continued negotiations after a contract has allegedly been made will lead to the inference that the parties never in truth intended to bind themselves, as in Hussey v. Horne-S.P. Sayne, (1879) L.R. 4 Appeal Cases 311. The Court of Appeal further observed :
"THEparties are to be regarded as masters of their contractual fate. It is their intentions which matter and to which the Court must strive to give effect. In this endeavour, help is to be gained from the observation of Lord Denning Mr in Port Sudan Cotton Co. v. Chettiar, (1977) 2 Lloyd's Rep. 5 (at p. 10): In considering this question, I do not much like the analysis in the text-books of inquiring whether there was an offer and acceptance, or a counter-offer, and so forth. I prefer to examine the whole of the documents in the case and decide from them whether the parties did reach an agreement upon all material terms in such circumstances that the proper inference is that they agreed to be bound by those terms from that time onwards. That is, I think, the result of Brogden v. Metropolitan Railway Co., (1877) App. Cas. 666, and Hussey v. Horne-S. Payne, (1874) 4 App.Cas. 311. I think, furthermore, that the Court must bear constantly in mind the subject matter with which it is dealing. The relevant principles of the law of contract are, no doubt, of universal application, but the proper inference to draw may differ widely according to the facts of the particular case. One case may concern a protracted negotiation, perhaps conducted in writing through lawyers, between parties who have had no dealings of any kind before. Another may concern a series of quick-fire exchanges between professionals, both of them practitioners of the same trade, both having had many previous dealings, and with a wide measure of common experience, knowledge, language and understanding between them. One could not sensibly approach these cases in the same way. Inferences which it would be appropriate to draw in one case might be quite inappropriate in the other. But the Court's task remains essentially the same; to discern and give effect to the objective intentions of the parties."
The Court of Appeal concluded that the parties did mutually intend to bind themselves on the terms leaving certain subsidiary and legally un-essential terms to be settled later.
(55) The Madras High Court had occasion to consider the question whether there was a concluded contract in H.G. Krishna Reddy and Co. v. MM. Thimmiah and Another, , a Division Bench of the Madras High Court held:
"IT is now settled that if a document which is entered into between two parties and which is relied on as constituting a contract contemplates the execution of a further regular agreement between the parties. It is a matter of construction whether the execution of a further contract is a condition of the terms of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the original agreement should be performed. In the former case, there cannot be any enforeable contract unless the condition is fulfillled or on the ground that law does not recognise a contract to enter into a contract. In Ridgway v. Wharton, (1957) 6 Hlc 238, Lord Cranworth observed that the fact of a subsequent agreement being prepared may be evidence that the previous negotiations did not amount to an agreement, but the mere fact that persons wish to have a formal agreement drawn up does not establish the proposition that they cannot be bound by a previous agreement."
On facts the Madras High Court held that there was no concluded contract.
(56) This Court had occasion to consider the question whether there was a concluded contract between the parties on the facts of that case in J.K. Industries Limited v. Mohan Investments & Properties Private Limited, . The facts briefly are this. The defendant represented to the plaintiff that it owned certain premises and offered to grant lease of the premises to the plaintiff. The facts would indicate that the plaintiff gave certain amount as advance to the defendant during negotiations. The parties do not appear to have come to any concluded contract either by exchange of letters or by acceptance of money by the defendant: The receipt given by the defendant for the amount received from the plaintiff also indicated that the terms of the lease were yet to be finalised between the parties. Under those circumstances, this Court held that there was no concluded contract. This Court followed the principles laid down by the Madras High Court in the above case referred to.
(57) Therefore, on the facts and circumstances of this case, as pointed out by the Court of Appeal in 1987 (2) Lloyd's Report 601, it is the duty of the Court to find out from the facts of each case whether there has been a concluded contract. There is absolutely no difficulty in coming to the conclusion in this case that there has been concluded contract between the parties. Before I pass on to the next point, one argument of Dr. Singhvi, learned Senior Counsel for the defendant, has to be noticed on this aspect of the case. He contended that the Draft Agreement, according to him, was not approved by the Governing Council and, therefore, there was no concluded contract between the plaintiff and the defendant. The correspondence between the parties and the conduct of the defendant would show that this contention is not at all tenable. When the defendant had acted on the agreement it is futile on the part of the defendant to contend that it was not approved by the Governing Council. It is very significant to notice that the defendant has admitted the Memorandum by the learned Senior Counsel for the defendant. The bioscope of the Draft Agreement and the Memorandum of Understanding by the defendant is not at all justifiable.
(58) The learned Senior Counsel for the plaintiff relied upon the following cases:
1.Cummbhoy & Co. Ltd. v. L.A. Creetand Ors. . Abdul Jabbar slo Jaffar and Others v. Azizul H(nj s/o Mohd. Hay at Qureshi and Another Air (29) 1942 Peshawar 35. 3. Amritlal Maganlal v. Harkisandas Kahandas Air (33) 1946 Bombay 149. 4. K. Sriramulu v. Aswatha Narayana, .
for the proposition that the Court has to consider on the facts and circumstances of the case whether there has been a concluded contract. These cases support the case of the plaintiff.
(59) On the facts and circumstances of this case, I am unable to accept the argument of learned Senior Counsel Dr. Singhvi that there was no concluded contract between the parties and, therefore, the applicant-plaintiff is not entitled to any relief in this case.
(60) The next point to be considered is whether the letter dated 16.10.1995 issued by the defendant is justifiable.
(61) A survey of the events is necessary though it involves a repetition of some of the events already related but in a case of this nature such exercise becomes inevitable.The defendant filed atype set of paperson 14.11.1995 alongwith its reply to the application under Order 39, Rules I and 2 filed by the plaintiff. At page 140 the defendant has filed the agenda for the 22nd meeting of the Governing Council to be held on 26.11.1993. Agenda No. 22.06 reads:
"22.06Cost of interiors for the facilities block The budget estimates for the interiors of the Conference Centre and the Library (Rs. 3.5 crores) and the estimates for conference equipment (2.20 crores) have been approved by the Building Committee after presentations by the respective architects/consultants. However, the budgetary estimates of the cot of interiors of restaurants, guest houses, the equipment of the kitchen, etc. which amount to Rs. 7.19 crores and the cost of upgradation of services amounting to Rs. 3.79 crores have yet to be formally approved. The sub-committee appointed by the Governing Council to look into the finalisation of the operating agreement for the Hotel facilities approved the agreement as well as the scope of work and budget estimates for the facilities block at its last meeting. The break up of all these cots are at Annexure-D page No. 23. It has been the understanding from the beginning that the cost of interiors of the facility block should be met largely from membership fee and that these costs not be loaded on to the institutional members. The amount expected to be generated through membership entrance fee is not likely two exceed Rs. 10 crores, leaving an uncovered gap for Rs. 7 crores (approx). There are to options to raise this amount: (i) We could "sell" the conference centre to a large corporate organisation such as Itc, Pepsi, etc. The Company which decides to make this contribution would lend its name and the conference centre would be named the Habitat-(Go's name) Conference Centre. As is the case will the Ncpa Bombay, Wwf Delhi, etc."
The Council ratified the decision of the Sub-Committee in approving the budgetary estimates for the cost of interiors for the facilities block. On the same Agenda 22.06 at page 141 in the second paragraph it is stated: "The subcommittee appointed by the Governing Council to look into the finalisation of the operating agreement for the Hotel facilities approved the agreement as well as the scope of work and budget estimates for the facilities block at its last meeting. The break up of all these cots are at Annexure-D page No. 23."
(62) The defendant states that the contract has never been approved by the Governing Council of the defendant which alone is competent to conclude a contract with the plaintiff. The defendant being a public body is expected to act fairly and place all the material before Court. The minutes of the meeting was filed on 29.1.1996 alongwith an affidavit. The affidavits are filed by Mr. K.K. Bhatnagar, Mr. R.K. Pachauri and Mr. Dinesh Mehta. I am not able to appreciate what is stated in the affidavits. That cannot be taken as evidence. The minutes now filed by the defendant on 29.1.1996 does not show that the Governing Council rejected the contract. When a serious matter about budget proposal by the plaintiff is being considered by the Governing Council it is futile on the part of the defendant to say that the Governing Council did not consider the contract. The members of the Governing Council must have been aware of what was going on. If they want us to believe that they did not have any knowledge of the agreement/I am afraid, they demonstrate themselves totally unequal to the task entrusted to them. A commercial venture has to be approached with commercial perception and the bureacratical methodology may be cautious but would be counter productive not only with reference to the work on hand but in general. The Officers Incharge of a big project involving several crores of rupees are expected to be vigilant and are expected to act with alacrity. They are to have in mind the twin objects, the public interest and the rights of the citizens.
(63) On 3.2.1994 the plaintiff sent photo copies of the advertisement issued by it to show that it is going to have a team to work in the Complex for the purpose of providing an exemplary service to the members and the invitees to the Centre. On the same day, the plaintiff wrote to the defendant giving a progress report. The plaintiff stated therein: "We feel that it would be helpful for you to get an up to date progress report on our activities. We have briefly explained the status of some of the areas and activities entrusted to us and shall follow up soon with a more elaborate one". The plaintiff had indicated that the Managing Director had travelled abroad to garner necessary talent for the working of the system. The report is relevant, because the efforts taken by the plaintiff pursuant to the contract are evident therefrom and it shows the earnestness of the plaintiff to act in accordance with the terms of the contract. The report reads as follows :
"PROGRESSREPORT Operational Planning The undersigned had made two trips overseas which were greatly beneficial in etching out the various interior as well as F & B concepts, researching current trends, seeing modern equipmentand hiring several chefs/instructors for training. We have been working on the facility planning and in the process have involved several consultants and eminent experts in the field. We are pleased to inform you that inspite of the challenges that this project presented, we shall now probably have the most professionally planned food service facility in the whole country. This has taken months of effort and trips to almost all the kitchens and back of the house areas of every single hotel and flight kitchen in Delhi, as well as some in Bombay and of course abroad. We have short-listed a list of vendors and shall soon be tendering for the equipment in a phased manner. Since a lot of the equipment would have to be imported, we have had discussions with several reputed manufacturers as well as their agents in India and are finalising our brand preferences and requirements. At that same time our people have been liaising with the Reserve Bank and the Ministry of Tourism in order to negotiate a referential duty structure on the import duties. We had, of course, already done enough home work on equipment in order to prepare an approximate budget for the sub-committee a few months ago. There shall, however, be some variations, and that too, since you get to know a project better only over time and several operational peculiarities also come to light. We are, however, concerned about the pace of the project sine the estimated prices shall of course increase the longer we delay the project. Most of the areas still lack the services input and getting them started seems to be a long term option. In fact that water in the lower basement till date has not permitted our consultants to even explore the said area properly. Recruitment Old World Hospitality Private Ltd. has already recruited a few key executives and spent generously on a recruitment campaign in order to attract the finest talent in the land. We have also attached a lot of importance to our management training programme and you shall be happy to know that we have selected an extremely bright batch of management trainees from the Catering Institutes. We interviewed hundreds of students personally and have hand picked the few we feel shall be long term assets at the India Habitat Centre. Within the course of the next month, we would be hiring almost all our key executives and department heads. We would thus be requiring office space almost immediately at the centre. A start up General Manager, Mr. Pierre Fori, with over 35 years of experience in the U.S. shall bejoining us on February 15,1994 for a few months. His forte is operational planning, systems and training. He is also extremely strong in cuisines and is a celebrated television personality. Interiors Mr. Mohit Gujral and his team at Casa Plus have been working full steam on the interior planning with us. The planning of the club with its rooms is almost complete. We are ready to allot work on the civil component manly of the back of the house areas. We targetted the upper and lower basements as top priority ares and for speed and ease in procedures we recommend alloting this work to the original contractors based upon your current price parameters. We are still awaiting a tremendous amount of input from M/s. Sdb and their Services Consultants which is crucial to our planning since all aspects are tied to each other. Once we get all the required information, our work will truly get on line. We propose to stagger the opening of the various food and beverage outlets over the course of the year according to priority as well cuisiness. We have been looking for project people and the recruitment advertisement releasing this weekend would hopefully reap quick results."
(64) The defendant has not disputed this. Nothing is mentioned at the time of arguments nor is it mentioned in the affidavits filed by the officers.
(65) On 7.2.1994 the defendant wrote to Mr. Summit Ghosh, Hauz Khas about the meeting to be held on 10.2.1994. The defendant expressed the view that such meeting should be held on every Tuesday and Thursday. On the same day, the defendant wrote to Mr. J.R. Bhalla of Stean Doshi & Bhalla, the Consultants appointed by the defendant about the meeting to be held on every Tuesday and Thursday to discuss and finalise matters regarding the upgradation of services. A copy was sent to the plaintiff. This was filed by the defendant and no explanation is forthcoming from the defendant as to why a copy was sent to the plaintiff. It should have been stated or explained by staling that it is because of a tentative arrangement the plaintiff also expected to be in the meeting. The inference is irresistible that the plaintiff was instructed because of the contract.
(66) On 18.2.1994 the plaintiff sent a copy of the communication circulated to all Travel Agents. Organisations of Conference about the service in the Centre. The plaintiff stated in the beginning of the letter "We are pleased to inform you that we have been awarded the licence to operate the hospitality facilities at India Habitat Centre".
(67) The Director of the Centre circulated the Agenda for the 68th meeting of the Building Committee to be held on 7.3.1994. In paragraph 68.10 the Agenda reads as under:
"ALLOCATIONof 300 sqm at upper ground floor zone 4 for resultant That work of operation and management of the facilities block has been awarded to M/s. Old World Hospitality Services. When offers were invited Ihc had indicated capacities of various restaurants and conference halls, based on which all quotations wYere made by the tenderers. On the award of work and on detail design analysis it was found that the capacities were falling way short of what was estimated in the following areas due to following reasons. (a) Those areas which were earlier conference-cum-eating areas were now designated either as dedicated conferences or eating areas thus resulting in a loss of effective catering areas. (b) The figures for capacities indicated by Ihc in the tender papers were not in conformity with hotel industry standards and in actual fact there was lesser effective capacity for catering than indicated in our bid papers. Due to the above it was found out that they were short of around 300-400 covers overall. The matter was discussed with M/s. Old World and Sdb and it was agreed that the loss in capacities was genuine. Earlier an area in the West Court was designated for food service which was later excluded from the scope for which offers were invited. Looking to the above and also to the fact that the profit sharing promised by M/s. Old World was dependenton actual capacities which has been reduced substantially it is proposed that an area of around 300 sqm be provided above the existing restaurant in the East Court so as to use the existing kitchen as the supply point."
