Paulmech Infrastructure Private Limited vs The State of Orissa & Ors.

HELD: 1.1 Admittedly the appellant was not ready with the amount to make the payment within the timeframe contemplated under Clause 2 of LOI. The appellant, through their letter dated 04.02.2010 requested UAHCL that they be allowed to pay 50% of the bid money by 19.02.2010 which would include all the components indicated in Clause 2 of LOI and not just the upfront component. The rest of the money was undertaken to be paid by 15.04.2010. UAHCL through their reply dated 12.02.2010 allowed the same as a special case. The appellant once again through their letter dated 17.11.2010 requested for extension of time for payment of Rs.4.93 crore. UAHCL again extended the time till 15.12.2010. Despite indulgence shown by UAHCL the appellant did not make the balance payment before 15.12.2010. Instead, the sum of Rs.4.11 crore was paid subsequent thereto. [Para 12, 13][1050-C-E]

1.2 The submission of the appellant that UAHCL having received the said payment cannot at this stage contend that the payment was not made within the time stipulated, cannot be accepted. UAHCL is a corporation which has different departments and as such the remittance made being accepted in itself cannot be taken as an act to condone the delay caused by the appellant in complying with the terms of the LOI so as to alter the terms of contract. There is no material on record that subsequent to 15.12.2010, there is any positive act on behalf of UAHCL to either extend the time for payment or for having expressly condoned the delay and having accepted the payment so as to regularise the transaction. This is relevant more so in the context that at an earlier point as against the time stipulated for payment under the LOI specific correspondence was exchanged between the parties and the time had been expressly extended prior to the time fixed earlier having expired. In such situation, when admittedly the balance payment had not been made prior to 15.12.2010, unless the appellant had obtained express extension from UAHCL mere tendering the payment and the same having been accepted cannot be construed as a positive act to alter the contract. [Para 14][1050-F-H; 1051-A-B]

1.3 No doubt, the appellants relied on the communication dated 13.04.2011 addressed by the General Manager, UAHCL indicating therein that the issue of offering VRS to all the employees unwilling to join the new management was a consideration and the VRS amount will have to be paid by the appellant to UAHCL. Apart from the reason assigned by the High Court to indicate that the same cannot be treated in favour of the appellant, the said letter does not indicate that the discussion in that regard was after indicating to the appellant that the delay in payment of the upfront amount has been condoned and accepted. If at all the said aspect relating to VRS of the employees was also mutually agreed and, in that context, if UAHCL had proceeded to condone the delay and enter into the lease agreement it is only in such circumstance the exchange of correspondence in that regard would have assumed relevance. If that be the position, when admittedly the appellant was required to make the agreed payments within the timeframe indicated under LOI and the appellants themselves being unable to comply with the requirement, though having secured extensions on two occasions cannot turn around to contend otherwise at this juncture. Despite the extended period having come to an end on 15.12.2010, the appellant not having made the full payment within the said date cannot at this stage contend to have complied with the terms so as to seek a direction to UAHCL to execute the lease agreement. In fact, the High Court having examined the material on record has also arrived at such conclusion. Notwithstanding such conclusion reached by the High Court, ultimately it arrived at the decision that in view of the disputed questions to be resolved between the parties, the same cannot be gone into in writ jurisdiction. [Para 15, 16][1051-B-G]

1.4 On facts, the High Court arrived at the conclusion that such disputed questions of fact cannot be resolved in the writ petition of the instant nature. Therefore, in the instant facts, the High Court has not dismissed the writ petition on maintainability but having taken note of the issue involved was of the opinion that the submission urged would necessitate the requirement of recording evidence and therefore relegated the parties to an appropriate forum. To that extent, though the observations made by the High Court are taken note of, keeping in view the nature of the considerations made, the prayers which were sought in the amended writ petition were required to be conclusively answered by the High Court on the aspect as to whether the decision of UAHCL to terminate the LOI dated was justified and the requirement for resolution of the dispute by an appropriate forum ought to have been left open only to the incidental aspect which may require appropriate evidence to be tendered and adjudication to be made by an appropriate forum. [Para 17][1052-F-H; 1053-A]

