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Bombay High Court
DHARMADHIKARI,KAMAT
Trade Centre Developers and Builders - Appellant
Versus
Union of India - Respondent
Decided On : 03/13/1984
ESSO (ACQUISITION OF UNDERTAKINGS IN INDIA) ACT, 1974 - Ss. 5(2) AND 7(3) - CONSTITUTIONALITY - PROTECTION UNDER ART. 31C - RENEWAL OF LEASE - PRINCIPLES OF NATURAL JUSTICE - BOMBAY RENT ACT - APPLICABILITY.
Fact of the Case:
The petitioner, Trade Centre Developers and Builders Pvt. Ltd., became the owners of the land in dispute pursuant to a consent decree passed by the Bombay High Court in 1981. The land was leased to Esso Standard Eastern Incorporated in 1958 for a period of 20 years, expiring in 1978. In 1974, the Esso (Acquisition of Undertakings in India) Act was enacted, which vested the right, title, and interest of Esso Standard Eastern Incorporated in the Union of India. The Act also provided for the vesting of the undertaking in a Government Company, Hindustan Petroleum Corporation Ltd. (HPCL). HPCL informed the petitioner in 1978 of its desire to renew the lease for a further period of 20 years on the same terms and conditions. The petitioner objected, claiming that she wanted to develop her property and had no desire to continue the lease. HPCL maintained that it was entitled to renew the lease under Ss. 5(2) and 7(3) of the Act. The petitioner filed a writ petition challenging the constitutionality of Ss. 5(2) and 7(3) and seeking a declaration that HPCL was not entitled to renew the lease.
Finding of the Court:
The Bombay High Court held that Ss. 5(2) and 7(3) of the Esso (Acquisition of Undertakings in India) Act, 1974 were protected by Art. 31C of the Constitution and were therefore immune from challenge on the ground that they violated the petitioner's fundamental rights under Arts. 14, 19(1)(f), and (g). The court found that the Act was enacted to give effect to the policy of nationalization of petroleum products as laid down in Art. 39(b) and (c) of the Constitution and that Ss. 5(2) and 7(3) were integrally connected with that policy. The court also held that the provisions did not confer arbitrary or unbridled power on the authorities concerned and that the principles of natural justice did not apply to the renewal of the lease under these provisions. The court further held that the Bombay Rent Act was not applicable to the present case.
Issues: 1. Whether Ss. 5(2) and 7(3) of the Esso (Acquisition of Undertakings in India) Act, 1974 are protected by Art. 31C of the Constitution? 2. Whether the provisions violate the petitioner's fundamental rights under Arts. 14, 19(1)(f), and (g) of the Constitution? 3. Whether the principles of natural justice apply to the renewal of the lease under Ss. 5(2) and 7(3) of the Act? 4. Whether the Bombay Rent Act is applicable to the present case?
Ratio Decidendi: 1. The court held that Ss. 5(2) and 7(3) of the Esso (Acquisition of Undertakings in India) Act, 1974 were protected by Art. 31C of the Constitution because: - The Act was enacted to give effect to the policy of nationalization of petroleum products as laid down in Art. 39(b) and (c) of the Constitution. - Ss. 5(2) and 7(3) were integrally connected with that policy. - The provisions did not confer arbitrary or unbridled power on the authorities concerned. - The principles of natural justice did not apply to the renewal of the lease under these provisions. 2. The court held that the provisions did not violate the petitioner's fundamental rights under Arts. 14, 19(1)(f), and (g) of the Constitution because: - The classification made by the provisions was reasonable and had a rational nexus with the object of the Act. - The restrictions imposed by the provisions were in the interest of the general public. - The provisions did not confer arbitrary or unbridled power on the authorities concerned. 3. The court held that the principles of natural justice did not apply to the renewal of the lease under Ss. 5(2) and 7(3) of the Act because: - The provisions conferred a unilateral right on the Central Government and/or Governmental Companies to renew the lease on the same terms and conditions. - There was no scope for further negotiations or alterations or modifications. - The Legislature had made a provision for hearing in other sections of the Act where it was necessary.