The Member" of the Governg Council of the defendant cannot pretend that they were not aware of what was happening in the meeting of the Building Committee. On the 7th of March, 1994 the plaintiff wrote to the defendant that as per the contract between the plaintiff and the defendant the latter had included a clause in the agreements between the defendant and the third parties who would be entrusted the work of maintenance and security, etc. in the Comp lex mention ing about the plaintiff. Nothing was said about this in the arguments. No reply had been sent by the defendant to the plaintiff. On the l6th of March, 1994 the plaintiff wrote to the defendant expressing its difficulties in proceeding further in the matter in the following terms:
"MR.Sarath Kant Monitoring Officer India Habitat Centre Lodhi Road New Delhi. Dear Sir, This is to inform you that till date we have not received the landscape drawings from M/s. Sdb inspite of repeated promises. Besides the landscape work is still going on in all the areas and since only we know operationally where the greens and paved areas should be, it would be a shame to undo all the work down. We are also surprised that inspite of repeated reminders the work is still going on in other areas as well. We would also like to remind you again that the temporary office space is still not ready. It takes its toll on our resources since we need to accommodate so many people. Also, the project team not being on site is delaying the completion of the project. The onus for any delay sunder standably should not be entirely on us. Please expedite all the above mentioned items in the best interest of the project."
On the 29th of March, 1994 the plaintiff on similar lines wrote to the defendant. In the concluding paragraph of the letter the plaintiff said :
"WITHseveral operational executives waiting to move into our site office as well as the project team also being without any space, we would urge you to expedite giving us the office space. The project has been getting delayed and it is quite surprising that we are completing almost a year of interaction and have not been in a position to activate any work. This as you well understand, shall increase the delay of the commissioning as you will understand."
On the 31st of March, 1994 the plaintiff wrote to the defendant giving suggestions about the communication system inside the Complex and about the transportation of goods intra Complex.
(66) On the 5th of April, 1994 the Director of the defendant sent a copy of the agreement to the plaintiff. On that day it self a Memorandum of Understanding was executed between the parties about which I have already referred to. It is not the case of the defendant that before 5th of April, 1994 the financial implication of the project were not studied by the defendant. This Memorandum of Understanding is not disputed. I shall refer to the nature of the attack on this Memorandum of Understanding a little later when I deal with the submissions made by learned Senior Counsel Dr. Singhvi on behalf of the defendant.
(67) 0N 3rd of May,1994 the Monitoring Officer Mr.U.Sarath C.Kanth of the defendant wrote to the plaintiff in the following terms:
"ENCLOSEDplease find aletter from M/s. Casa Plus dated April 2, 1994 with regard to things, to be bought for the Project Office. The matter has been discussed with the Director and it is clear as to why this has been forwarded to IHC. You are requested to kindly discuss this with the Director Ihc since this is not part of our agreement."
(68) On the 11th of May, 1994 the plaintiff wrote to the defendant about the bud get estimates and the project cost. At the end ofthe letter the plaintiff had stated:
"THEREFORE,our total budget as compared to the previous one would now be around Rs. 13.25croresascompared to 11.11crores in the previous budget. So the actual increase would barely be 5% to 7% of the budget which is not bad considering it was just a rough estimate."
(69) On the 13th of May, 1994 the defendant wrote to all members of the Building Committee enclosing the Agenda for the 70th Meeting of the Building Committee to be held on the 16th of May, 1994. In paragraph 7.07 if is stated "the work of operation and the management ofthe facilities block has been awarded to M/s. Old World Hospitality Services".
(70) On the 25th of May, 1994 the defendant had given a certificate in the following terms:
"TOWHOMSOEVER It May Concern This is to confirm that M/s. Old World Hospitality Pvt. Ltd., 4/15A, Asaf Ali Road, New Delhi-110002 has been awarded Licence to operate the hospitality facilities at the India Habitat Centre, Lodhi Road, New Delhi as per the layout attached. This certificate is issued at the request for M/s. Old World Hospitality Pvt. Ltd. to enable them to obtain various licences/permissions/approval from different Government/Statutory Bodies in connection with their licensed operations consisting of Club, Restaurants, Bars, Conference Rooms, Auditorium, Banquets, etc."
(71) On the 26th of May, 1994 the plaintiff wrote to the defendant about the discussions the parties had. In paragraph 2 it is stated :
"Achart depicting the various areas and the short fall was also prepared by your office in October, 1993. We had at that time requested for the space on the upper ground floor on the East Court admeasuring 5,500 sq. ft. Thereafter we were informed that we Would only get 384 square metres and selected a space that fits into a specific grid over the kitchen as well as the restaurant below."
Aserious matter had been mooted out by the plaintiff and that was apparently being considered by the defendant. Nothing is mentioned about it in the reply of the arguments.
(72) On the 27th of May, 1994 the plaintiff again wrote to the defendant about the Comprehensive Project Budget. Here also the plaintiff made it clear "Therefore, as we had clarified earlier the initial costs presented were only rough estimates to form some basis of the volume of work to be done and it is only now that one can present the estimates as true estimated cost. "This has involved a tremendous exercise of M/s. Casa Plus as well as our entire team in the absence of all B.Q.Qs. and supplier's quotes". This letter is referred to in the Agenda for the 71st Building Committee Meeting to be held on the 6th of July, 1994.
(73) On the 23rd of June, 1994 the plaintiff wrote to the defendant enclosing a letter from Casa Plus. The letter from Casa Plus is stated to be dated 27.6.1994. It may not be correct because in the letter dated 23.6.1994 reference naturally cannot be made to any letter dated 27.6.1994 but that is a different point. The fact is that the plaintiff had written a letter to the defendant enclosing the letter from Casa Plus about the work.
(74) On the 5th of July, 1994 defendant had sent all Members of the Building Committee the Agenda for the 71st Meeting wherein also reference is made to the Work in the Block Complex. Such a Building Committee Meeting would not have been necessary but for the contract given to the plaintiff. In the minutes of the 71st Meeting of the Building Committee the Members of the Building Committee had decided only about the work in the Complex.
(75) Without disclosing any reason the defendant wrote to Casa Plus with a copy to the plaintiff in the following terms:
"DUEto certain policy decisions to be finalised by Ihc with regard to the Hospitality block it has been decided to temporarily suspend all execution of work at site for works that have already been awarded. You are requested to kindly do the needful in this regard and instruct the contractors to temporarily suspend the execution of the mock-up rooms and back of house facility until further instruction."
A vague statement is made that certain policy decisions to be finalised by the defendant, The officers of the defendant must have considered the matter in his proper perspective and having awarded the contract to the plaintiff they cannot unilaterally stop the work and what happens subsequently would also disclose the arbitrary nature of the actions of the defendant. On the 9th of July, 1994 Casa Plus wrote to the defendant in response to the letter dated 7th of July, 1994 and Casa Plus had following the instructions from the defendant to stop the work. Subsequently, there was a note by the Director of the defendant for the special meeting of the Building Committee to be held on 13th of July, 1994. At page 4 of the note it is stated "in the initial bid by the plaintiff Rs. 2.47 crores were shown as the cost of interiors fixtures furniture for the Guest Room and the Restaurant". The fact that the figures have undergone substantial change for a variety of reasons is also noted. In the paragraph headed 'Conclusion' it is stated as follows:
"WEhave reached the final stages of the project with necessary approvals of concepts and budgets at every stage. Regarding our licence arrangement Ihc has been fair and equitable in its dealings with all bidders. If the budget appears to be large it is on account of the facilities to be provided by Ihc rather than demands being made by the licencee. We also have to take into account the fact that the licences has come a long way, made financial and other commitments towards his preparedness to start operations. I do not think we have an option to go back and start all over again. The cost of the delay and the legal costs would also be a factor to consider."
On the 13th of July,1994 the plaintiff wrote to the Director of the defendant about the letter addressed to Casa Plus and also staling that the plaintiff had employed about 51 employees and the work was going on. The plaintiff is training a batch of the 21 brightest managing trainees picking them up from 800 Graduates. The plaintiff has also stated about the efforts it had taken to secure the best possible talent for doing the job in the Complex. The plaintiff also brought to the notice of the defendant that the Managing Director had refused several other assignments depending upon the work in the Complex and he wanted to discharge his obligations under the contract.
(76) On the 26th of July, 1994 the defendant wrote to the plaintiff enclosing a cheque for Rs. 2,83,197.00 towards amount payable to the suppliers. No argument was advanced on this by Dr. Singhvi.
(77) On 28th of July, 1994 the defendant sent to all the Members of the Building Committee Agenda for the 72nd Meeting of the Building Committee to be held on 29th of July, 1994. What is mentioned in paragraph 72.0 is about the Project Budgetary Estimates. Here also the Agenda mentions about the extra area to be allotted to the plaintiff. The relevant portion reads :
(A)Extra are to be allotted to M/s. Old World The area to be allocated now to the Facilities is in lieu of loss usable food service areas and conference areas earlier indicated thus resulting in loss in the revenue. When the offers were invited from various hotel groups Ihc had specified certain capacities for the conference rooms restaurants, etc. in order to ensure the quotes made would be at par and could then be assessed easily. Based on these figures the offer received from M/s. Old World Hospitality Pvt. Ltd. had indicated the capacities assumed for their calculation as indicated. This had been arrived at after seeing the site and the area for each outlet a comparative between the figures are given below -
Description Area in sqm As per Asper OWH's Difference Ihc offer 1. East Court 375 400 +25 Food Court 2. East Court 500 250 -250 Restaurant 3. South Block Cafe 200 150 -50 4. South Block 150 80 -70 5th floor 5. South Block 200 160 -40 6th floor 6. Banquet 400 250 -150 7. Health Club - - - 8. Business Centre - 100 +100 9. Packed Food - 1800 +1800
From the above table the short fall noted is Rs. 4.35 crores, even after which the party had offered a guaranteed return of Rs. 4.00 crores. Subsequently during discussions it was mentioned by M/s. Owh that they were using the conference halls also to serve lunch and dinner for the conferences which was not acceptable to M/s. Sdb the prime consultants. Hence Owh were asked to reconfigure the food outlets servicing the conferences. This was done alongwith Sdb and resulted in designated separate conference rooms and food service areas which in turn resulted in a loss in the total number of conference rooms since some of the earlier conference cum catering areas had now been converted into designated catering outlets. This has now resulted in a loss of 4 conference rooms out of the 14 indicated in the original bid papers and hence has resulted in a loss of revenue both in terms of conferences and banquet or party spaces for the evenings. The loss has been quantified as follows: (b) Banquet facilities As against an original offer of Rs. 17,14,000.00 month due to the changes in function the revenue from banquet had dropped to Rs. 11,88,000.00 month, since against the earliermentioned conferences halls which were also being used for banquets in the evenings only 5 halls were now available for food services. (c) Conferences facilities Against the original offerofRs.24,20,000.00 month froml4halls,due to the restricted usage of conference halls and dedicated food service area the revenue from the conferences has now dropped to Rs. 13,44,000.00 due to halls being reduced to 10 from the earlier mentioned 14 with the lower capacities being affected the most. Incidentally the lower capacity halls are the ones which have been found to be more frequently in use in the other such conference centres. These are figures given over a year ago. Further to the above Owh have also used up the entire ground floor cafeteria space for putting up their main kitchen to serve the south block since the space provided earlier for the kitchen was found to be insufficient or inadequate for a kitchen to serve two restaurants, guest house and the conferences. This has further cut down the area for the food services. The health club lounge was later merged with the pool coffee shop and children activity centre to provide 100 covers extra 85 sqm was added to East Court restaurant. But the shortage still persisted. It is in lieu of this and the loss in revenues in the conference area as mentioned above that Owh have requested for extra space to be utilised for food service so as to make up the short fall in revenue and hence give Ihc the promised return. The Building Committee in its last meeting took the view that in case there was a seizable loss which in tune reflected on the revenue and therefore, on the contractual obligation we would have to compensate him. The Building Committee may approve providing of 300 sqm at upper ground continuous with existing kitchen facility to compensate for above loss."
(78) In August, 1994 the Auditor of the defendant was asked to examine the financial implications of the Project and the Auditors had given a note mentioning all the aspects of the matter. The Auditor also refers to the legal opinion obtained by the defendant. Nothing is mentioned by the defendant in the reply about this Auditor's report or the legal opinion. At the time of the arguments, learned Senior Counsel for the defendant submitted that the legal opinion given by the defendant's Counsel is a privileged communication and, therefore, that cannot be disclosed and filed. The Auditor had categorically stated that the transaction would be profitable to the defendant.
(79) On the 2nd of September, 1994 the defendant had sent Agenda for the 74th Meeting of the Building Committee to be held on the 7th of September, 1994. In the document a brief history of the matter is given. At page 99 in the type set filed by the plaintiff alongwith the rejoinder it is noticed that detailed exercise p. 111.2 relating to the budget was undertaken and was presented in detail at its 23rd Meeting on 27th of May, 1994. This was done as per the direction of the Governing Council as detailed in the minutes available at paragraph 22.05 of the earlier meeting. Reference also is made to the fact that the estimated figure at Rs. 16.68 crores was approved by the Governing Council in November, 1993 meeting. At page 101 it is explained as to why there is change in figures in the budget and in the conclusion paragraph it is stated as follows:
"WEhave reached the final stages of the project with necessary approvals of concepts and budgets at every stage. Regarding our licence arrangement Ihc has been fair and equitable in its dealings with all bidders. If the budget appears to be large it is on account of the facilities to be provided by Ihc rather than demands being made by the licencee. We also have to take into account the fact that the licences has come a long way, made financial and other commitments towards his preparedness to start operations. I do not think we have an option to go back and start all over again. The cost of the delay and the legal costs would also be a factor to consider."
(80) On 2nd of September, 1994 Mr. VinayJha, Director of the defendant wrote to Mr. K.K. Bhatnagar giving his comments on the salient features what had happened. The Cmd, Hudco Mr. K.K. Bhatnagar had received the comments and he had not raised any objection relating to the matter.
(81) On the 15th of September, 1994 there was a meeting of the Governing Council of the defendant Mr. K.K. Bhatnagar was present in the meeting. Dr. R.K. Pachauri and Mr. Dinesh Mehta were not present. In the meeting it was decided:
"THECouncil noted the above and were of the opinion that since the Building Committee was looking into the matter, they may have another meeting before they finalise their recommendation and circulate the same to the members of the Governing Council for their consideration. The Council also felt that as recommended by Chairman Hudco expert opinions could be taken with regard to the adequacy of the spaces since it was felt that the increase incost was basically arising out of this increase in the area for the facility. It was decided that Ihc would get in touch with Mr. A.K. Dave and Associates as well as the Institute of Catering and Hotel Management to get an opinion in this regard, It was decided that the above exercise be carried out and the matter finalised by the first week of October so that work could be resumed."
