2007 (2) TMI 582 - SC - Indian Laws

Whether the order of cancellation dated 13.4.2005 passed by respondent No.2 was illegal and that respondent No.1 was entitled to further time to furnish the bank guarantee after the order granting exemption in terms of Section 81(3)(b) of the Kerala Land Reforms Act, 1963? Held that - Appeal allowed. An implied warranty, or as it has been called, a covenant in law, as distinguished from an express contract or express warranty is really founded on the presumed intention of the parties and upon reason. The implication which the law draws from what must obviously have been the intention of the parties, it draws with the object of giving efficacy to the transaction and preventing such failure of consideration as cannot have been within the contemplation of either side. In view of what we have stated above, it is not necessary to deal with the grievance raised by the State Government in its belated Special Leave Petition.

Issues Involved:
1. Legality of the order of cancellation dated 13.4.2005.
2. Entitlement of respondent No.1 to further time to furnish the bank guarantee.
3. Application of Section 81(3)(b) and Section 87 of the Kerala Land Reforms Act, 1963.
4. Interpretation of tender terms and conditions.
5. Judicial review of administrative decisions in contractual matters.

Detailed Analysis:

1. Legality of the Order of Cancellation:
The Supreme Court examined the legality of the cancellation order dated 13.4.2005 issued by Goshree Island Development Authority (GIDA) against respondent No.1, M/s Hotel Venus International (Venus). The High Court had previously held the cancellation illegal, granting Venus additional time to furnish the bank guarantee. The Supreme Court scrutinized the sequence of events leading to the cancellation, including the tender process, Venus's failure to furnish the bank guarantee, and the subsequent ratification of the cancellation by GIDA's General Council.

2. Entitlement to Further Time to Furnish Bank Guarantee:
The core issue was whether Venus was entitled to additional time to furnish the bank guarantee, which it failed to do within the stipulated period. The High Court had ruled in favor of Venus, stating that the exemption notification under Section 81(3)(b) of the Act was a condition precedent for compliance with the tender conditions. The Supreme Court, however, found that Venus was aware that the exemption could be granted later and had not initially contested the requirement for the bank guarantee. The Court held that the High Court erred in treating the exemption notification as a condition precedent.

3. Application of Section 81(3)(b) and Section 87 of the Act:
The Supreme Court analyzed the applicability of Sections 81(3)(b) and 87 of the Kerala Land Reforms Act, 1963. Section 81(3)(b) pertains to the exemption of land for specific purposes, while Section 87 deals with the acquisition of excess land. The High Court had interpreted these sections to mean that the exemption notification should precede the tender process. The Supreme Court disagreed, stating that the exemption was necessary only if the total area exceeded the ceiling limit and that the successful bidder could be allotted land below this limit without immediate exemption.

4. Interpretation of Tender Terms and Conditions:
The Supreme Court emphasized the importance of adhering to the explicit terms and conditions of the tender document. Clauses 10 and 15 were particularly significant, detailing the requirements for furnishing bank guarantees and the conditions for registering the sale deed. The Court concluded that the High Court had effectively re-written the tender terms by implying conditions that were not explicitly stated. The Court also noted that the tender conditions did not make the exemption notification a prerequisite for furnishing the bank guarantee.

5. Judicial Review of Administrative Decisions in Contractual Matters:
The Supreme Court reiterated the principles governing judicial review of administrative decisions in contractual matters. Referring to precedents, the Court stressed that the terms of the invitation to tender are not open to judicial scrutiny and that the Government must have the freedom to contract. The Court highlighted that the High Court had overstepped its jurisdiction by modifying the tender terms, which is not permissible under the principles of judicial review.

Conclusion:
The Supreme Court set aside the orders of the learned Single Judge and the Division Bench of the High Court, holding that the cancellation of Venus's tender was justified due to its failure to furnish the bank guarantee. The Court directed that the appellants, who had matched Venus's offer, should be allowed to pay the amount within one month, with interest, and that Venus's deposit be refunded with interest. The appeals were allowed without any order as to costs.

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