Supreme Court Upholds Disqualification of Petrol Pump Applicant Due to Lease Commencement Clause: Anapurna Jaiswal vs. Indian Oil Corporation Ltd. (30 September 2021)

Introduction

Date of the Judgment: 30th September, 2021

Citation: (2021) INSC 693

Judges: K.M. Joseph, J., Pamidighantam Sri Narasimha, J.

Can a lease agreement that only becomes effective upon a future event, such as the approval of a petrol pump, be considered a valid lease for the purpose of awarding marks in a competitive application process? The Supreme Court of India recently addressed this crucial question in a civil appeal concerning the grant of a petrol pump dealership. The core issue revolved around whether the appellant, who had secured the highest marks in the initial evaluation, was correctly disqualified due to a clause in her lease agreement that linked its commencement to the future approval of the petrol pump. This judgment clarifies the interpretation of lease agreements in the context of public procurement and emphasizes the importance of adhering to the specific terms of such agreements. The bench comprised Justices K.M. Joseph and Pamidighantam Sri Narasimha, with the majority opinion authored by Justice K.M. Joseph.

Case Background

On October 12, 2011, Indian Oil Corporation Ltd. (the respondent) issued an advertisement inviting applications for petrol pump dealerships. Anapurna Jaiswal (the appellant) submitted her application on November 11, 2011. Based on the evaluation, she was initially placed first. However, a complaint led to a review, and on November 12, 2014, the respondent issued an order stating that the lease agreement dated November 8, 2011, submitted by the appellant, would only commence from the date of approval of the petrol outlet. The respondent concluded that the lease was not in effect on the date of the application, effectively disqualifying the appellant. The appellant then registered a rectification deed on December 12, 2014, and made multiple representations, all of which were rejected by the respondent on February 25, 2015. This led the appellant to file a Writ Petition, which was dismissed by the High Court, prompting the present appeal to the Supreme Court.

Timeline

Course of Proceedings

The High Court dismissed the Writ Petition filed by the appellant, which challenged the decision of the Indian Oil Corporation Ltd. to disqualify her from the petrol pump dealership application process. The High Court upheld the corporation’s decision that the lease agreement submitted by the appellant did not meet the criteria for awarding marks, as it was not effective on the date of application. Aggrieved by this decision, the appellant filed a civil appeal before the Supreme Court of India.

Legal Framework

The Supreme Court considered the following legal provisions:

• Section 47 of the Indian Registration Act, 1908: This section specifies that a registered document operates from the time it would have commenced to operate if no registration was required, not from the time of registration. The court noted, “A registered document shall operate from the time which it would have commenced to operate if no registration thereof had been required or made, and not from the time of registration.”
• Section 5 of the Transfer of Property Act, 1882: This section defines “transfer of property” as an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, or to himself and one or more other living persons. The court observed, “In the following sections “transfer of property” means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, [or to himself] and one or more other living persons; and “to transfer property” is to perform such act.”
• Section 105 of the Transfer of Property Act, 1882: This section defines a lease of immovable property as a transfer of a right to enjoy such property for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised. The court quoted, “A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.”

Arguments

Appellant’s Submissions:

• The appellant argued that the lease deed dated 08.11.2011 was effective from the date of execution, as possession was handed over on the same day. The appellant relied on Clause 7 of the lease deed, which stated that if the petrol pump was not approved, the land would be returned to the lessor.
• The appellant contended that Clause 1 of the lease, which stipulated that the 30-year lease period would commence from the date of approval of the petrol pump, did not invalidate the lease from coming into effect on 08.11.2011.
• The appellant invoked Section 47 of the Indian Registration Act, 1908, arguing that the lease should operate from the date it was intended to, regardless of the registration date.
• The appellant argued that the complaint against her was not genuine, pointing out an overwriting in the document.
• The appellant emphasized that the lease was for 30 years, exceeding the required 19 years and 11 months.