There was no suggestion that the contract with the plaintiff should be terminated, but as a matter of fact the Governing Council directed the resumption of the work.
(82) On the 4th of October, 1994 the plaintiff wrote the following to Mr. Samath Kanth, Monitoring Officer of the defendant:
"THIS is to inform you that we have completed over a month and a half of licensed operations. The Gross Operating Revenue earned from licensed operations for the period was Rs. 48,904.27 on which the IHC's share is being credited to your account as per our agreement. The share does not include the other sale relating to low budget canteen meals and subsidised tea and meals to Ihc and Thali an and other exempted revenue. This is for your record and kind information. In the Habitat October issue mention is made about the plaintiffs Trainees topped in the list of candidates appearing for the examination."
(83) On the 8th of November, 1994 the plaintiff wrote to the defendant about the stoppage of work and also about space. The letter reads as follows :
"THIS is with reference to the licensed operations of Ihc awarded to us. All plans, budget estimates were finalised and approved in October, 1993. We were given the go ahead to commence work. We commenced and began investments Construction was going on till 7th July, 1994. On account of some internal matter you had advised our Architects for temporary suspension of work. This brought the entire activity to a stand still. We had repeated meetings with your office to resume the work. We were basically informed that the stoppage is due to IHC's own internal budgeting problem, which will be sorted out shortly. Kindly refer to the meeting that was held on Monday, November 7, in the chambers of the President, India Habitat Centre. In the aforesaid meeting, we were asked to present some sort of package in which we would surrender some space to help the Centre meet its financial requirement and reduced its constrains. This meeting was brought about due to the unfortunate turn of events that the project had taken over the past few months. In our last meeting on October 19, the Building Committee had requested us to look into the possibilities of reducing spaces and thereby budgets. This had come on the heel of 11 successive meetings held over four months in which our spaces according to bid invitation as well as standard norms, budgets, as well as the entire stand was totally vindicated. The Centre also appointed outside consultants to examine the matter whether spaces were adequate or not and we are given to understand that they also found the spaces as inadequate. Hence it is evident that surrender of further space would undermine service capabilities of the Centre. In view of the said request, in a spirit of co-operation and since this delay is costing not only us but the Centre too in terms of expense, good will and reputation, we decided to re-do a section of the planning as well as come up with various other means of helping the financial health of the Centre. We discussed our proposal in great length during the meeting on November, 7 and were requested by those present to submit it in writing after adding a couple of other formats. We are doing so and have been assured that a decision would be reached during your meeting on November 10,1994. As suggested by you during the meeting, we have worked out the figures in consultation with Ihc officials and these are, therefore, endorsed by them. The proposal is as annexed. Kindly note that our proposal is resulting in an initial gain to Ihc of approximately Rs. 3.67 crores and during the tenure of approximately over Rs. 70 crores. In contrast delays due to no fault of ours have resulted in huge losses to OWH. Even though we will be suffering on account of lack of space, etc. we have in this package worked out an initial revenue benefit to Ihc amounting to approximately Rs. 3.67 crores. The proposals herein is composite and would be workable only if accepted in totality. Pending composite acceptance by both of us, the same is without prejudice to the mandate granted to us. Thus this proposition is being made with trust and faith in the fact that our view and proposal would be appreciated and that keeping in view our intense commitment to the success of this project, a just decision would be arrived at. We look forward to a decision from you on November Ii, 1994."
(84) On the 9th of November, 1994 the Director wrote to the Members of the Governing Council for a special meeting to be held on 10th of November, 1994. Reference is made to the budget and also other suggestions made by the plaintiff and at page 34 type set filed alongwith the rejoinder it is stated :
"INaddition the following decisions are to be taken : (a) Commencement of construction immediately so as to ensure completion in a year's time but have phased openings beginning March-April, 1995. (b) Streamlining of purchase procedures to ensure least delays. (e) Approval for utilisation of outdoor areas for catering in the evening;. and during non office hours."
(85) The minutes of the meeting of the Governing Council held on the 10th of November, 1994 is at page 39 of the type set filed alongwith the rejoinder. In that meeting Mr. K.K. Bhatnagar, Cmd, Hudco and Mr. Dinesh Mehta were present. Dr. R.K. Pachauri was not present. The Members said :
"THEmembers examined in detail, the space requirement specially in relation to the kitchens and the back-of-the-house facilities. In response to a question, it was clarified that back-of-the-house included storage, pro-preparation of food before it went into the kitchens, administrative offices and areas used by the staff, e.g., locker rooms, toilets, etc. The proposal of the licencee to relocate the fast food preparation facilities outside the complex was also examined especially in the context of the problem of converting some storage space into Far space and the resultant compounding charges. This proposal had been made in response to certain options formulated by the Building Committee in respect of hospitality operations. It was pointed out that the major difference in the space requirement between what was originally planned and what lias now been assessed to be necessary due to the perception of the size of the operations and the employee strength of the operator asestimated originally and as planned by the operator/licencee. Regarding the size of operations, the architect/consultants had the correct data on the numbers and there seemed to be no difference in perception. They had also stated that they had planned for adequate spaces.On the question of the back-of-the-house spaces, with particular reference to the number of employees required for the operations, the architect/consultants had planned on an employee strength of 80. The licencee/operator' scontention was that the kitchen spaces were inadequate not only considering of the number of meals to be served but also because of the dispersed nature of the operations scattered all over the complex and the absence of a centralized kitchen at the central hub of the service outlets as in hotel complexes. Therefore, there was under-estimation on part of the consultant who did the original planning. This question had been referred to hotel management experts, viz., Shri A.K. Dave, Consultants and the Institute of Catering and Hotel Management as per the earlier decision of the Governing Council besides making an in house assessment by IHC's own Architects and Engineering Consultant. The conclusion of all these three exercises was that the kitchen, pantry and back-of-the-house spaces were indeed inadequate as originally planned and that these spaces as assessed and shown as required by the licencee operator were not unreasonable. Shri A.K. Dave, Consultant had also held that 540 persons were required to operate the hospitality/conference services. The Governing Council ruled out the option of shifting off site facilities outside. It was also of the view that conversion of non-FAR space to Far space is unavoidable to some extent but should be kept to the absolute minimum. Considering the circumstances and the opinion of the experts, the following space utilization was approved by the Governing Council. Figure indicated Figure now in bid invitation approved 1. Restaurant 1970 sqm 1708 sqm 2. Kitchen 536 sqm 855 sqm
3. Pantry 100 sqm 209 sqm 4. Back of the house 1452 sqm 2599 sqm (On the basis of actual calculation) In respect of the project costs, the Governing Council was of the view that the format of the presentation of figures did not correctly reflect the picture. The cost of services and facilities that were to be provided by Ihc, the scope of work transferred from other contracts and the increase in cost over bid figures due to changes in specifications made on request of Ihc, etc. should be shown separately to enable a correct assessment of the cost increases. In other words, the revised format should clearly show what was transferred from other accounts, what was due to inadequate original provision and what was due to increase of space. The Governing Council also desired that the provisions for additional lifts in place of dumb waiter, generator and kitchen equipment be reviewed again and their justification reconfirmed. It was decided that these proposals be given a final shape and put up for the approval of the Governing Council at a meeting to be convened on November 21, 1994 at 4.30 p.m.
Further, the Governing Council decided :
"(1)That a blue collar canteen be provided in the basement and that the cost implications for this both in terms of interiors and space conversion (FAR) be indicated separately, (2) Not to accept the proposal to shirt some of the food processing to offsite locations and, therefore, not to consider the loan request of the operator in this connection. However, the request of the operator for a working capital loan could be considered separately, (3) Not to give up any share of the fitness centre income, (4) To accept the offer of the operator in respect of promotional expenditure (Rs. 24 lakhs annually) by him or sponsors on his behalf and a 60% share in rental income of audio visual equipment in the Conference Centre. The question of project management, supervision and monitoring also came up for discussion. The Governing Council was of the view that the project management team of Casa Plus should be supervised from time to time by either a team from Nbcc of Cpwd specially with a view to check quality and adherence to specifications. This should be done in addition to the monitoring by Ihc and its Engineering Consultant. Pending the review on November 21,1994, the Governing Council decided that the work on the facilities block which had been ordered to be stopped by the Building Committee be resumed forthwith."
(86) On the 21st December, 1994 the plaintiff wrote to the defendant requesting co-operation in the matter. In the first paragraph, it is stated as follows:
"THIS is a follow-up on your letter dated November Ii, 1994. We are pleased to inform you that work is on in full swing again, although as estimated, it did take quite a long time to remobilize all the concerned parties. We would now have to work on a war footing to begin some operations by summer."
(87) Therefore, the work which was stopped for nearly 5 months was resumed is clear from the above documents.
(88) On the 22nd of December,1994 the Director wrote to the Members of the Governing Council enclosing supplementary Agenda for the meeting to be held on the 23rd of December, 1994.
(89) On the 11th of November, 1994 as I had pointed out earlier the defendant had written to the plaintiff in the following terms:
"THIS is to inform you that you may resume work at site and on the design of Hospitality Facility at India Habitat Centre. A decision regarding all other issues is to be taken shortly and will be conveyed to you indue course of time. "
(90) The defendant had made it clear that the plaintiff can resume the work and reference is made to issues which were only relating to the space and the approval of the budget.
(91) On the 16th of January, 1995 the plaintiff wrote to the defendant in the- following terms:
"THIS is a follow-up on our letter dated December 21, 1994. We made a presentation to the General Council on November, 7 and the Committee quite kindly acceded to our requests since they were considered justifiable. However, several issues have still not been resolved and the Committee was expected to meet on November 21,1994 to do so. That meeting was postponed to December 23, 1994 wherein again we believe the Committee could not deliberate upon our issues due to paucity of time. We would like to submit now that the following points need to be addressed immediately : 1. The General Counil had realised that the delay caused by India Habitat Centre had cost us a tremendous amount not only in time but in precious finances. Our situation now is quite grim and we shall be running out of bank loaned funds in a very short period. We had thus made a proposal to you on November 8, 1994 and are eagerly awaiting disbursement of the funds. 2. We need to urgently shift our project office to the East Court first floor area and are awaiting your permission for that. 3. We would also like to point out that inspite of the mutually taken decision that the project work would have to start on a war footing things are not proceeding with the speed that they ought to. Inspite of awarding contracts to IHC's old contractors who were already working on site, wherein the terms were as per IHC's agreement, the tenders are yet to be awarded. Mr. Gujral's letter dated January 2 is enclosed as anenclosure and is self-explanatory. With a highly qualified project management team at the disposal of Ihc as well as a dedicated team of hotel professionals working full time to ensure that both Ihc and Owh do not lose any more time or money, we could certainly work more expeditiously. What is more worrying us mostis the fact that the members are most definitely expecting an opening in March after an earlier let down. This seems to be an impossible deadline judging by the current state of affairs. We would thus urge your office to take much quicker decisions on awarding tenders etc. so that we can attain our targets."
(92) On the 7th of February, 1995 the plaintiff wrote to the defendant about the booking requests by various persons.
(93) On the 9th of February, 1995 the plaintiff wrote to the defendant seeking permission to write all Members or programmes.
(94) On the 15th of February, 1995 the plaintiff wrote to the defendant is reply to the query raised by the defendant about exact earnings of the plaintiff. The plaintiff wrote in the following terms :
"THIS is with reference to your query regarding the exact earnings that Old Worid Hospitality would have out of the licensed operations at India Habitat Centre This question was put up to us by your auditors in August, 1994 too. We were awarded the licence in a fair tender and have been informed that our bid was almost the times higher than our nearest rival. Whatever we earn or do not earn out of this project shall be based on our efforts and efficient operations. Since we were requested to share information with you by your auditors and not having anything to hide, we did so. Since that day, our estimated investments have more than quadrupled due to work delays caused by the Centre and our pay back period seems even rather away than earlier envisaged. Being geared up to begin operations and having to bar tremendous overheads, we are already in dire straits financially. In this context we are now being asked whether a net return of 28% on the licensed operations is a fair amou for us to "take home". The return oi" 28% is not our net income but Gross Operation Profit. It appears that the concept of Gross Operating Profit as prevail ing in our business has not been properly understood. 28%
wasprojectedasaprobableGrossOperatingProfit(G.O.P.). To compute net profit, we have to first pay/our license fee share out of this G.O.P., take care of our investment and interestand then "take home" the rest. To better illustrate the picture, we are presenting as Annexure "A' our comparative earnings statement. We must add that these are approximate projected figures and further delay in start of operations as well as other factors would adversely disturb these projections. For no fault on our part and on account of reasons mentioned in our earlier letters the project has been delayed by several months and tremendous losses have been borne by the licencee. in fact the loan to tide over these losses for the time being has still not been given. Other than the initial investment these losses would also take a long time to recover. The Gross Operating Profit in a property which has tariffs controlled, as well as no precedence in any other facility which has a club, convention centre, cultural venues and restaurants, is at best a hypothetical assumption. The licencee would definitely take quite a beating in the first couple of years but as turn over increases our margin shall increase. The Centre, however, is assured of Rs. 4 crores from the first full financial year itself. The query regarding computation of our earnings has no bearing on our relationship. We have still tried to co-operate with by giving the enclosed comparative statement and hope that the matter now stands closed."
(95) On the 13th of March, 1995 the plaintiff wrote to the defendant requesting the defendant to get clearance from public Authorities. The letter reads as follows:
"ENCLOSEDplease find a list in respect of the captioned subject with a target of opening Banquet Halls and some rooms by June 15, 1995. You may kindly observe that it is mandatory to submit clearance of Fire Dept. and Occupation Certificate from M.CJ). alongwith the applications for most of the operational licences. You are, therefore, requested to take expeditious action to obtain the same keeping in view the urgency involved in implementation of the Project. As regards licences, for which Fire Clearance & Occupation Certificate are not required, we have already started taking action and shall co-ordinate with you as and when required for disbursement of fees."
(96) On the 21st of March, 1995 the plaintiff wrote to the defendant for mobilisation advance.
