Summary
The Court upheld termination of a hotel operating-lease letter of intent for failure to make the required payments even within extended time. Mere receipt of late remittances did not establish an agreed extension or waiver. However, describing the upfront lease payment as non-refundable did not authorise forfeiture where the lease never became operative. The Court ordered refund of 4.11 crore rupees paid late, left recovery of the earlier 4.41 crore and competing loss claims to a civil suit, and directed return of the separate Supreme Court deposit with accrued interest.
Issues
- Whether acceptance of late remittances required execution of the lease or invalidated termination of the letter of intent.
- Whether the non-refundable description authorised retention of all payments despite the lease never taking effect.
- Which refund issues could be decided in writ proceedings and which required evidence in a civil suit.
Provisions considered
- Article 226, Constitution of IndiaContractual subject matter does not wholly exclude writ jurisdiction. The undisputed basis for termination could be decided, while factual issues concerning loss, set-off and interest were reserved for civil adjudication. (¶¶ 16, 17, 18, 20, 21, 22)
Held
- The letter of intent required the entire stipulated amount, including security and advance annual premium, within the prescribed period. The bidder failed to comply even after extensions. Receipt of remittances by a corporation with different departments did not itself show a positive decision extending time or condoning default. Termination was justified and execution of the lease could not be compelled. (¶¶ 10, 11, 12, 13, 14, 15, 18)
- Under these terms, the upfront non-refundable payment was part of the lease transaction and became non-refundable if the lease took effect. The letter did not provide forfeiture for failure to complete that transaction. Retaining the 4.11 crore rupees paid after the extended deadline would unjustly enrich the corporation, and that sum had to be refunded. (¶¶ 19, 20, 22(ii))
- The earlier 4.41 crore rupees could remain with the corporation pending a properly constituted recovery suit, in which it could assert loss by set-off or counterclaim. The actual loss and the bidder’s interest claim were left open for independent decision; retention was not a final damages award or approval of forfeiture. Pendency of such a suit would not obstruct fresh dealings with the property. (¶¶ 20, 21, 22(iii))
- The High Court’s order was modified to require refund of 4.11 crore rupees within four weeks and return of the separate three-crore-rupee Supreme Court fixed deposit with accrued interest. No interest on the 4.11 crore refund was separately awarded in these directions. (¶ 22)
Result
Appeal disposed of by modifying the High Court order: termination upheld, 4.11 crore rupees to be refunded within four weeks, recovery of the earlier 4.41 crore reserved for a civil suit, and Court deposit returned with accrued interest. No costs; pending applications disposed of.