Facts of the Case

Chemmanur Fashion Jewellers was the successful bidder in a tender-cum-auction conducted by the Cochin Port Trust for allotment of a Tourist Jetty with allied structures and nearby open area at Willingdon Island on a licence basis for a period of five years.

The allotment order was issued to the petitioner on 19 October 2020. Before issuance of the allotment order, the petitioner had paid:

  • ₹9,90,000 as Security Deposit; and
  • ₹1,65,000 plus GST as licence fee for the first month.

Under Clause 2.9 of the Bid Document, the licensee was required to take over the licensed premises within 30 days of allotment and commence payment of licence fee from the date of takeover.

According to the petitioner, immediate steps were taken to commence construction. However, the Cochin Port Trust required the petitioner to obtain all necessary clearances before beginning construction activities.

The petitioner relied upon correspondence exchanged between the parties to contend that it had acted in accordance with the allotment conditions and that the delay was attributable to the Cochin Port Trust.

The dispute became more serious when the CRZ Authorities allegedly took the position that no construction was possible at the allotted site. Faced with this obstacle, the petitioner issued Ext. P10 letter dated 13 October 2021, terminating the contract.

Thereafter, the Cochin Port Trust issued Ext. P11 letter, calling upon the petitioner to show cause why the licence should not be terminated and the allotment cancelled. The proposed cancellation was stated to be based on the petitioner’s alleged default in commencing activities in accordance with the tender notice.

Aggrieved by this action and the dispute concerning licence fee liability, the petitioner approached the Kerala High Court.

Issues Involved

The principal issues arising in the matter were:

  1. Whether the petitioner could be held liable to pay licence fee from the date of takeover when the alleged delay in commencing activities was claimed to be attributable to circumstances beyond the petitioner’s control.
  2. Whether the delay in commencement of construction and project activities was attributable to the petitioner or to the Cochin Port Trust and regulatory clearance requirements.
  3. Whether the alleged stand of the CRZ Authorities that construction was not possible at the allotted site materially affected the petitioner’s contractual obligations.
  4. Whether the Cochin Port Trust was justified in insisting upon strict compliance with the terms of allotment without granting relaxation.
  5. Whether the writ court could conclusively adjudicate the disputed contractual and factual questions when their resolution required oral and documentary evidence.
  6. Whether the impact of the COVID-19 pandemic and lockdown should be considered while quantifying any claim for licence fee.
  7. Whether the petitioner should vacate the licensed premises following termination of the licence and contract.

Petitioner’s Arguments

The petitioner contended that it had acted in accordance with the allotment and had taken immediate steps to commence construction.

It was argued that the delay was not attributable to the petitioner. According to the petitioner, the Cochin Port Trust itself required necessary clearances to be obtained before construction could commence.

The petitioner relied upon the correspondence exchanged between the parties to demonstrate that it had acted pursuant to the allotment and that the delay had occurred on the side of the Cochin Port Trust or because of circumstances connected with necessary approvals.

The petitioner further relied on the alleged stand of the CRZ Authorities that no construction was possible at the allotted site, treating the same as an insurmountable hurdle to implementation of the project.

Consequently, the petitioner issued the letter dated 13 October 2021 terminating the contract.

On the issue of licence fee, the petitioner specifically contended that it was not liable to pay licence fee from the date of takeover, because the delay was not in any manner attributable to it.

Regarding possession of the premises, the petitioner submitted before the Court that it had expressed willingness to vacate the premises long ago and, the licence having been terminated, it had no intention of continuing in occupation.

Respondents’ Arguments

The Cochin Port Trust maintained that the petitioner was bound by the terms of the allotment and that no relaxation could be granted under any circumstances.

Its position was that the contractual and tender conditions governed the parties’ obligations, including the petitioner’s obligations concerning takeover, commencement of activities and payment of licence fee.

The Port Trust’s show-cause action proceeded on the allegation that the petitioner had defaulted in commencing activities in terms of the tender notice.

The Cochin Port Trust also filed an interlocutory application seeking a direction requiring the petitioner to immediately vacate the licensed premises.

Court Order / Findings

The Kerala High Court observed that, from the pleadings and arguments, it was evident that resolution of the dispute required adduction of evidence, both oral and documentary.

The Court therefore did not undertake a final adjudication of the disputed questions regarding responsibility for delay or the ultimate licence fee liability in the writ proceedings.

Importantly, the Court expressed the opinion that the Cochin Port Trust should adopt a practical approach, taking into account the impact of the COVID-19 pandemic and lockdown.

However, the Court refrained from issuing any specific direction because the parties had other efficacious remedies available to them.

The Court further clarified that, while quantifying the claim for licence fee, all relevant aspects should be taken into account.

As regards possession, the Court recorded the petitioner’s submission that:

  • the petitioner had expressed willingness to vacate the premises long ago;
  • the licence had been terminated; and
  • the petitioner had no intention to continue occupying the premises.

Accordingly, the writ petition was closed, while reserving the right of the parties to resort to appropriate remedies available to them.

Important Clarification

This judgment does not declare that the petitioner is automatically exempt from payment of the licence fee.

It also does not finally determine that the Cochin Port Trust alone was responsible for the delay.

The Court’s crucial finding was that the dispute involved contested factual questions requiring oral and documentary evidence, making final resolution inappropriate in the writ proceedings.

At the same time, the Court made an important observation that the Cochin Port Trust should take a practical approach considering the impact of the COVID-19 pandemic and lockdown.

Further, while quantifying any licence fee claim, all relevant aspects must be considered. This observation is significant because it indicates that licence fee quantification should not be approached mechanically without considering the surrounding circumstances relevant to the dispute.

The Court ultimately left the parties free to pursue their respective claims and defences through appropriate efficacious remedies.

Section / Clause Involved

Clause 2.9 of the Bid Document – The licensee was bound to take over the licensed premises within 30 days of allotment and was required to commence payment of licence fee from the date of takeover.

Constitutional Writ Jurisdiction – The matter was instituted as a civil writ petition before the Kerala High Court. The judgment’s central procedural significance lies in the Court declining to conclusively determine disputed contractual questions requiring oral and documentary evidence and reserving appropriate remedies to the parties.

Tender and Licence Conditions – The dispute concerned contractual obligations arising from the tender-cum-auction, allotment order, licence arrangement, commencement of activities and liability for licence fee.

CRZ Clearance / Regulatory Restrictions – The petitioner relied upon the alleged position of CRZ Authorities that construction was not possible at the allotted site as a material circumstance affecting performance of the contract.

Link to download the order -

https://mytaxexpert.co.in/uploads/1783334792_1141compressed.pdf

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