(97) On the 24th of March, 1995 the Director sent to all the Members of the Building Committee Agenda for the 78th Building Committee Meeting to be held on 31st of March, 1995. In paragraph 78.04 the subject relating to the loan requested by the licencee is mentioned in the following terms:
"THELicencee had submitted on November 7, to the Committee that in addition to the money required for the laundry, they would also need some mobilisation money due to the delay in the project due to suspension in work. They have subsequently enhanced that request by Rs. 25 lakhs taking the amount to Rs. 125 lakhs. Part of this is to finance the laundry which would have been the Centre's capital expense. It had been decided by the Centre that it would loan this amount rather than invest in a laundry operation off site where it would have no control. The pay back of this amount is guaranteed since the Centre would be collecting the revenue accrued from fitness centre fees. Annexure at Iii enumerates the potential share of the Centre and the licencee. The licencee would not be disbursed their share till the loan alongwith interest at 18% is realised by the Centre. According to projection this would take less than 3 years. The projected health club income and calculation are at Annexure IV."
(98) On the 29th of March, 1995 the Director sent supplementary Agenda for the meeting of the Building Committee to be held on 31st of March, 1995.
(99) Then in the meeting held on the 31st of March, 1995 the Building Committee decided to place the matter before the Governing Council.
(100) This is the cause for the letter dated 16.10.1995. The defendant was not inclined to grant the loan and later on it had dedded to terminate the contract.
(101) On the 4th of April, 1995 the plaintiff wrote to the defendant enclosing a cheque towards the share of the defendant.
(102) On the 29th of April, 1995 plaintiff wrote to the defendant about the joint inventory of the assets taken on 3rd of April, 1995.
(103) On the 1st of May, 1995 the plaintiff wrote to the defendant again requesting that a decision may be taken relating to the financial assistance.
(104) On the 4th May, 1995 as I had already mentioned, the defendant wrote to the Bank of Baroda enclosing a copy of the agreement.
(105) It appears that on the 7th of September, 1995 the defendant of its own accord had constituted Malhotra Committee to get a decision even though the defendant had taken the opinions of the auditors and its legal advisers.
(106) On the 16th of October, 1995 the defendant issued the letter to the plaintiff which reads as follows:
"YOUare aware, India Habitat Centre (IHC) is a Society set-up in 1987 as nonprofit, non-Governmental Organisation to act as a nodal Centre to promote research and awareness to Habitat and related issues. Ihc comprises 40,000 sq.mtrs. of office space shared by about 30 participating organisations and 12,000 sq.mtrs. of convention centre with guest rooms, restaurants and a meeting room. Also included is 200 seats Theatre and 500 seats Auditorium alongwith a library and allied facilities. You are ware, for operating hospitality facilities under licence, bids from professional organisations, competent in the running of such facilities, were invited. Your offer to operate/manage the hospitality facilities was under consideration and you were allowed to provide some services on ad ad-hoc basis pending finalisation. All detailed terms and conditions were yet to be worked out. As stated above, pending finalisation of the agreed terms and conditions and reaching any agreement,.you were permitted to operate catering and supply food and beverages on an ad-hoc basis to those persons on the premises of Ihc who chose to avail of such catering facilities from you upon direct payment by the persons concerned to you. Unfortunately, your requisitions and demandsb have changed frequently from time to time and as a result it has become impossible for Ihc to agree to any specific terms and conclude any contract in your favour. You had submitted a list of facilities required to organise catering and allied services at a cost of Rs. 10.98 crores in June, 1993 as against the original contemplated investment of Rs. 3.5 crores. The initial capital costs to be incurred by Ihc on hospitality has gone up in your estimate, from Rs. 3.54 crores to Rs. 20.63 crores which is obviously expotential and unacceptable; operational areas to be earmarked by Ihc for your operations have substantially enhanced; Ihc is asked to fulfilll several conditions and assurances not envisaged under the original offer document. Notwithstanding the increase in the capital costs the minimum amount of return, which was stated to be gross and not net payment, remains of Rs. 4 crores whereas the proposed terms on the one hand made the payment subject to conditions which in effect invalidate the offer and on the other hand enjoin on Ihc the obligation of incurring series of costs on operation and maintenance with the prospect of having negative net return in this arrangement. Under the circumstances, it has not been possible to come to any understanding much less an agreement or contract in respect of the detailed terms and conditions of your presence at Ihc and as a result the scope of work, the mutual obligations of the two parties, the essential terms and conditions regarding area and space of operation, the budgetary allocations necessary for the proposed Hospitality Centre, the tariff setting structure and a host of other vital, essential and core terms and conditions have not been agreed upon and havenotbeenfinalised.On your advice and insistence,the designer consultants were aid by Ihc and some work has been executed as per their recommendations and some work is still in progress. It is observed in the context of the foregoing facts and circumstances, that while there is no concluded contract and no detailed arrangements have been worked out, the ad-hoc arrangement has not worked properly and satisfactorily and no contract is possible in view of your exorbitant unusual, unreasonable and excessive demands. You will appreciate that this has occurred principally on account of considerable and frequent changes in your demands and proposed requirements from the Ihc which have envisaged huge financial, administrative and allied responsibilities on Ihc not at all convicted at the time of the original negotiations. At the same time, you are aware that you have also proposed and are seeking substantially enhanced budgetary allocations and outlays by Ihc for providing services at the proposed Hospitality Centre. A scries of correspondence have been exchanged but no terms finalised for the above reasons and a variety of other reasons. You will please appreciate that Ihc is a non-profit, non-Governmental Organisation which acts as a nodal centre to promote research and awareness of Habitat and related issues and such uncertain ad-hoc arrangement cannot be permitted to continue without any proper planning and specific terms and conditions reduced to a contract. You will please appreciate that your original offer has substantially undergone change in so many major respects as to alter the basic character of the bid and analysis on which you were originally selected in preference to other offers. It is not possible to continue this arrangement in the light of these circumstances and highly unreasonable non-specific terms which are totally unacceptable offered by you inspite of the correspondence undertaken so far. Wholly without prejudice to the foregoing and in the alternative, we would further like to state that assuming without in any manner conceding or accepting that there is any understanding, the present arrangement stands dissolved with immediate effect in view of the repeated and continuing breaches and violations of the same by you and in view of the excessive and unreasonable demands made by you upon Ihc materially at variance with the original bid. In the aforesaid circumstances Ihc is constrained to discontinue the arrangements with immediate effect and you are requested to withdraw your staff and the facilities given to you for operating in the premises of IHC. In the context of the foregoing facts and circumstances, we hereby direct and request you to cease all. such operations immediately and vacate the Ihc premises within 7 days from the date of this letter. Kindly note that this letter is not an exhaustive itemisation of all the grounds of cessation of the present arrangement and we reserve all rights to add to, vary and modify the same."
(107) As could be seen from the letter the defendant had assumed that what was agreed was only on ad-hoc basis and "all detailed terms and conditions were yet to be worked out". It is not known from 5.4.1994 to 16.10.1995 when the work was going on and when the work was stopped and resumed what was the defendant doing. If terms were to be worked out the defendant should say what was the terms agreed upon and what were the terms to be worked out. The defendant of its own volition try to give borne vague reasons to wriggle out its contractual obligations. The statement that direct payment was made to the plaintiff without any reference to the defendant cannot at ail be countenanced because the plaintiff was functioning in the complex of the defendant. The defendant further states that the plaintiff had increased the cost of the work and it has not been possible to come to any understanding regarding the area and space of operation and budgetary allocation. A perusal of the correspondence already adverted to by me would snow that the parties had been discussing only in working out the modalities and the plaintiff had always been co-operating and acceding to whatever was suggested by the defendant. Though the defendant would claim to be a nonprofit, a non-Governmental Organisation acting as a nodal Centre it is only an alter ego of the Government of India. Only Government officials are in the Governing Council and Incharge of the entire administration of the defendant. By giving a nomenclature the defendant cannot project itself a non-profit Organisation Dr. Singhvi submitted that about Rs. 45 crores have been spent by the Centre for putting up the Complex. It is not shown to the Court as to how did the Centre get the money, if not from the Government. A vast extent of land about 9 acres belonging to the Government of India is given to the defendant. Therefore, the defendant cannot pretend that it is doing some charitable service to the people of tills country. The responsibility that is given to the defendant is very stupendous and the defendant is expected to act with circumspection and in public interest. A Government land cannot be used by anybody in this country if ultimately the benefit is not derived by the Government which ultimately will go to the people of this country. Even land in India is to be used only for the benefit of the entire population of the country. Simply because the land is situated in Delhi, a few persons who have access to corridors of power cannot assume the role of custodians of this country. That was never the intention of the Founding Fathers of the Constitution of India. The matter is of agreat moment. What the defendant has done would have tremendous impact on the functioning of the Government. I am driven to infer that the Government of India and the Officers have turned Nelson Eye to what is being done by the Officers Incharge of the administration of the Centre. It is really an unfortunate situation. And what is more, the Officers who are entrusted with the administration of the Centre feel that they are the Judges of their own cause and they are not under control of anybody and they can decide anything they like and they can file affidavits in the Courts without any regard for truth and they can get away with those things with impunity. The arbitrary action of the defendant is writ large in the letter and the tenor of the letter makes me feel very sad and the Officer Incharge of the defendant should have acted in the manner in which they have dealt with the plaintiff. Every Public Institution in India as pointed out by the Supreme Court in Ramana Dayaram Shetty v. The Intemational Air-port Authority of India and Others, Mr , which has been reiterated in Kasturi Lal Lakshmi
Reddy v. State of Jammu & Kashmir and Am.. , and right upto the famous Cricket match case reported in Secy., Ministry of inforination and Broadcasting. Government of India and Others v. Cricket Association of Bengal and Others, , is to act for the benefit of the country. The defendant has been posted with all information relating to the budgetary estimates and it was being considered by the Governing Council and also the Building Committee. It is stated in the letter that the ad-hoc arrangement has not worked properly and satisfactorily and contract is not possible in view of the exorbitant, unusual, unreasonable and excessive demands of the plaintiff. Prior to 16.10.1995 it is very significant to notice that there had been no letter from the defendant to the plaintiff that the plaintiff made any demand which could be characterised as exorbitant, unusual, unreasonable and excessive. I am afraid. Officers of the defendant cannot escape without giving any explanation to what they had said in this letter. It is not the case of the Officers of the defendant anterior to 16.10.1995 that the defendant was ever in dangerof being bilked if they acted in accordance with the agreement and that the Memorandum of Understanding on 5.4.1994. What was said on 5.4.1994 in the Memorandum of Under standing is not disputed by the defendant What follows is that the defendant had completely accepted the terms of the agreement. What was required was only a formal execution of the agreement. The Officers of the defendant being public officers must have been aware of the difference between a formal execution of agreement, terms of which had already been concluded and negotiations between the parties being not complete and to be discussed and decided between the partics. The Officers of the defendant would have taken the legal opinion about the difference between an executory contract and an executed contract. The defendant cannot plead ignorance and then project that the terms were to be worked out. During the course of the arguments, I had directed the learned Senior Counsel appearing for thedefendant Mr. Kapil Sibal and learned Senior Counsel Dr. Singhvi to produce their profit and loss account for the years 1993-94,1994-95 and also a list of members of the defendant and the activities of each of the members of the defendant for the purpose of ascertaining what was the nature of business or activities carried out by each of the members and how far the allotment of space in such a prime locality in Delhi would be in public interest. The defendant produced on 6.4.1996 only the following documents:
1.Original Thirty first Annual Report 1991-92. 2. Original Thirtyfirst Annual Report 1992-93. 3. Original Eighth Annual Report 1993-94. 4. Original Seventh Annual Report 1993-94. 5. Original Seventh Annual Report 1993-94. 6. Original Thirty third Annual Report 1993-94. 7. Original Annual Report 1993-94 Tata Energy Research Institute. 8. Original Indo-French Centre for the Promotion of Advanced Reserach (IFCPAR). 9. Original Thirtyninth Annual Report. 10. Original Annual Report 1994-95. 11. Original Thirtyfourth Annual Report 1994-95. 12. Original Eighth Annual Report 1994-95. 13. Original Indo-French Centre for the Promotion of Advanced Research (IFCPAR) Annual Report 1994-95. 14. Original Auditor's Report and Account 1994. 15. Original Ncr Planning Board Annual Report 1994-95. 16. Original Housing Development Finance Corporation Limited Annual Report 1994-95. 17. Original Delhi Urban Art Commission Annual Report 1994-95. 18. Original Annual Accounts & Annual Report 1994-95. 19. Original Thirtyfifth Annual General Meeting 25th September, 1995. 20. Original Third Annual Report 1994-95 National Foundation For India. 21. Original Auditors Report to the Members of the Board of Trustees of National Foundation for India. 22. Original the Automotive Industry Growth & Prospect. 23. Original All India Housing Development Association Audit Report Under Section 12(A)(b) I.T. Act.
The defendant was not inclined to give the Court full facts.
(108) A perusal of the documents produced shows that the Organisation is only for the benefit of few persons who had come into contract with the defendant. It is not stated what was the basis on which the allotment was made to the members. It is not stated what is the quid pro quo for the allotment of space to each of the Organisations and significantly it is not explained to the Court as to how the allotment of space to the members would be for the benefit of the country. If a vast section of land like this had been used by the Government of India on a reasonable commission basis which will be in the interest of all people in India. The defendant had ignored the most crucial fact that it was duty bound to account for its action to the Government of India when it is expected to act for the welfare of the country. It is stated in the letter that the plaintiff had committed breaches and violations of the agreement and the ad-hoc arrangement was uncertain and it cannot be permitted to continue. The reasoning given in the letter is totally unreasonable, arbitrary and no person properly instructed in law having regard to the common course of events would have issued such a letter. What is more, no mention is made about Malhotra Committee Report.
(109) What is done by the defendant by issuing this letter is in effect and in substance a termination of the contract. In the present case, the plaintiff had to the best of his ability and resources had placed before the Court all facts which would go to show its rights under the contract which would constitute an interest in the services undertaken by it as per the terms of the contract. It is well-settled that when we deal with principles of contract the Court has to remember two basic principles, first is the principle of sanctity of contract. Sometimes expressed in the Latin maxim Pacta Sunt SERVANA. This speaks of purpose of the contract inaccordance with the terms of the contract. The other principle is Rebus Sic STANTIBUS. This speaks of discharge of contractual obligations owing to events which had occurred destroying the basic assumption which the parties had made at the time of entering into the contract.
(110) Lord Wright in 1940 A.C. page 701 (P.C.) at page 729 had observed that the party seeking to terminate has to justify the determination of the contract or the case will be one of breach repudiation.