Final Decision: The Bombay High Court dismissed the petitioner's writ petition, holding that Ss. 5(2) and 7(3) of the Esso (Acquisition of Undertakings in India) Act, 1974 were protected by Art. 31C of the Constitution and were therefore immune from challenge on the ground that they violated the petitioner's fundamental rights under Arts. 14, 19(1)(f), and (g). The court also held that the principles of natural justice did not apply to the renewal of the lease under these provisions and that the Bombay Rent Act was not applicable to the present case.
DHARMADHIKARI, J .:- The present petitioner No. 1 i.e. Trade Centre Developers and Builders Pvt. Ltd. became the owners of the land in dispute pursuant to the consent decree passed by this court on 7th of may 1981 in suit No.895 of 1981 between the original petitioner Dina Dara Sukhia and the petitioner No.1. Petitioner No.2 Jagdish Prasad is the Director of the petitioner No.1 company. It is an admitted position that by an agreement of lease dated 3rd of December 1958 the original petitioner agreed to lease the land in dispute to Messrs Standard Vacuum Oil Company for a period of 20 years with effect from 1st October 1958. The said period was to expire on 1st October 1978. The annual rent of the said land was Rs. 2,200/- plus taxes. Other terms and conditions of lease were also incorporated in the agreement. It is also an admitted position that from 19th March 1962 rights and interests of the Standard Vacuum Oil Company were taken over by the Esso Standard Eastern Incorporated and therefore latter became the tenants of the said land. Under the Esso (Acquisition of Undertakings in India) Act, 1974 (hereinafter referred to as the said Act), the right, title and interest of the Esso Standard Eastern Incorporated stood acquired and transferred to the Union of India. Thereafter under S.7 of the said Act the respondent No.1 directed vesting of the said Undertaking in the Government Company i.e. Hindustan Petroleum, vide Notification dated 14th March 1974. Thus for all practical purposes the Hindustan Petroleum the respondent No.2 became the lessees of the original petitioner. Thereafter vide letter 1st June 1978 the respondent No.2 the Hindustan Petroleum Corporation Ltd. informed the original petitioner, that they desire to renew the lease for a further period of 20 years from 1st October 1978 on the same terms and conditions. It appears that even before the receipt of this letter the original petitioner vide her letter of 2nd June 1978 informed the respondent No.2 that she desires to develop her property and has no desire to continue the lease any further. Therefore she called upon the respondent No.2 to deliver vacant possession of the said property by the end of the said period of lease. After receipt of this letter the respondent No.2 informed her that the averments made in her notice that she wants to develop her property are false and since they have already exercised their rights under Ss.5(2) and 7(3) of the Act, they were entitled to get the said lease renewed on the same terms and conditions. Thereafter on 1st August 1979 the original petitioner served a notice on the respondents and ultimately filed the present writ petition. Since during the pendency of this writ petition present petitioners became the owners of the property, the petition was amended and the name of the original petitioner came to be deleted. In the present petition mainly the provisions of Ss.5(2) and 7(3) of the Act are challenged by the petitioners on several grounds.
2. Shri Paranjape the learned Counsel appearing for the petitioners contended, that S.5 of the Act read with S.3 vests the Central Government with the right, title and interest in relation to the Undertaking of Esso as defined in S.4 of the Act. S.5(2) does not confer any statutory right on the Central Government to renew the lease. The object of S.5(2) read with S.7(3) is limited to the renewal of the contractual rights, if the initial agreement so provided. The said provisions are transitory in nature and were inserted in the enactment with the sole object of enabling the organisation burdened with the new rights and responsibilities to have breathing time to adjust its own affairs. S.7(3) has also limited application. The said section has been inserted to provide breathing time to the new organisation to organise and adjust its affairs. The protection conferred by the said sections is meant for interim period only. They only confer a limited right of renewal of lease for th
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