2007 (4) TMI 666 - SC - Companies Law

Whether mere expressing desire for renewal or not furnishing reasons for renewal is necessary? Held that - In the instant case, the concurrent finding of fact is that the desire of the appellant was not bona fide. In any event, possession of the lease holding has already been delivered. Respondents have received possession after a long struggle. It is, therefore not a case where we should interfere with the impugned judgment particularly in view of the finding of fact arrived at by the courts below. Appeal dismissed.

Issues Involved:
1. Statutory right of renewal under the Burmah Shell (Acquisition of Undertakings in India) Act, 1976.
2. Fairness and reasonableness of the appellant's action.
3. Applicability of the doctrine of fairness to the appellant as a 'State' under Article 12 of the Constitution of India.
4. Judicial review of executive action based on subjective or objective criteria.
5. Interpretation of statutory provisions in light of constitutional rights.

Issue-wise Detailed Analysis:

1. Statutory Right of Renewal:
The appellant, a government company, claimed a statutory right to renew the lease under Section 5(2) read with Section 7(3) of the Burmah Shell (Acquisition of Undertakings in India) Act, 1976. The Act provided that upon the expiry of any lease or tenancy, it would be renewed on the same terms and conditions if desired by the Central Government. The appellant exercised this right by issuing a notice in 1989, seeking renewal of the lease for another 30 years.

2. Fairness and Reasonableness of the Appellant's Action:
The respondents opposed the renewal, arguing that the appellant had not paid rent and the provisions of the Act did not apply. The First Appellate Court and the High Court found that the appellant's desire for renewal was not based on any need and was driven by unfair and unreasonable motives. The courts emphasized that the appellant had not paid rent for 17 years and sought to continue the lease at a nominal rent of Rs. 50 per month, despite a significant reduction in business due to changes in traffic patterns.

3. Applicability of the Doctrine of Fairness:
The appellant, being a 'State' within the meaning of Article 12 of the Constitution, was required to act fairly and reasonably. The Supreme Court reiterated that just because a statutory power is conferred, it does not mean it can be exercised arbitrarily. The desire for renewal must be based on objective criteria and not subjective satisfaction.

4. Judicial Review of Executive Action:
The Supreme Court emphasized that executive actions must be informed by reason and fairness. An action that is simply unfair or unreasonable would not be sustained. Even subjective satisfaction by the State is subject to judicial review. The Court cited precedents where it was held that the State must exercise its powers bona fide and not arbitrarily, particularly when it affects the rights of others.

5. Interpretation of Statutory Provisions:
The Court noted that statutes must be construed justly and reasonably. The Parliament is presumed to enact reasonable statutes, and any statutory order or discretion exercised by a statutory authority must be tested on the anvil of the constitutional scheme. The Court emphasized that when two views are possible, the one satisfying constitutional rights should be preferred.

Conclusion:
The Supreme Court dismissed the appeals, holding that the appellant's action did not meet the test of fairness or reasonableness and was wholly arbitrary. The concurrent finding of fact was that the appellant's desire for renewal was not bona fide. The possession of the leasehold had already been delivered to the respondents, and any interference with the impugned judgment was unwarranted. The appeals were dismissed with costs assessed at Rs. 50,000/-.

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