(111) The House of Lords in White & Cartr (Councils) Ltd. v. Me Gregor, 1962 A.C. 413, had occasion to consider the award or a contract.
(112) The contract in Clause29 provides for termination under the circumstances state therein. Clause 29(3) gives rights to the defendant to terminate for a reason other than specified inArticle29(l)/29(2). Therefore, the contract spedfically states that it could be terminated only for reasons to be stated and the reason could be only on objective basis and it can never be subjective satisfaction of the defendant. Therefore, I have no hesitation in coming to die conclusion that the letter dated 16.10.1995 is primafacie, void in law and it cannot affect the rights of the plaintiff under the contract which had been complete and acted upon by the defendant.
(113) Before I go to the other arguments of Dr. Singhvi one principal point very much pressed by him was that the plaintiff is seeking to enforce the contract which requires supervision and therefore, by virtue of Section 14 of the Specific Relief Act, 1963, the plaintiff would not be entitled to the relief of specific performance and therefore, the plaintiff is not entitled to an order of interim injunction. The ancillary argument to this is, that the proper remedy of the plaintiff is to sue for damages and therefore, theplaintiffisnotentitled to the specific relief. In Chitty on Contracts27th Edition 1994 Vol. I in paragraph 27.003 the statement of law is as follows :
"THEquestion is not simply whether damages are an 'adequate' remedy, but whether specific performance will "do more perfectand complete justice than anaward of damages"."
In paragraph 27.008 the statement of law is very clear "damages are considered to be adequate remedy where the plaintiff can readily get the equivalent of what he contracted for, from another source". This must be the consideration while considering the issue in this case. About the aspect of the supervision, in paragraph 27.016 the learned Author succinctly puts it; it is submitted that difficulty of supervision should not of itself beregarded as a bar tospecific performance but only as one of many factors to be taken into account in determining whether this form of relief is to be granted. If the Court attaches sufficient importance to the interest which the plaintiff wishes to protect, it will not be deterred from granting specific relief by the argument that such relief will require constant supervision.
(114) In the Law of Contract by Hugh Collins 2nd End. 1993 the learned Author has posited as under:
"ALTHOUGHthe Courts still repeat the rule that damages must be inadequate before they will award an order for compulsory performance, the" rule has been subtly modified in recent years. In Beswick v. Beswick, ( 1968 Ac 58), an elderly and ailing coal merchant sold his business to his nephew in return for various promises including a promise to pay his widow Pond 5 per week after his death. When the nephew refused to pay, the widow in her capacity as administratrix of her husband's estate claimed specific performance of the contract. Since the estate had lost nothing by the nephew's breach of contract, because the payments were owed to the widow personally, it was likely that the measure of damages would be nominal. The House of Lords ordered specific performance of the contract even though an award of nominal damages would have covered all the losses of the estate. The Court made the award of compulsory performance because they though that it achieved a just result, for otherwise the nephew would have been unjustly enriched by being entitled to hold onto his uncle's business without paying his aunta penny. The modern judicial test asks the question: is it just in all the circumstances that the plaintiff should be confined to his remedy in damages?"
This test squarely raises the issue of describing the circumstances which induce a Court to find the award of the remedy of specific performance more just than damages. The key to the law of compulsory performance lies in recognizing that such a remedy is not designed to compensate the injured party for the losses, but to force performance of the contract. Normally a Court declines to order performance because damages provide a sufficient incentive to complete most contracts except where the defendant hopes to achieve unusual economic benefits from breach, in which case to compel performance would only serve to discourage contracts and to reduce the combined wealth of the contracting parties. A remedy of compulsory performance, therefore, deliberately overrides these normal considerations concerning remedies in order to serve different policies. Courts use orders of compulsory performance to resist exploitation of relations of domination and to prevent unfair outcomes arising from break of contract. In amplifying further, the learned Author has pointed out the question of fairness would also arise. Again the Author has said :
"Aconcern for fairness has also motivated the use of compulsory performance in a few cases. We saw considerations of distributive justice influence the Court in Beswik v. Beswick to prevent the nephew from being unjustly enriched at his widowed aunt's expense. The order for specific performance of the payment of an annuity prevented the nephew from obtaining the business without having to pay for it. The most common kind of case where compulsory performance is ordered for distributive purposes involves transactions for the transfer of an asset which will provide an opportunity to earn an uncertain income. If the injured party cannot prove his losses with sufficient certainty to satisfy the compensatory principle, a Court may order specific performance. For example, an injured party may be able to enforce a sale of shares which would give him control over a Corporation, because damages for his loss of the right to control the Corporation arc too speculate to be compensatable. Similarly, the loss of the right to be an exclusive distributor of a product may lead to the loss of goodwill and trade reputation, items which are hard to quantify under the compensatory principle, but which can be protected by an injunction. The fundamental problem here is not that damages are inadequate to cover these kinds of losses but that the losses cannot be proven, and in order to overcome these evidentiary difficulties, the Courts are prepared to order compulsory performance where this will lead to a fair distributive consequence. These examples of oppression through bilateral monopoly and dependence, and injustice in the outcome of awards of damages, do not exhaust the occasions when an order for specific performance may achieve what the Court perceives to be more complete justice between the parties. The Courts reserve a discretion to award compulsory performance whenever it seems appropriate to do justice in the case."
(115) In Halsbury's Laws of England Vol. 44 4th Edn., the statement of law is in the following terms:
"INcertain circumstances the Court may even grant a mandatory injunction directly requiring a party to the contract to perform his contractual obligations either on an interlocutory application or at the trial of the action." The footnote given in this Volume there is considerable law on the point and the same is in the following terms:
"SMITHv. Peters (875) Lr 20 Eq 511, where a vendor was ordered to give a valuer access to premises; Sky Petroleum Ltd. v. Vip Petroleum Ltd. (1974) I All Er 954, (1974) I WLR567, where the defendants were ordered not to withhold supplies of motor fuel from the plaintiffs; filling stations, no alternative sources of supply being available; Astro Exito Navegacion S.A. v. Southland Enterprise Co. Ltd.
(ChaseManhattanBankN.Aintervening).TheMessinikaiTolmi(1982)3AIIER335 , (1982) 3 Wlr 296, Ca (cited in Practice And Procedure, Vol. 37, para 361), where the buyers of a ship were ordered to sign a notice of readiness in order to enable money secured by a confirmed letter of credit to be paid out before the expiration of the letter. See also Acrow (Automation) Ltd. Rex Chainbelt Inc (1971) 3 All Er 1175, (1971) I Wlr 1676, CA. Puddephat v. Leith (1916) I Ch 200, where a shareholder was ordered to exercise voting rights in accordance with a contractual undertaking (cf. Greenwell v. Porter (1902) I Ch 530, where an injunction was granted restraining shareholders from voting contrary to their undertakings): Bourne v. Me Donald (1950) 2 Kb 422, (1950) 2 All Er 183, Ca, where the defendant was ordered to carry out his contractual undertaking to build a fence in an action commenced in a country Court but not within the Court's statutory jurisdiction relating to specific performance."
(116) In Chave v. Breamer, 1976 Q.B. 76, Rosekill learned Judges said "In principle contracts are made to be performed and not to be avoided according to whims of the market fluctuations where there is a free choice between the two possible constructions of a contract, I think the Court should tend to prefer the construction which will infer performance and not encourage avoidance of contractual obligations."
(117) Learned Senior Counsel Dr. Singhvi submitted that in injunction relief is barred under Section 14 of the Specific Relief Act, 1963, and, therefore, the injunction pending the action cannot be granted. Section 14 of the Specific Relief Act, 1963 reads as follows :
"SECTION14. Contracts not specifically enforceable.-(I ) The following contracts cannot be specifically enforced, namely (a) a contract for the non-performance of which compensation in money is an adequate relief; (b) acontract which runs into such minute or numerous details or which is so dependent on the personal qualifications or volition of the parties, or otherwise from its nature is such, that the Court cannot enforce specific performance of its material terms; (e) a contract which is in its nature determinable; (d) a contract the performance of which involves the performance of a continuous duty which the Court cannot supervise. (2) Save as provided by the Arbitration Act, 1940 (10 of 1940), no contract to refer present or future differences to arbitration shall be specifically enforced; but if any person who has made such a contract (other than an arbitration agreement to which the provisions of the said Act apply) and has refused to perform it, sues in respect of any subject which he has contracted to refer, the existence of such contract shall bar the suit. (3) Notwithstanding anything contained in Clause (1) or Clause (e) or Clause (d) of Sub-section (1), the Court may enforce specific performance in the following cases (a) where the suit is for the enforcement of a contract. (i) S to execute a mortgage or furnish any other security for securing the repayment of any loan which the borrower is not willing to repay at once; Provided that where only a part loan has been advanced the lender is willing to advance the remaining part of the loan in terms of the contract; or (ii) to take and pay for any debentures of a company; (b) where the suit is for, (i) the execution of aformal deed of partnership, the parties having commenced to carry on the business of the partnership; or (ii) the purchase of a share of a partner in a firm; (e) where the suit is for the enforcement of contract for the construction of any building or the execution of any other work on land: Provided that the following conditions are fulfillled, namely (i) the building or other work is described in the contract in terms sufficiently precise to enable the Court to determine the exact nature of the building or work; (ii) the plaintiff has a substantial interest in the performance of the contract and the interest is offsuch a nature that compensation in money for non-performance of the contract is not an adequate relief; and (iii) the defendant has, in pursuance of the contract, obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed. Persons for or against whom contracts may be specifically enforced. "
As Chitty has pointed out, the adequacy of damages would be relevant only if the parties are bale to get immediately what they contracted for. Dr. Singhvi, learned Senior Counsel, relied uponDewan Chand Sabharwalv. Union of lndia & Another Air (38) 1951 Punjab 426. He brought to my notice paragraphs 11,13,15 and 19. It is a judgment by a learned Single Judge. The appellant before High Court entered into a contract for the construction ofabou t200 office flats in Mew Delhi. The Union of India granted time to complete the contract when the contractor failed to completewithin the time allowed. Subsequently, notice was given to the contrafetor for the rescission of the contract on the ground that the contract had not been completed within the timespecified. The contractor moved the Court undersection 20 of the Arbitration Act, 1940. There was an application for injunction and the lower Court refused to grant injunction on the following grounds :
(1)"harm which will accrue by the grant of interim injunction is much greater than the benefit which will accrue to the appct"; (2) the decision of the points incontroversy between the parties will take a long time & by the grant of an injunction the construction will remain incomplete; (3) amount of damages can be ascertained; & (4) the balance of convenience is in favour of the injunction not being granted. It is against this order that the appeal has been brought to this Court.
The learned Judge noted the factui position in the following terms :
"THEREis some dispute in the two affidavits of the Executive Engineer & the contractor as to who had to do the levelling of the sites & also whether the changes that were made in the specifications, etc. were of a minor nature or not. But the Executive Engineer has stated in his affidavit that at the end of 15 months more than 50 per cent of the work had till to be done & notice of rescission under Clause 3(a) of the agreement was first given on 23.11.1949, but the contractor assured the Chief Engineer by his letter dated 29.11.1949, that the contractor had recognised his partnership & would not have any more financial difficulty & he agreed in writing that 112 flats would be completed by 7.1.1950, & 88 flats by 31.3.1950, & on this assurance departmental action was stayed, but as the contractor did not keep to his promise & his progress was slow, on 24.2.1950, the Dept. withdrew its staying of the action under Clause 3(a) of the terms of the contract. The contractor has put in his affidavit in reply but has not specifically denied the statements made with regard to the facts which I have given above."
Therefore, this case cannot be of any help to the defendant.
(118) The learned Senior Counsel brought to my notice the judgment of the Rajasthan High Court reported in Ramchandm Tanwar v. Mis. Ram Fakiniial Amichandand Another, Air 1971 Rajasthan 292 . The caserelates to right of a person doing business of vending articles in stall in the Railway Station. The learned Judge declined to grant injunction on the ground that the case of the plaintiff would fall under Section 14(1)(a) of the Specific Relief Act, 1963 as the plaintiff himself had assessed the damages for breach of contract @ Rs. l,500.00 per month so on his showing the plaintiff's grievance could be compensated in terms of money. I fail to sec how this case helps the defendant.
(119) The learned Senior Counsel relied up on the decision of the Suprerne Court in Executive Committee of U.P. State Warehousing Corpn. Lucknow v. Chandra Kiran Tyagi, . This case relates to contract of personal service. In paragraph 23 the Supreme Court had observed as under :
"from the two decisions of this Court, referred to above, the position in law is that no declaration to enforce a contract of personal service will be normally granted. But there are certain well-recognized exceptions to this rule and they are: To grant such a declaration in appropriate cases regarding; (1) a public servant, who has been dismissed from service in contravention of Article 311, (2) Reinstatement of a dismissed worker under Industrial Tribunals; (3) A statutory body when it has acted in breach of a mandatory obligation, imposed by statute."
Therefore, this case is not of any use to the defendant.
(120) Similarly, in executive Committee of Vaish Degree College, Shamli and Others v. Lakshmi Narain and Others, the Supreme Court held that the contract of personal service cannot be specifically enforced. The question in the instant case is different. The learned Senior Counsel relied upon the decision of the Allahabad High Court in M/s. Triveni Structurals Ltd. v. M/s. Newage Enterprises, Allahabad, . in the case before the Allahabad High Court the
appellant had taken a contract from National Thermal Power Corporation for raising a Microwave Tower at Noida District at Ghaziabad. The contractor M/s. Triveni Structurals Ltd. was insisting on the revision of rates for the work and the contractor did not complete the work within the time allowed and further opportunity was given by Ntpc to complete the work. In stead of completing the work, anticipating cancellationby Ntpc, the appellant approached theCourt for injunction restraining the Ntpc from cancelling the contract. The lower Court granted injunction and that was reversed by the High Court. There is also provision in Utter Pradesh a proviso added to Order 39, Rule 2 which reads as follows :
"PROVIDED that no such injunction shall be granted : (a) where no perpetual injunction could be granted in view of the provisions of Section 38 and Section 41 of the Specific Relief Act, 1963 (Act 47 of 1963) or.......and any order for injunction granted in contravention of these provisions shall be void."
And the High Court agreeing with the Ntpc that the contract was not specifically enforcable and, therefore, the plaintiff was not entitled to the relief of injunction. The facts are very clear in this case and I don't think that the judgment of the Allahabad High Court is of any help to the defendant.
