C.J. International Hotels Limited v. New Delhi Municipal Council

High Court Of Delhi 
2003 3 AD (Delhi) 733
C.J. International Hotels Limited
New Delhi Municipal Council


In brief, facts relevant for the determination of the present appeal may be noted. The respondent/NDMC, being the owner of a parcel of land at Windsor Place, Janpath, invited offers from parties to have the land licensed to them on certain terms and conditions. The site was to be used for the construction of a Five Star Hotel. Various offers were received. One of the offers received was from M/s. Pure Drinks (New Delhi) Ltd. This was accepted by the respondent. The offer was that the licensee offered to pay a licence fee of 23% of the gross turnover or Rs. 2.68 crores per annum, whichever was higher. This offer of 23% of the gross turnover was subsequently reduced to 21% of the gross turnover.

A licence agreement dated 16.4.1981 was executed. Rights of the licensee M/s. Pure Drinks (New Delhi) Ltd. were assigned/taken over by the appellant and on 14.7.1982 a licence agreement was entered into.

As per the licence deed dated 14.7.1982, the demised parcel of land measuring 4.29 acres was licensed to the appellant. The stipulated licence fee was 21% of the gross turnover or 2.68 crores per annum, whichever was higher.

Due to certain reasons, the hotel building could not be completed within the time envisaged by the appellant. Appellant wrote letters to the respondent to reconsider the quantum of licence fee (reduce the same) and reschedule the licence fee which had become payable. The matter dragged on till 1990. The respondent issuing a letter dated 6.3.1990 to the appellant, calling upon the appellant to stop the use of the plot of land and hand over vacant possession of the same to the respondent and further pay a sum of Rs. 13,11,24,758.89 on account of the arrears of licence fee. There was also a threat of disconnection of the electric supply to the hotel constructed by the appellant. Two proceedings were initiated by the appellant. A Civil Writ Petition being CW No. 356/89 was filed challenging the threatened action of disconnection of electric supply. A petition under Section 20 of the Indian Arbitration Act, 1940 was also filed for the appointment of an Arbitrator to decide the disputes, which according to the appellant arose in relation to the demand raised by the respondent. Since the respondent had initiated eviction proceedings under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, the appellant sought interim protection to restrain the Estate Officer from proceeding further in the matter, the stay was also sought against recovery of the arrears of licence fee.

By order dated 16th October 1990 the application for interim stay in the proceedings initiated under Section 20 of the Indian Arbitration Act, 1940 was decided and the stay was declined. An appeal was preferred against the order dated 16.10.1990 declining the interim relief.

Parties arrived at some settlement outside the Court. What was agreed to, was reduced into writing and a supplementary agreement dated 11.3.1991 was executed.

Recitals of the said supplementary agreement dated 11.3.1991 traced out the background of the dispute between the parties which led to the execution of the supplementary agreement.

Since the supplementary agreement was re-scheduling the licence fee, which had fallen in arrear, a chart was annexed thereto containing the details of the schedule of instalments. It worked out the arrears of licence fee payable and granted time up to 2003 for payment of the same. The licence fee computed for a determination as being payable up to the date of the agreement was taken at 2.68 crores per annum.

Preceding and succeeding the date of a supplementary agreement, various requests were made by the appellant to the respondent that the licence fee payable had rendered the hotel as an unviable unit. Certain grievances were raised that the NDMC was responsible for the delay in sanction the building plans and in the erection of the hotel. Appellant had been making requests that the licence fee should be reduced. According to the appellant, in May 1993 L&DO appointed IFCI, as a consultant to go into the question regarding the fairness of the licence fee and its effect on the viability of the project. According to the appellant, IFCI submitted its report on 4th July 1994 to the effect that the licence fee was extremely exorbitant and required reduction. The appellant contends that the issue was deliberated thereafter in meetings held on 6.3.1995 and 7.3.1995 to sort out the issue pertaining to the reduction in the licence fee. According to the appellant, since its financial condition had improved, in modification of the term in the supplementary agreement dated 11.3.1991, to pay arrears @ Rs. 45 lacs per month, appellant acceded to the request of the respondent to accelerate the payment of arrears and started liquidating the same at the rate of Rs. 60 lacs per month, apart from paying the annual licence fee with effect from the year 1991 at the rate of Rs. 2.68 crores p.a., which was the minimum assured sum. According to the appellant, it met the administrator of the respondent on 25.7.1997 who accepted and assured that the redetermination of the licence fee would be done on the appellant enhancing the arrear payment to a sum of Rs. 1 crore per month. According to the appellant, it agreed to the same on the assurance that the matter pertaining to the reduction in licence fee would be sorted out. With effect from September 1997, the appellant started making payment @ 1 crore per month towards the liquidation of the arrears of licence fee. The enhancement of the monthly instalment from 45 lacs to Rs. 60 lacs was reduced into writing by a further supplementary agreement dated 4.8.1995. The further enhancement of payment of arrears @ 1 crore per month was reduced into writing by a supplementary agreement dated 31st March 1998.

