- Ganga Retreat and Towers Ltd. and Anr vs State Of Rajasthan & Ors
- Bench: Judge R.C. Lahoti andJudge Ashok Bhan
Issue:
- Can Section 20 of Indian Contract Act apply if one of the parties knew about mistake of fact and acted further with knowledge of such mistake?
- Does the act of respondent amounts to misrepresentation and whether the doctrine of frustration will be applicable or not?
Facts:
- The State of Rajasthan (Respondent) decided to sell by public auction two properties situated in Jaipur City, namely Dr. Helligs Bungalow, and the other was a plot of land situated near Khasa Kothi known as the site of Food Craft Institute building.
- We are only concerned with the first property. Respondentissued advertisement for auction of Dr. Helligs Bungalow. In the advertisement the property was described as free hold, ceiling free, vacant, crest jewel property known as Dr. Helligs Bungalow (10,400 sq. yards). The permitted use of the property was shown as hotel/commercial complex/hotel cum-commercial complex. The terms and conditions for the auction were also provided in the advertisement.
- The appellant won the auction with bid of Rs. 19,56,76,000/-.
- Then Additional Director and Competent authority under the Urban Land Ceiling and Regulation Act, 1976 issued a notice to the appellants under Section 38 of the Ceiling Act, alleging that the appellants were holding land in excess of ceiling limits and had not filed the return as required under Section 6 (1) read with Section 15 of the Act.
- The appellants replied that the Respondent had sold the property as free from ceiling limit and therefore, there was no need to file a return. As the explanation was not accepted by the competent authority, the appellants applied for exemption under Section 20 of the Act. processed. However, the competent authority granted exemption to the appellants on certain conditions. It was stipulated that the exemption was being granted subject to the terms and conditions stated in the conveyance deed dated.
- The Jaipur Development Authority revised its bye-laws. Vide Regulation No. 9.3.3 of the 1996 Regulations the FAR was reduced to 1.75 instead of 2.00 as provided by the Bye-laws of 1989.
- Appellants submitted their building plans as per FAR 2.00. JMC approved the building plans subject to FAR 1.75 only as per 1996 Bye-laws as against FAR 2.0 permitted by the auction notice and the conveyance deed.
- The appellants wrote a letter to the Minister for Urban Development, Government of Rajasthan, for intervening in the appellants' favour in their dispute with the JMC which was not allowing FAR 2.0 as promised in the terms of auction and the sale deed. Also, wrote a letter to the Chief Minister asking for intervention. It was also stated in the letter that if no response was received to the proposals in writing within fifteen days, the appellants shall go to the court of law for redressal of their grievances.
- The Learned Single Judge rejected the preliminary objections and declared that the sale deed was statutory in nature. No change could be affected thereafter on any pretext whatsoever in regard to the reducing the FAR from 2.0 to 1.75. In the auction notice property was described as free hold and ceiling free. The action of the State in not acting upon the assurance given amounted to a fraud, which invalidated the sale. The contract was frustrated. All consequent actions taken by either of the parties pursuant to the auction and the sale deed were invalidated and the appellants were declared entitled to be restituted to the original position as it existed prior to the date of auction and execution of the sale deed.
- Appeal was filed by the respondent and it was held that the sale of land by way of auction was neither statutory nor by way of grant. It was held that the rights and obligations incorporated in the sale deed were not statutory in character. That it was a completed contract in which highly disputed questions of fact were involved which could not be adjudicated upon by the High Court in exercise of its writ jurisdiction.
Argument raised by Appellant:
- The appellants contended that the conveyance deed is liable to be cancelled and set aside on the ground that it is vitiated by misrepresentations made on behalf of the Respondent, on account of which the appellants were wrongly induced to enter into the contract and that the conveyance was entered into by mistake.
- The appellants founded their case on the plea of avoidance of contract as vitiated by misrepresentation on the part of respondents or mistake on the part of the appellants or in the alternative, on the ground of frustration.
Argument raised by Respondent:
The respondent contended that the amended bye-laws were more beneficial to the appellants as there was number of exemptions to be taken into account while calculating the FAR, namely, storage on all floors, balcony, guard-door, lobby, terrace garden, service floor, AC plant room, locker, dark room, PBX room, guard room, power house, lift room and the lift well. Under the amended bye-laws of 1996 the appellants would get more covered area thus causing no prejudice to them.
Judgment:
The court held that the appellants are not entitled to any relief in the realm of the law of contracts. In spite of having acquired knowledge of the true facts assuming that there was any mistake or misrepresentation to begin with and having learnt that the title which was sought to be conferred on them by the respondents was not such full title as they had contemplated it to be, they proceeded to have the sale deed executed and registered in their favour, seeking extensions of time and paying interest for the period of delay in payment. The contract stood accomplished into a demise and the transaction ended. It is writ large that the appellants had elected to stand by the contract by digging the land, sinking the basement and raising about 9 floors above, investing crores of rupees. They have by their own conduct rendered the position irreversible and restitution impractical. We have not been shown any law or authority based whereon the appellants may annul and avoid a concluded contract and fix liability on respondents for the cost of their construction which they have voluntarily chosen to raise in spite of being aware of all the relevant facts and circumstances.
The appeal was dismissed.