(121) The learned Senior Counsel relied upon the judgment of the Andhra Pradesh High Court for the proposition that injunction cannot be granted if damages are adequate relief. The argument proceeds on the assumption that damages are adequate relief to the plaintiff in this rase. I have already dealt with this aspect. Prima fade, I feel that damages cannot be adequate relief to the plaintiff as explained by Chitty on Contracts. In M/s. Golden Wine Agencies, Hyderabad v. M/s. Venedela Distilleries (P) Ltd., Hyderabad, Air 1984 Andhra Pradesh 274, the Division Bench was considering the suit for specific performance of agreement to sell certain goods to the plaintiff. The plaintiff filed an application for temporary injunction restraining the defendant from committing the breach. The question there was whether the Court could issue mandatory injunction when the defendant had committed-breach with reference to supply of goods when there was dispute about the quality of goods. The Court observed that injunction should not be granted when the plaintiff cannot specifically enforce the contract. The Court held that it cannot compel the defendant to supply at the agreed rate. The plaintiff wanted a direction for the supply of Teiugu Prince Beer at the agreed price of Rs. 260.00 per case when the defendant increased the price to Rs. 270.00 per case. The Court had noted that the main suit itself was for restraining the defendant from committing the breach and the suit itself was for a declaration without any consequential relief. The Court also observed that "the Court should exercise its discretion of granting temporary mandatory injunction with greatest possible care and in case where the remedy of damages is inadequate in the interests of justice." That is exactly the position in the case before me. The ratio laid down by the Andhra Pradesh High Court does not at all help the defendant.
(122) The learned Senior Counsel brought to my notice the decision of the Allahabad High Court reported in Smt. Kusuma Gupta and Others v. Smt.Sarta Devi and Others, . This is a partnership
action. In paragraph 8 the Division Bench observed as under :
"THIScase is where the Court below has committed a clear error. It ignored the indisputable legal position that the grant of temporary injunction is governed by Order 39 of the Code of Civil Procedure. The principles governing the grant of temporary injunctions are far too well settled to require any elaboration. To capitulate, these are the existence of, (i) a primafacie case and (ii) the balance of convenience in favour of the plaintiff before he can ask for interim injunction.The consideration of the balance of convenience necessarily brings in the concept of irreparable injury. Needless to add that the very first principle on which temporary injunction may be granted is that the Court will not grant the same to restrain an actionable wrong for which damages might be the proper remedy. The Court has to consider the comparative mischief or inconvenience of both the parties. In order to succeed the plaintiff must establish that the inconvenience he is likely to suffer by the refusal of the injunction would be greater than that which the defendant would suffer, if it is granted. And injury which the plaintiff is likely to suffer is unquantifiable, that is, the damages and other forms of security would not furnish an adequate remedy at the end of the trial of the suit. In paragraph Ii the Court rejected the claim of the plaintiff. Therefore, this case is of no use to the defendant.
(123) The learned Senior Counsel then referred to the decision of the Calcutta High Court Ranjit Chandra Mitterv. Union of India, . There, the contractor filed an application for
injunction restraining the Union of India from accepting the tender for work of any other contractor in respect of which the petitioner alleged that he had subsisting contract with the Government. In paragraph 4 of the judgment the learned Single Judge observed as under:
"INDonald Keating's Law and Practice of Building Contracts (2nd Ed.) the equitable remedies open to a contractor on a wrongful termination of the contract is stated in the following terms:
"INthe ordinary case, the contractor cannot obtain an injunction restraining forfeiture by the employer because this would be equivalent to specific performance of the contract and the Court does not normally grant this remedy in the case of a building contract. The contractor can be adequately compensated in damages for any wrongful forfeiture."
I am quite unable to appreciate how this helps the defendant in this case.
(124) The learned Senior Counsel for the defendant submitted that the suit is barred by virtue of Section 34 of the Specific Relief Act, 1963. Section 34 reads as follows:
"34.Discretion of Court as to declaration of status or right.- Any person entitled to any legal character, or to any right as to any property, may institute a suit against any person denying or interest to deny, his title to such character or right, and the Court may in its discretion make therein a declaration that he is so entitled, and the plaintiff need not in such suit ask for any further relief: Provided that no Court shall make any such declaration where the plaintiff, being able to seek further relief than a mere declaration of title, omits to do so."
(125) He brought to my notice the following cases :
1.Mothey Krishna Rao v. Grandhi Anjaneyulu and Others, . 2. S. Bhagat Singh v. Satnam Transport Co. Ltd.
and Others, . 3. Vithoba Bhanji and Others v.
Vithal Sakroo and Others, . I don't feel that the
defendant can seek to defeat the rights of the plaintiff on this ground.
(126) The learned Senior Counsel submitted that the contract is unconscionable one sided, giving unfair advantage to the plaintiff, therefore, cannot be specifically enforced'. The learned Senior Counsel relied upon the decision of the Kerala High Court Narayana Pillai Chandrasekharan Nair v. Kunju Amma Thankamma, . I
don't think that I need take serious note of this untenable contention.
(127) The learned Senior Counsel further submitted that the plaintiff had fraudulently induced the defendant to proceed with the negotiation with the alleged licence agreement based upon false suggestions and various concealments in order to deliberately deceive the defendan and thereby take unfair advantage of the defendant. The alleged licence deed is void ab-initio. The learned Senior Counsel relied upon the decision of the Supreme Court in S.P. Chengalvaraya Naidu (Dead) by L.Rs. v. Jagannath (dead) by L.R.S. and Others . The officers of the defendant had considered all the aspects of the matter and nothing is suggested anywhere in the pleadings or in the entire correspondence with the plaintiff at any time made any attempt to conceal facts. I expressed my mind to Dr. Singhvi that if the defendant too much press into service this plea I may have to commentupon thevariousactsofcommissionsand onimissions on the part of the Officers of the defendant and I expressed my view that I did not propose to do that exercise in this matter except touching upon the affidavits filed by the three office.
(128) The learned Senior Counsel submitted that the alleged licence agreement cannot be enforced on the ground of mutual mistake. He relied upon the following decisions:
1.Rflmanujulu Naidu v. Gajaraja Animal, . 2.
Chimanram Motilal v. Divanchand Govindram, Air 1932 Bombay 151. 3. Norwich Union Fire Insurance Society Ltd. v. \Vm. H. PriceLtd. Air 1934 Privy Council 171. There is absolutely no basis for such a plea and I have no difficulty in rejecting the contention.
(129) The learned Senior Counsel next contended that the alleged licence agreement is void for uncertainty under Section 29 of the Contract Act, 1872. For this proposition, he relied upon the following cases:
1.Mis. Saral Trading Co. and Others v. Mis. Mahesh Steel Traders, New Delhi, Air 1987 Delhi 4. 2. Smt. Phuljhari Devi v. Mithai Lal and Others, . 3. Keshavlal Lallubhai Patel and
Others v. Lalbhai Trikumlal Mills Ltd., . It was
not pointed out to me where is the uncertainty in the case. The facts of the case cited by the learned Senior Counsel are absolutely different and on the basis of those facts we cannot say in this case that the contract is vitiated by uncertainty.
(130) The learned Senior Counsel then contended that the plaintiff is not entitled to interim relief since the alleged agreement is not a concluded contract within the meaning of Section 13 of the Contract Act, 1872. He pressed into the following three decisions:
1.Sri Satya Prakasil Gael v. Ram Krishan Mission and Others, . 2. J.K. Industries Limited v. Mohan investments & Properties Private Limited, . 3. EastAsiatic Co.
(India) Ltd., Bombay v. MessrsRugnath Tricumdas Air 1953 Saurashtra 122 I have already held that there has been a concluded contract between the parties. The decisions cited by the learned Senior Counsel are distinguishable on facts. It is really surprising that when the matter had been discussed by officers of the Centre and the same have been acted upon, the defendant should come forward with a plea that there was no consent.
(131) The learned Senior Counsel then contended that the alleged licence agreement is hit by Sections 14 and 18 of the Contract Act, 1872. Sections 14 and 18 read as follows:
"SECTION14. "Free consent" defined.-Consent is said to be free when it is not caused by- (1) coercion, as denied in Section 15, or (2) undue influence, as defined in Section 16, or (3) fraud, as defined in Section 17, or (4) misrepresentation, as defined in Section 18, or (5) mistake, subject to the provisions of Sections 20,21 and 22. Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake. Section 18. "Misrepresentation" defined--"Misrepresentation" means and includes- (1) the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true. though he believes it to be true; (2) any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or any one claiming untier him, by misleading another to his prejudice, or to the prejudice of an) one claiming under him; (3) causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement". The learned Senior Counsel relied upon the judgment of the Himachal Pradesh High Court . I do not find any
substance in this argument.
(132) The learned Senior Counsel apart from contending that there is no concluded contract, thought that his coup de grace, was that the defendant would be incurring heavy losses and that one circumstance alone would suffice for the purpose of refusing injunction to the plaintiff.
(133) The question arises whether the appellant-plaintiff is entitled to interim injunction pending the suit. The principles relating to the grant of injunction are well settled but in applying the principles to the facts of a given case the difficulty arises because the grant of interim relief depends on the facts, prima fade, established by the parties. I have considered all the facts and circumstances of this case. The main plank of the defendant's case is that what was agreed was only an ad-hoc arrangement. What the defendant says is true on the materials placed, I would have had no difficulty in rejecting the application for injunction. But I cannot shut my eyes to the realities and what has happened in this case. Here is a person who had bid pursuant to the tender. He was aware that he was dealing with Government officials. He trusted them and agreed for the contract. He had taken all steps pursuant to the contract. The Managing Director of the plaintiff Company has been acting as per the directions issued by the defendant from time to time.
(134) On the 29th of January, 1996 Dr. R.K. Pachauri, Mr. K.K. Bhatnagar and Mr. Dinesh Mshta filed affidavits and additional documents were filed by the defendant and the following is the list of documents filed by the defendant on 29.1.1996:
1.Defendant's letter dated December 7th, 1995. 2. Plaintiff is letter dated December 14th, 1995. 3. Defendant's letter dated December 16th, 1995. 4. The Times of India dated December 29th, 1995. 5. Defendant's letter dated December 29, 1995. 6. Plaintiff's letter dated January 1st, 1996. 7. Plaintiff's letter dated January 5th, 1996. 8. Plaintiff's letter dated January 13th, 1996. 9. Defendant's letter dated December 20th, 1995. 10. Plaintiff's letter dated January 22nd, 1996. 11. Defendant's letter dated January 23rd, 1996. 12. Plaintiff's letter dated January 24th, 1996. 13. Land DO's letter of allotment dated May 2nd, 1988. 14. Order of Hon'ble Delhi High Court dated July 18th, 1994 in Cm 486/ 94 in Cwp 2896/94".
Except item Nos. 13 and 14 all other documents are after suit and documents No. 13 and 14 also do not relate to the merits of the case. Therefore, I have not dealt with them.
(135) In the affidavit filed by Mr. Pachauri he would state that he has been a member of the Governing Council of the defendant. The draft agreement submitted by the plaintiff was never brought up for discussion nor was any analysis on the implications of the same ever submitted to the Governing Council. The Governing Council considered the matter for the first time in September, 1995 wherein it was decided to appoint a Committee under the Chairmanship of Mr. R.N. Malhotra, Ex. Governor, R.B.I, to look into the capital cost and other implications of the draft agreement. It is further stated by him that the Governing Council never approved the draft agreement at any stage, had never authorised the communication of the letter dated 26.10.1993, never authorised the execution of the Memorandum of Understanding. The Governing Council was never approached for permission in this regard. It is further stated in paragraph 5 "that the Governing Council have since authorised the President to call for the comments of the then Director and ascertain the basis on which he has proceeded to incorrectly represent that a Sub-Committee had approved the Draft Agreement. This position is totally false to the best of my knowledge and the then Director had admitted this to the Malhotra Committee".
(136) Mr. K.K. Bhatnagar in his affidavit has stated that the Governing Council did not confirm or approve of the Draft Agreement, The Draft Agreement submitted to the Director was given to him for informal comments and guidance. Some of the aspects of the Draft Agreement sent by him were completely unacceptable and he expressed reservations. He did not give any approval to the Draft Agreement or did he authorise the Director to convey his recommendation of his approval to any agency much less the plaintiff. The Draft Agreement was never placed in any of the meetings of the Governing Council. In September, 1995 the Governing Council decided to appoint a Committee under the Chairmanship of Mr. R.N. Malhotra, Ex. Governor of R.B.I. In paragraph 6 he would state "I state that the contents of the reply of the defendant to I.A. No. 9886 of 1995 have been perused by me and I state that the contents thereof pertaining to the proceedings of the Governing Council are true to my knowledge".
(137) There is no document mentioned as Annexure A is filed alongwith the affidavit. There is nothing on record as Annexure A.
(138) Mr. Dinesh Mehta in his affidavit would state that at no point of time was the Draft Agreement submitted by the plaintiff was ever brought up for discussion nor was any analysis on the implications of the same was ever submitted to the Governing Council. What he states like other persons is "I state that the Governing Council considered the matter for the first time in September, 1995 wherein it was decided to appoint a Committee under the Chairmanship of Mr. R.N. Malhotra, Ex. Governor of R.B.I. to look into the capital cost and other implications of the Draft Agreement submitted by M/s. Old World Hospitality Pvt. Ltd. I further state that on receipt of the Malhotra Committee's recommendations which unequivocally analysed the implications of the Draft Agreement as disastrous for India Habitat Centre, the finding in the report were accepted by me and by the Governing Council and the recommendations of the Malhotra Committee endorsed unanimously by the Governing Council".
(139) The three Officers had not mentioned as to why they did consider the matter in September, 1995 to refer to the Malhotra Committee. The Malhotra Committee Report was not filed. The minutes of the Governing Council deciding such issue a not filed. They have not stated as to what was happening in the Complex from October, 1993 upto 16.10.1995. They have not referred to the stoppage of work by the defendant. They have not mentioned about the Journals issued by the defendant wherein reference is made to the award of the contract to the plaintiff. It is not their case that the Journals published by the defendant were, without any reference to them. They have not referred to the nature of the Draft Agreement. They have not referred to the Auditor's Report and the opinion given by their Counsel. They have not said as to how the Auditors of the defendant and the Counsel of the defendant had gone wrong and they have not acted in the interest of the Centre. They had not taken care to mention very very many materials particulars which would be of assistance to the Court in the affidavit. They have assumed that whatever they say in the affidavit should be accepted by the Court. They do not say under what authority they had appointed the Malhotra Committee. What is the legal effect of the report of a Committee appointed by them when they are bound by the terms of the contractand whey they arebound to give respect of the Auditor's Report and opinion given by the Counsel. They could have issued die letter dated 16.10.1995. if they thought what they were doing was legal and proper without the formation of the Malhotra Committee giving the same reasons. They have not said anything in the letter dated 16.10.1995 about the reasons stated by the Malhotra Committee.