We may note that the terms of the supplementary agreements dated 4.8.1995 and 31.3.1998 did not vary the terms of the supplementary agreement dated 11.3.1991, save and except record a change in the amount of monthly payment to be made towards the liquidation of the arrears of the licence fee.

On 31.12.1998 the respondent sought information from the appellant to appreciate the viability of the licence fee, which according to the appellant was provided.

Thereafter the appellant requested the respondent to constitute a committee for re-determination of the licence fee. As per the appellant, on 30th July 1999, a meeting took place between the appellant and the respondent in which it was agreed that an independent committee would be appointed to determine the licence fee and that the appellant would deposit a sum of Rs. 3 crores as licence fee and continue to pay licence fee @ 50 lacs per month till the date of appointment of the Committee. Appellant claims to have honoured its commitment as per the agreement arrived at on 30th July 1999.

The grievance of the appellant is that without appointing a committee and without re-considering the matter pertaining to revision(lowering) in the licence fee, the respondent issued a notice dated 12th November 1999 demanding licence fee at a rate of 21% of the gross annual turnover, which according to the appellant stood waived. On 22nd November 1999, the respondent is stated to have declined to constitute an independent committee to determine the fair licence fee. The Appellant was directed to deposit the payment of the licence fee as demanded. Alternatively, it was pleaded by the appellant that if letter dated 12.11.1999 was the letter declining the request for redetermination of the licence fee, inasmuch as, it affected a valuable civil right of the appellant, the decision being without reasons was violative of principles of natural justice


 Appellant filed a writ petition being CW No. 7163/99 in this Court. The said writ petition was held to be not maintainable by order dated 7th March 2000 by A.K. Sikri, J. It was held that disputed questions of fact were involved and grant of relief was dependent on prior adjudication of facts that needed investigation, an exercise for which writ proceedings was not an appropriate remedy.

Thereafter, the present suit came to be filed by the appellant. Prayer was made for interim relief to suspend the demand towards licence fee, which as noted above was declined. The respondent has denied the averments of the appellant

Submissions of Mr Amarjeet Singh Chandhok, Senior Advocate on behalf of the appellant, in brief, may be noted as under:

(1) Relying upon the pleadings made in suit plaint and the letters exchanged between the parties and meeting held culminating in the supplementary agreement dated 11.3.1991 it was argued that as reflected in Clause-7 of the agreement there was an express promise held out by the respondent to the appellant to reconsider the licence fee payable to it and till this was not done, the demand raised by the respondent, prima facie, could not be enforced.

(2) That it was evident from the supplementary agreement dated 11.3.1991, as evidenced by the chart annexed therewith containing the schedule of payment of the arrears of licence fee, that an agreement was arrived at, that pending re-determination of the licence fee, the appellant would pay licence fee at the minimum rate of Rs. 2.68 crores p.a. It was contended that in the year 1991, balance-sheets of the appellant for the years 1989 and 1990, taken on the basis of gross turnover showed licence fee payable was more than 2.68 crores p.a. In drawing the schedule for future payment for liquidation of the arrears of licence fee, by taking the same @ 2.68 crores p.a. it was evident that the respondent had given a go by to the concept of maximum licence fee.