1.5 Having noted that the appellant had failed to adhere to the terms indicated in the LOI and the payment required thereunder not being made even within the extended period, the Board of Directors of UAHCL were justified in deciding to terminate the LOI through their letter dated 10.12.2013. In fact, the prayer seeking calculation of interest on the amount deposited and such amount is being sought to be adjusted towards the balance payments would in itself indicate that even to the knowledge of the appellant, the entire payments had not been made even as on the date of the filing the writ petition. In such circumstance, when the LOI has been rightly terminated, the directions sought in the writ petition to execute the lease agreement pertaining to ‘Hotel Nilanchal Ashok’, Puri does not arise and the prayers in that regard are liable to be rejected. [Para 18][1053-B-D]

1.6 A close perusal of the phrase employed in the LOI would indicate the one-time payment made upfront is shown as “nonrefundable” and such payment is towards execution of the Operating Lease Agreement. If that be the position, the terms of LOI is clear that the said payment is towards the lease rentals and is the upfront payment which becomes a part of the lease transaction and therefore not refundable only if the lease agreement comes into operation and not otherwise. The word employed is not “forfeiture”, therefore, the amount payable towards the advance lease rentals and the other advance payments provided in clause 2 of the LOI, cannot be forfeited if there is default in complying with the term and entering into the lease agreement, going by the stipulations contained in the LOI governing the parties. That apart, the amount was required to be paid, latest by the extended date i.e., 15.12.2010. The very termination of the LOI is for the reason that the entire payment was not made even within the timeframe. The cause for termination of LOI occurred on 15.12.2010. Hence the amount paid after the extended date, in any event cannot be retained by UAHCL as otherwise it will amount to unjust enrichment. Therefore, it is liable to be refunded. Even with regard to the amount of Rs.4.41 crores which was paid on 07.02.2010, since the same cannot be forfeited it is an amount which will be available for accounting. In a normal circumstance, a direction was required to be issued to refund the said amount also. [Para 20][1053-F-H; 1054-A-C]

1.7 UAHCL submitted that due to the conduct of the appellant in not paying the amount within time and completing the lease agreement formalities and thereafter involving UAHCL in litigation and taking benefit of the status quo order, UAHCL was unable to utilise the property but on the other hand had to incur expenses. On this aspect, prima facie it is seen that the lease transaction ought to have been entered into before 19.02.2010. However, in the whole process itself more than 10 months had elapsed. Soon thereafter the appellant had filed the writ petition before the High Court and the matter has been pending before one forum or the other for nearly a decade during which time the property could not be utilised nor expenses could be frozen. Even if that be so, it would not be appropriate for this Court to hazard a guess with regard to the actual loss that would have been suffered by UAHCL. At the same time, when this prima facie aspect is noticed it would also not be appropriate for this Court to direct UAHCL to refund the amount to the extent of Rs.4.41 crore which was paid within the timeframe and allow UAHCL to thereafter initiate recovery process. On the other hand, it would be in the interest of justice to permit UAHCL to retain the amount and grant liberty to the appellant to file an appropriately constituted civil suit seeking recovery of the said amount. [Para 21][1054-D-G]

1.8 The order passed by High Court is modified. In that view, the prayer of the appellant to quash the letter terminating the letter of LOI is rejected. Consequently, the termination of LOI is upheld. However, UAHCL is directed to refund the amounts deposited by the appellant after the extended date in all amounting to Rs.4.11 crores within the stipulated period. The appellant is reserved liberty to file a civil suit for recovery of Rs.4.41 crores paid to UAHCL. [Para 22][1055-B-D]

Unitech Ltd. and Others vs. Telangana State Industrial Infrastructure Corporation 2021 (2) SCALE 653; Arya Vyasa Sabha v. Commissioner of Hindu Charitable & Religious Institutions & Endowments AIR 1976 SC 475; DLF Housing Construction Private Ltd. Vs. Delhi Municipal Corporation AIR 1976 SC 386; National Textile Corporation Ltd. vs. Haribox Swalram AIR 2004 SCC 1998 : [2004] 3 SCR 738; Dwarka Prasad v. B.D. Agarwal AIR 2003 SC 2686 : [2003] 1 Suppl. SCR 336; Defence Enclave Residents’ Society v. State of U.P. AIR 2004 SC 4877 – Referred to.