(140) On 16.3.1996 Mr. K.K. Bhatnagar was examined by me to ascertain facts. He was not able to tell me the conditions imposed by the Central Government for the allotment He is not aware of the exact number of Institution Members and when the question was put to him about the documents filed by the Centre he would say that the Director would be in a better. position to answer.
"Q.13.Kindly see the pages 26 to 52 i.e. documents filed by IHC. These things were prepared by the Engineers and Architects of the Ihci presume. When they were done? Ans. The designs of the complex have been prepared by the Architects of the Centre i.e. M/s. Stein Doshi and Bhalla. The information for the writ up also has been supplied by the Architects. However, the write up must have been prepared by the office of the Director. I am afraid, the Director who has filed this information would be in a better position to answer this question. Q. 14. Now how many members have been allotted the accommodation in the complex? Ans. The members which I have mentioned above of Institutional Members are the ones who have allotted the space."
He has not been able to tell me the total revenue collection per year by the Centre. He simply answered that the operation of the facility has not yet commenced and no actual membership is being collected at present. He was not able to tell the Court the income for the years 1992-93, 1993-94, as according to him as Member of the Governing Council these matters do not come to him. When asked about how much the Centre had spent in putting up the Complex, he said "I do not have it but i can submit it". But nothing was submitted. He would admit "that the Centre is run by the Government".
"Q.46.The entire Centre is in the control of the Government through its officers. Is that position correct? Ans. The Centre has always been under the control of the Governing Council which happens to be presided over by the Secretary to the Government in the Ministry of Urban Development. However, it always had its own Director and officers who were looking after the activities of the Centre".
He was not able to give the present market value of the land of the Centre. When asked about the minutes of the 22nd meeting of the Governing Council he would answer '.
"Q.53.See page 140 i.e.extract of the 22nd meeting of the Goveming Council dated 26.11.1993. Tell me what is the effect of the decision of the Governing Council? Ans. The only effect of this decision approval of the Budget estimates of the cost of interiors for the facilities block. The facilities block had a number of areas in which Ihc itself was required to carry out certain works which alongwith the estimates for the remaining part of the facilities block were approved in this meeting".
When asked about the communication sent by the Director to the plaintiff on 5.4.1994 the answer is :
"Q.54.See page 22 of the type set filed by the plaintiff. Before sending this communication to the plaintiff, when was the decision taken by the Centre? Ans. The Governing Council at no stage took this decision to approve the agreement. The Governing Council did not meet at all before this communication was sent to the plaintiff. The matter came to the Governing Council only in September, 1995 when it was decided to appoint a committee under Shri R.N. Malhotra to look into the aspects relating to the agreement and the capital outlays for the hospitality facilities".
Answer to question No. 55 would also show how Mr. Bhatnagar would deal with the position :
"Q.55.How did Mr. Vinay Jha, Director communicate this to the plaintiff? Ans. This question may better put up to Mr. Vinay Jha himself. Asa matter of fact, as early as on August 9, 1994 I had myself requested the director to give me a copy of the proceedings of the Sub Committee which are referred in this and referred to earlier in the letter dated 26.10.1993 sent to the plaintiff. I would like to file a copy of that note".
(141) The defendant itself filed the extract of the Minutes of the Meeting of the Goveming Council held on 26th of November, 1998 at page 140 of the type set filed by it on 14th of November, 1995. At page 140, as I had already noted, the budget estimate given by the plaintiff was Rs. 16.68 crores is referred to. Again when the type set was filed by the defendant on 29th of January, 1996 the agenda of the 22nd meting of the Council and the minutes thereafter were filed. At page 49 of the type set we see the agenda for the 22nd meeting to be held on 26th of November, 1993. At page 52 paragraph 22.05 under the heading items for approval of the Council is Revised Budgetary Estimate as on August, 1993 is mentioned. The budget for 16.68 crores given by the plaintiff is also referred to. As I had already extracted, reference is made to paragraph 22.06 the approval of the decision of the Subcommittee to look into the finalisation of the operating agreement is also referred to.
(142) At page 57 in the typed set, Minutes of the 22nd Meeting of the Governing Council is given. At page 59 in paragraph 22.06 the Governing Council decided as under:
"22.06Cost of interiors for the facilities block. The Council ratified the decision of the Sub Committee in approving the budgetary estimates for the cost of interiors for the facilities block. It was also brought to the notice of the Council that the following costs.
Estimate in crores 1. Cost of conference & library interiors. 3.50
2. Cost of conference equipment. 2.20 3. Costs of the interiors for restaurants guest house, health club etc. 4.89 4. Costs of upgradation of services for the facilities block. 3.79 5. Cost of equipment for kitchen, health club, pantries. 2.30 16.68
amounting to Rs. 16.68 crores were not forming part of the budget presented at item 22.05. Out of this approx Rs. 10 crores would be generated through membership entrance fee but for the,remaining Rs. 7 crores the Council asked the Director to explore the possibility through both the proposals put forth in the agenda namely- (i) We could "sell" the conference centre to a large corporate organiation such as Itc, Pepsi etc. In fact the company we choose would in lend its name and the conference centre would be named the Habitat - (GO'S name) Conference Centre. As is the case will the Ncpa Bombay, Wwf Delhi etc. (ii) Borow the amount from a financial institution. Initial enquiries with Hudco indicate that they might be in a position to loan Ihc this money".
As I had pointed outearlier the Governing Council did not reject the agreement. The three Officers who had filed the affidavits in the light of the specific language of the agenda and the minutes would state that the Governing Council did not consider any Draft Agreement on 26.11.1993. It is a travesty of truth. The answer to question 57 would belie the statement of the deponent of the affidavit that it was only in September, 1995 the Governing Council considered the matter :
"Q.57. Could you tell me when in August, 1994 you senta letter to Mr. Vinay Jha, did he take any steps to convene the Governing Council and stop the plaintiff from coming to the Centre? Ans. The Governing Council was in any case meeting from time to time and considered issues relating to this particular problem. The relationship at that time between the Certre and the plaintiff was basically of a Habitat and we continue to interact to arrive at basic decisions so that the arrangement could be formalised".
Mr. Bhatnagar admits that he was aware of the activities of the Centre. The statement by Mr. Bhatnagar that the relationship between the defendant and the plaintiff was only to intract and he was aware of the activities of the plaintiff when several crores of rupees were involved is very disingenuous. About the report of the Auditor Mr. Bhatnagar would state :
Q.61.Kindly see the Annexure 20 at page 248 of the documents and also Annexure 21. What are your comments? Ans. Annexure 20 at page 248 June, 1995 issued by the Habitalkwa^ being brought out by the Director from time to time and circulated to all the members of the Centre. Annexure 21 pages 251 to 263 did come up for consideration before the Governing Council but I recollect that the Council did not agree to various projections of revenues made in this note prepared by the Auditor".
No minutes of the Governing Council has been produced by the defendant to show that the Auditor's Report was ever considered and discussed by the Governing Council. He undertook to file the minutes of the Governing Council to show that the Auditor's Report was considered and tht has not been filed. When asked about the publication in the Habitat World he would state that he had no comments to make. He would even go to the extent of saying that the letter dated 4.5.1994 was wrongly issued.
(143) After giving the statement, on the 16th of March, 1996 Mr. Bhatnagar filed an additional affidavit on 19th of March, 1996. He would state in the affidavit that the agreement between the plaintiff and the defendant had never been finalised and he was also having some correspondence which he was filing. Annexure A is the communication from the Director Mr. V may Jha to Mr. Bhatnagar enclosing a copy of the agreement. Another letter is dated 3.8.1995 from Mr. Bhatnagar to Mr. Jha. The letter reads as follows :
"THANKSfor sending me a copy of the proposed agreement to be executed with M / s. OWH. I have gone through the proposed agreement once gain and given my comments. We will have to discuss them at the earliest. Some of the crucial portions in the agreement are not clearly typed which we can see at the time of discussion. You would kindly recall that earlier also I had given extensive comments on the agreement and, I am not sure, whether they have been taken into consideration while finalising the draft. Possibly, it has not been donen certain cases. I shall be grateful if the earlier copy in which I had suggested modifications could be traced and also made available at the time of discussion. One of the comments which I had made at that time and I would like to repeat, is that, this is a highly loaded agreement in favour of the licensee and some of the legal implications may not become clear to a general reader. We will have to get them checked through a competent legal expert unless this has already been done. Quite a few portions do not even appear to be relevant and could be just deleted since, later on, these could give rise to avoidable interpretation and controversy".
If may be recalled that on August 9,1994 Mr. Bhatnagar had written to Mr. Jha about the agreement and by letter dated 2nd of September, 1994 Mr. Jha, Directed wrote to Mr. Bhatnagar about the observations made by Mr. Bhatnagar and the comments of the Director on those observations. But in this letter dated 3.8.1995 he would not refer to the letter from Mr. Jha in 1994 and comments sent by him. Mr. Bhatnagar does not mention why did he ask for the agreement from the Director in July,. 1995. Mr. Bhatnagar apparently thought what happened between the Director and him in 1994 would not some to light. Mr. Bhatnagar is also not prepared to tell us any where what happened in the 24th Governing Council meeting held on 15th of September, 1994. He also filed the letter dated 7th of August, 1995 in the following-, terms:
"THISwith reference to my letter dated 3rd August, 1995 regarding the agreement with OWH. I have since been able to lay hands on my previous comments on the draft agreement. The same is enclosed".
The enclosure is not filed here. He also files the letter dated 13th of September, 1995 from the Director to him which is in the following terms :
"THIS is in continuation of my earlier letter No. 1HC-5/1 /1310 dated September 8, 1995, I am forwarding herewith a copy of the Draft Agreement regarding the licensed hospitality operations. This would form part of the back ground paper for the meeting to be held on September 15,1995 at 2.30 p.m. in the office of Chairman Icrier at India Habitat Centre".
He files Annexure B, the report of the Malhotra Committee omitting some portions. He does not explain as to why these documents were not filed earlier and how did he think of filing th same after he had given the statement on the 16th of March, 1996. Annexure C List of Allottees is filed. There are 36 allottes, the details of the space allotted and the amount collected is also given.
(144) In the light of these facts I have no hesitation in coming to the conclusion that these three Officers Mr. Bhatnagar, Mr. Pachauri and Mr. Dinesh Mehta have suppressed material facts and they have sworn to false affidavits. They could have said that the agreement worked hardship to the defendant and it was not in the interest of the Centre to proceed with the work and how the Centre will lose. On the 18th of July, 1995 Director Mr. Jha had written to Mr. Bhatnagar in response to the request made by Mr. Bhatnagar. Mr. Bhatnagar had thought of again asking for the agreement only after the plaintiff requested for payment of money from the Centre. If the defendant did not want to pay the money to the plaintiff the defendant could have taken the stand in a straight forward way stating that the defendant cannot provide the assistance and if the plaintiff cannot defend for itself the plaintiff must leave the premises. The defendant had acted in a very arbitrary way subsequent to the demand made by the plaintiff. There is no explanation atall from the defendant as to how it was justified p. 111.3" in stopping the work in July, 1994 and asking the plaintiff to resume the work in the beginning of 1995. However, such things could not be tolerated in a democratic set up. And I am afraid, that the affairs and the efficient management of the Centre are not safe in the hands of officers like Mr. K. K. Bhatnagar, Dr. R.K. Pachauri arid Mr. Dinesh Mehta and they had ignored that the officers have to function as a public functionaries within the parameters of the Constitution. The defendant had full faith in the plaintiff's capacity to do the service and on that basis the plaintiff had employed persons who are well qualified, very many industries who would look forward to promising careers in life. And all of a sudden the defendant had issued this letterdated 16thof October, 1995 unilaterally putting an end to the contract.
(145) In the facts and circumstances of this case and in the light of the nature of the work of the plaintiff entrusted to it by the defendant, there is no question of constant supervision by the Court. If there had been misunderstanding between two individuals, it may be a bit difficult but the defendant is a public authority who had received money from 36 allottees and it had undertaken the task of rendering service to those allottees, who have to function in the p.I II' Office Complex and, ^therefore, there is no difficulty for the Court in directing the defendant to act in accordance with law and in accordance with the provisions of the agreement.
(146) The learned Senior Counsel for the defendant again and again submitted that the plaintiff is asking for specific performance without asking for such arelief in the plaintand undersection 14 of theSpecificRelief Act, 1963 this kind of contract cannot be specifically enforced and the defendant would lose heavily if the plaintiff is permitted to have the work in the Complex. I had given all the facts right from the beginning and there is absolutely no basis for the apprehension by the defendant. No details are given as to how the defendant would lose. As a matter of fact, at one stage the learned Senior Counsel said the income from the Health Centre is to be taken by the plaintiff but where as on record it is otherwise. The learned Senior Counsel submitted that the definition of full financial year is in favour of the plaintiff. The provisions of the contract are very clear and the defendant stopped the work and delayed the commissioning of the services. Taking advantage of its own wrong, the defendant puts forth an argument that the provisions of the Draft Agreement are vague, uncertain and it is one sided.
(147) On 16th of March, 1966 Mr. Vinay Jha gave a statement. He stated that there are 36 allottees and all the allotment was complete. He would say that the Sub Committee met on 22nd of October, 1993 and not on 26th of October, 1993. He would say that communication sent by him on 26th of October, 1993 was approved by the Governing Council. He would say that on 9th of August, 1994 further report of the Auditors and the legal opinion were discussed. He has given details about the allotment and how the defendant had allotted to the members at a low cost when the market late is very high.