(3) That after 1991, till the period of dispute, appellant liquidated current licence fee @ 2.68 crores p.a. And not as per the gross turn over. According to the learned Senior Counsel, this was yet another indication of the fact that the respondent had agreed to charge a licence fee at the minimum rate of 2.68 crores p.a. till it was re-determined.

C.J. International Hotels Limited v. New Delhi Municipal Council


To support these three contentions following judgments were relied upon at AIR 1950 SC 15, AIR 1969 SC 9, AIR 1959 MP 151 & AIR 1968 Delhi 68. Based on the aforesaid judgments it was contended that extrinsic evidence is admissible to determine the effect of an instrument. The surrounding circumstances attending the execution of the document have to be considered and that acts done by a party under a written document constitute evidence as to what was the intention of the parties.

That even otherwise, the respondent being a public authority was enjoined to act fairly, justly and reasonably with the appellant. Elaborating on this argument, it was contended that not only was there a contractual element (crystallized in submission 1, 2 & 3 noted above) but there was also a public duty element involved, in that, the respondent was estopped from retracting from the assurance held out to the appellant that it was re-consider the issue of licence fee. The facts giving rise to the plea of promissory estoppel being the various letters written by the respondent calling upon the appellant to furnish information to enable it to arrive at a just and fair conclusion on the licence fee payable reports sought from IFCI and given by the IFCI as also the deliberation in the various meetings where the respondent agreed to appoint a committee to re-examine this issue. Further evidence of this, according to the learned senior Counsel was found in the files of the respondent whether notings existed that the matter had to be re-examined. It was argued that the notes contained admissions that the licence fee at 21% of the gross annual turnover was exorbitant. This argument was further extended to include within it, the legitimate expectations, which the appellant was entitled to; that the matter would be fairly and reasonably reconsidered. The terminal end of this submission was that the respondent was bound to reconsider the matter fairly and reasonably as a public body and was to give a reasoned decision.

Decisions relied upon were : 1976(1) SCC 1001, 1975(2) SCC 818, 1993(3) SCC 259, 1991(2) SCC 716, 1991(3) SCC 38, 1970(1) SCC 769, AIR 1971 SC 862 & AIR 1990 SC 1984 for the proposition that the respondent was obliged to give a reasoned decision. AIR 1979 SC 621, AIR 1968 SC 718, AIR 1971 SC 1021, AIR 1979 SC 1628, 1995(2) SCC 326, 1999 Volume 4 SCC 727, 1983(2) of ALL E.R. 346, 1972(2) ALL E.R. 589 & AIR 1990 Bombay 376 for the proposition that representations had to be considered and that the appellant had a legitimate expectation that before action would be taken; the representation would be considered that the respondent was obliged to place all material before the Court; it could not be a Judge of its own obligations and that the respondent could not act arbitrarily. In respect of the plea of estoppel, judgments relied on were 1991(2) SCC 75, AIR 1979 SC 621, AIR 1968 SC 718, 1992(2) SCC 411 & AIR 1989 Madras 104. Based on a judgment it was contended that the respondent was bound by its notings and decisions taken on the file and the assurance held out in the meetings that it would reconsider the lowering of the licence fee.

That decision taken in an earlier proceeding under Section 20 of the Arbitration Act, 1940 could not operate as res judicata because (i) it was a decision on an interim application, and (ii) by the supplementary agreement dated 11.3.1991 all disputes pending on said date came to be settled and issue had to be decided on basis of supplementary agreement and events subsequent thereto.

That in any case, the demand raised could not be enforced because it was based on an alleged gross turnover claimed by the respondent. A contention was that as per the original licence deed, the appellant was to pay a licence fee at 21% of the gross turnover as “certified by the statutory auditor” of the appellant. (7) That at this stage of the matter the issue had to be looked at from the point of view of Order 39 i.e. whether the appellant had a prima facie case, whether the balance of convenience was in favour of the appellant or the respondent and whether the appellant would suffer irreparable loss and injury in case interim relief as prayed for was declined


Parul Singh
I’m a law student at Banasthali Vidyapith , Jaipur and pursuing B.Com LLB.I love to learn new things because I feel learning redefines you. Since childhood I was interested in law because it is a field by which positive change can be made for the society