Respondent’s Submissions:

• The respondent argued that the lease was not effective on the date of the application (11.11.2011) because it was contingent upon the future approval of the petrol pump.
• The respondent contended that the appellant was not entitled to 35 marks because the lease was not in effect as on the date of application.
• The respondent supported the High Court’s judgment and stated that a letter of intent had already been issued to another party.

Issues Framed by the Supreme Court

The Supreme Court addressed the following issue:

1. Whether the lease deed dated 08.11.2011, which stipulated that the lease period would commence from the date of approval of the petrol pump, could be considered a valid lease for the purpose of awarding 35 marks to the appellant in the application process for a petrol pump dealership.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Section 47 of the Indian Registration Act, 1908: The court clarified that this section does not pre-pone the period of the lease, but rather ensures that the document operates from the time it was supposed to have come into effect under the document. “Section 47 of the Registration Act, 1908 is only intended to give effect to the lease deed which is registered at a later point of time than when it is executed. It is intended to provide that the document which is registered will have efficacy on its own terms with effect from the time when it was supposed to have come into effect under the document.”
• Section 5 of the Transfer of Property Act, 1882: The court held that the words “in present or in future” qualify the word “conveys” and not the word “property” in the section.
• Section 105 of the Transfer of Property Act, 1882: The court noted that a lease of immovable property is a transfer of a right to enjoy such property, made for a certain time.
• Jugalkishore Saraf v. M/s. Raw Cotton Co. Ltd., AIR 1955 SC 376: The court cited this case to support the view that a transfer of property that is not in existence operates as a contract to be performed in the future.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the specific wording of the lease agreement, which clearly stated that the lease period would commence from the date of approval of the petrol pump. This meant that the lease was not in effect on the date of the application, making the appellant ineligible for the 35 marks awarded for having a long-term lease. The court also emphasized the need for judicial restraint in reviewing decisions related to the award of public largesse, acknowledging the public authority’s discretion in interpreting the terms of the offer. The court noted that the rectification deed, which attempted to correct the original lease deed, further supported the conclusion that the appellant was not entitled to the 35 marks.

Sentiment Analysis of Reasons Given by the Supreme Court:

Fact:Law Ratio Table:

The court’s reasoning was influenced by both factual aspects of the case (the specific terms of the lease deed) and legal considerations (interpretation of the Transfer of Property Act and the Registration Act), with a slightly higher emphasis on factual aspects.

Logical Reasoning:

Key Takeaways

• Lease agreements must be carefully drafted to ensure that the commencement date aligns with the requirements of any application process.
• A lease that is contingent upon a future event may not be considered valid for the purpose of satisfying requirements that necessitate a present lease.
• Public authorities have a degree of discretion in interpreting the terms of offers, and judicial review in such cases is limited.
• Section 47 of the Indian Registration Act, 1908, does not pre-pone the period of the lease, but rather ensures that the document operates from the time it was supposed to have come into effect under the document.

Directions

No specific directions were given by the Supreme Court in this judgment.

Development of Law

The ratio decidendi of this case is that a lease agreement which stipulates that its term commences from the date of approval of a petrol pump, does not qualify as a valid lease for the purpose of awarding marks in a petrol pump dealership application process, if the application requires a lease to be in effect on the date of application. This judgment reinforces the principle that the actual terms of the lease agreement will be strictly interpreted and that the lease must be in effect on the date of the application. This decision clarifies the interpretation of lease agreements in the context of public procurement and emphasizes the importance of adhering to the specific terms of such agreements.

Conclusion

The Supreme Court dismissed the appeal, upholding the decision of the High Court and the Indian Oil Corporation Ltd. The court concluded that the lease agreement submitted by the appellant was not valid for the purpose of awarding 35 marks because it was not in effect on the date of application. The court emphasized that the lease period was to commence from the date of approval of the petrol pump, not from the date of execution. This decision underscores the importance of precise drafting of lease agreements and adherence to the specific terms stipulated in public procurement processes.