"Q.I1. Now these allottee members, whereby promotee members of subsequent allottees, all of them together they could have paid to the Centre towards cost of the build ing, towards the licence fee of the land. Ans. I think the total contribution from the allottee members was in the region of 72 or 74 crores. This was a project on cost sharing basis with no profit no loss. The Habitat was the mandatory agency for the allottees and M/s. S.D.B. who were the project consultants. One of the reasons why the problems about the budget arose was that approximately Rs. 30 crores which was to be spent on the Facilities Block i.e. the interior of the Conference Hall, Auditorium, Laboratory, Guest Rooms, Restura was not planned and budgeted by the Consultants. Without doing this very important part of the planning exercised the selling price of the space had been determined by the Governing Council of the defendant at Rs. l,700.00 per sq.ft. Subsequent allotments made were ata price which was arrived at by adding 18% interest every quarter to this price of Rs. l,700.00 persq.ft. Most of the allotment was done at this price. Later on allotment for i, similar spaces was done at prices ranging between Rs. 2,000 .00 to Rs. 2,500 .00 sq.ft. As far as I recollect the total budget for the completion of those protect, wen I left in October, 1995 was Rs. 110 crores. If all the members were to pay per sq.ft.cost of Rs.2,700.00 then the entire cost of the project as 'projected at the moment would be met. However, since many of the Institutional Members are non profit organisations depending upon grants and aids and donations they would perhaps find it difficult to raise additional money from the donors. But the fact remains that a prime location in Lodhi Road and they have office spaces at these prices when other public sector undertakings like Hudco itself, Nbcc is selling less attractive office space at Rs. 6,000.00 to 7,000.00 per sq.ft. and commercial spaces in prime location are being sold at Rs. 25,000.00 to 30,000.00 per sq.ft. These facts have not been placed before the Court by the defendant. About the consideration of the Auditor's Report he would say :
"Q.16. Kindly see Annexure 21at page 251 and could you tell me whether the Governing Council of the Habitat reviewed the situation and took a different view from the view taken by the Auditor of the Centre any time in 1994 or 1995 before you left the Centre ? Ans. To my recollection this is a note prepared by the Auditors as part the detailed exercise carried out between July and October, 1994. This particular exercise remained without a decision from August October, 1994. However, at special meetings of the Governii Council on 7.11.1994 and 10.11.1994 the Governing Council discussed these issues including the exercises that had been carried out in July and August and gave a comprehensive approval in respect of spaces in the Facilities Block to be operated by the plaintiff. Budgets an some other issues relating to the operations and work which we stopped since July was ordered to be resumed thereafter. This decision of the Governing Council was consistent with the view taken by the Auditors contained in Annexure 21. However, immediately before I left the Centre the Governing Council on the basis working done by the Malhotra Committee took a contrary view that the return of investments was inadequate."
He would say that the budget proposals given by the plaintiff for Rs. 17 crores was accepted by the Governing Council in the meeting held in November, 1994.
"Q.21. Could you kindly recollect and toll me before the matter examined by the Malhotra Committee the Governing Council accepted the Budget presented by the plaintiff for Rs. 17crores and if so when ? Ans. I do not have recollection of the particular meeting in which be of Rs. 17 crores. approximately was accepted but it is my recollection that it was accepted before the review was undertaken by the Malhotra Committee. I cannot be definite since I am unable to locate agenda notes but I recollect that this was the Governing Council meeting of 9th/llth November, 1994."
The Minutes of the Special Meeting of the Governing Council dated 10.11.1994 is on record. It is only there the Governing Council decided to resume the work. Therefore,what Mr.Vinay Jha state in die statement should becorrect. In the Special Meeting Mr. Bhatnagarand Mr. Dinesh Mehta were present. Mr. R.K. Pachauri was not present. It is not stated by the three Officers, who had Filed the affidavits or in the reply to the injunction application that a Director had acted against the interest of the defendant and any communication was sent to the director pointing out the fact that was acting against the interest of the Centre. The report of the Malhotra Committee is in a truncated from and it is an Obliging Committee and as it is, unless it is proved by the examination of Malhotra and others who had participated in the Committee it is not admissible in evidence. It is a self serving statement of the Members of the Committee to suit the convenience of the defendant.
(148) The question is whether the plaintiff has made out a, prima fade, strong case for the grant of injunction. It is true Lexnon Cogetad IMPOS51BILIA (the law does not compel the impossible). But the matter here is not a complex one. The parties have to work out their rights within the parameters of the agreement. The Court cannot also ignore LEXNON-DEBITDEFICARE Conquarentilrs M Justicia (The law ought not to fail dispensing justice to those with serious grievance). The plaintiff has come forward with a claim supported by the overwhelming documentary evidence and the defendant at no time take exception to anything done by the plaintiff. The defendant wanted to get out of the contract because the plaintiff made a demand for a loan. In a transaction like this the amount claimed by the plaintiff, a sum of Rs-1.25 crores is not a very high amountand the defendant was apprised of the facts that the money would be kept in deposit and no money would be drawn by the plaintiff without approval by the defendant. The plaintiff made it very clear that the defendant would be given details of the expenditure and that too for the sake of the defendant to expedite the commissioning of the services in the Complex.
(149) The contract involves reciprocal obligations and as I have said it is symbiotic. When several thousands ranging between 6500 to 7000 have to be attended to,it is a serviceata very massive scaleand,therefore, the plaintiff cannot be denied the relief pending disposal of die main suit. The contract is for 20 years. The plaintiff had entertained hopes and had given up oilier projects, as mentioned by the plaintiff in one of his letters, as the plaintiff had committed itself totally to the project in the defendant's Complex. Suppose, I decline to grant injunction, I ask myself the question whether the plaintiff could be compensated in terms of money. It is very easy to say for the person who had committed a breach that the other side can always be compensated in terms of money. Any transaction like the one we see in the present case is not one of many transactions which often come up before Courts. In view of the development in the society and the advancement invarious fields of human endeavours, providing such services became necessary for the proper and efficient functioning of the various organisations housed in the Complex. Therefore, an innovative thinking i s required to find out a solution which could be of help to both the parties. The defendant being a public authority has asserted that it can do no wrong and the complete answer to the plaintiff's case is Report by the Malhotra Committee. Yet another seemingly formidable argument according to the defendant is that the contract is not specifically enforceable and, therefore, I should not grant injunction. The plaintiff would be put to irreparable loss and hardship and as pointed out by Goddard Lord Justice in Borough of Howtslow v. Twickenham Garden Developiiwnts Ltd. (1970) 3 All E.R. 326, the status-quo to be preserved was not that which existed after the breach was committed but that which existed betore the injury was caused to the plaintiff. Suppose, I grant the injunction, what is the effect on the defendant. The plaintiff would be doing the services and the defendant would be getting the amounts as mentioned in the contract. The volume of service to be done by the plaintiff would depend upon the co-operation or the discharge of obligation by the defendant as per the provisions of the contract. Can the defendant say whatever the orders of the Court the defendant cannot expand money because there is no return and the Court cannot sit in judgment over financial aspects which could be appreciated only by the defendant. As the well known saying goes 'the we are knows where the shoe pinches'. On the facts and circumstances of this case, such an argument is not available to the defendant because the property involved is the property of the Government. The defendant does not claim any title to the property. The defendant is holding the property in trust for the benefit of the public. The defendant had received money from the Government of India for putting up the Complex. The defendant had received moneis from the allottees and the ultimate maintenance and the expenditure for performance of the services have to be made by those allottees and defendant is only a trustee for all these things. The Court is very much concerned with the property of the Government and how it is being managed by Officers like Mr. Bhatnagar, Mr. Pachauri and Mr. Dinesh Mehta, who had taken little care nor did they realise the responsibility of placing all the materials before Court. The Centre was intended to be a have for bringing to the country the latest industrial at technological and information Honey and not for the Complex alone. In other words, the Centre is for the benefit of the entire country. If those entrusted with the task of implementing the project do not function properly, the object of the Government in having such a Complex for the improvement of the people would remain metaphorical. If the plaintiff does not perform its duties and obligations, it is always open to the defendant to exercise its rights under the contract and terminate the same. In a matterlike this, when the citizens are to fight against the Government, the Court has.to interdict and dispense justice as far as possible. From the conduct of the plaintiff, that could be seen from the materials placed before me, the defendant has not said anything which could persuade me to say that the continuance of die plaintiff in the Complex would affect the rendering of service to the persons coming to the Complex. Of course, in fiscal matters one has to be careful and in particular when one has to handle public money but that is no reason to deprive a citizen of his legitimate rights. The plaintiff had accepted the decision by the defendant that the income from the Fitness Centre should go to the defendant and as a matter of fact that plaintiff had not objected to anything that is directed to bedone by the defendant. Having entered in to a contract and having hulled the plaintiff into a sense of security and the guarantee of continuance of the contract and having stopped the work fornearly five months and having asked the plaintiff to resume work pursuant to the decision of the Governing Council on 10th of November, 1994 it is not open to the defendant to say "I do not want you. I will be incurring loss even though my Auditorsor my lawyers may have different opinion. I go by my Malhotra Committee's Report". In my view, this can never be accepted.lt is against all canons of principles of law besides being contrary to the principles of natural justice. It is also against the principles of fairness. Therefore, I find no difficulty in coming to the conclusion that the plaintiff has made out a, prima fade, strong case for the grant of injunction.
(150) The learned Counsel for the plaintiff relied upon Evans Marshall f-f Co. Ltd. v. Bertola S.A. and Another (1973) I All E.R. 992, and the judgment of the Supreme Court in Gujarat Bottling Co. Ltd. and Others v. Coca Cola Co. and " Others, . Those cases deal with different situations and the principles laid down in those cases do not apply to the facts of this case.
(151) Next question arises whether the plaintiff has shown the balance of convenience in its favour.The plaintiff has engaged itself fully in the project and had garnered all its resources for the project and several young men and women have been engaged and they will all be thrown out of employment. The defendant itself has said in Journals that the plaintiff is doing the service in the Complex about which no argument was advanced on behalf of the defendant. It was all accepted by the defendant. The principles relating to this weighing of balance of convenience are well settled and I feel that great injustice will be done to the plaintiff if injunction is not granted and the defendant will not be put to any prejudice if injunction is granted. The defendant has to act in accordance with the principles of fair play and justice and if it takes decision objectively having regard its responsibility to the Government of India and to the public at large and to its obligations under the contract there will be no hitch in working out the terms of the contract. I dare say that the deponents of the affidavits had filed those affidavits only with the object of defending the action and I, therefore, do not intend to take any action against those deponents and that I have to painfully place on record that the affidavits when I read in the light of the materials available on record caused a great disturbance but yet I thought it fit to leave the matter at that. I may also note that the plaintiff was put to great prejudice by the stoppage of work and the officers of the defendant had been taking their own time in considering some aspects of the matter without any consideration for the plaintiff. The plaintiff had been making a request for a financial accommodation to the tune of Rs. 125 lakhs. On 9th of June 1995 the defendant wrote to the plaintiff in the following terms :
"THIS is the confirmation of our telephonic talk we had today. Your request for loan of Rs. 125 lakhs has been examined. At the outset the following clarifications/acceptance area sought from you before proceeding on the matter.
On 13th of June, 1995 the plaintiff wrote to the defendant suggesting how timings could be done in the following terms :
"WEopen a Recurring Deposit Loan Repayment Account. At the end of ever)' month, the pro-rata monthly share of that year's repayment of principal and interest shall be deposited. The Bank shall have instructions not to let O.W.H. withdraw from this account without a second signature, that of a nominee of I.H.C. In addition the Bank shall have standing instructions to put the pro-rata relevant monthly amount directly from our Current Account every month into this loan repayment account. This way the relevant amount due to I.H.C. is secured and we cannot withdraw it without I.H.C.'s concurrence. Our working capacity thereby is not disturbed and I.H.C. is assured of the yearly repayment as promised in Schedule 'A' of our proposed Agreement/Guarantee. Our Managing Director's personal indemnity remains an additional security with I.H.C. This takes care of both your concerns and is the most appropriate solution. We would request an immediate disbursal and would be happy to provide clarifications, if any."
Then as I had noted earlier the defendant did not take any decision and just referred the matter to the Governing Council. I am of the view that the money asked for by the plaintiff is not very high because the plaintiff is going to render service and as suggested by the Director from the amount payable by the defendant to the plaintiff money could be deducted. The defendant ought to have provided money to the plaintiff. If the matter had been put to the Members in the Complex, I am of the opinion that they would have willingly agreed to the proposal given by the plaintiff. The plaintiff had to ask for such financial assistance because of the delay caused by the defendant. Therefore, no prejudice will be caused to the defendant if the financial assistance asked for by the plaintiff is granted to it when the plaintiff was always ready and willing to abide by the stipulations made by the defendant. The defendant being an Organisation of the Government cannot try to take advantage of its own wrong and drive the plaintiff to the wall causing unemployment to a number of young people who are trained specially in the filed.
(152) There shall be a direction to the defendant to render all assistance to the plaintiff in carrying out the service in the Complex including financial assistance as required by the plaintiff and as per the suggestions made by the plaintiff in its letter dated 13th of June, 1995.
(153) There shall be an injunction restraining the defendant, its officers, servants and agents from in any manner whatsoever giving effect to or acting in pursuance of the letter of the defendant dated 16th October, 1995 and from in any manner whatsoever creating any obstruction or hindrance in the functioning of the plaintiff from the portion of the premises/property in the possession of the plaintiff or permitting any other agency to operate in the property and facility awarded to the plaintiff and from in any manner whatsoever dispossessing the plaintiff there from and from taking possession of any capital goods,equipmentand supplies in the possession of the plaintiff till the disposal of the suit.
No order as to costs.
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I.A.799/96 disposed of.
Post the matter for admission and denial on the 14th of November, 1996 before the Joint Registrar.
ORDEREDaccordingly I.A. disposed of.
merely because he is minded to do so-he must in the exercise of his discretion do not what he likes but what he ought. In other words, he must, by the use of his reason, ascertain and follow the course which reason directs. He must act reasonably."
20.I am of the view that the imposition of penalty by the Arbitrator is an arbitrary exercise of power. I have no hesitation in setting aside this part of the award. The Arbitrator should have awarded interest on Rs. 91,000.00 only @ 10% per annum only from the date of award. Consequently, the award is modified arid is made a rule of the Court as per the above terms. Suit and Ia are disposed of.
21.There shall be a decree : 1. directing the objector, M/s. Bry Air (India) Pvt. Ltd. to pay the claimant, M/s. Ram Bahadur Thakur (P) Ltd. the sum of Rs. 3,30,00-; 2. directing the seller to pay interest @ 10% per annum on Rs l,32,000.00 from 1.1.85 upto the date of payment; 3. directing the objector to pay interest @ 10% per annum on Rs. l,98,000.00 from 1.11.85 upto the date of payment; 4. directing the objector to pay the claimant the sum of Rs. 91,000 / -with interest(c) 10%perannumfrom thedateofaward (6.11995)till the date of payment; 5. directing the setting aside of imposition of penalty of Rs. 50,000.00 ; 6. directing the objector to pay the claimant the costs of Rs. 10,000.00 imposed in the award; 7. directing the parties to bear their own costs in the suit and the application.
Award made Rule of the Court with modifications.