9 Nov 2009

Higher licence fee demanded by DMRC justified: High Court

Turning down the challenge to the high licence fees demanded by the Delhi Municipal Rail Corporation (DMRC) for usage of spaces on license basis at metro stations, the High Court has declared the action of the DMRC to be in accordance with law and not arbitrary or discriminative as alleged by the petitioners. 

The dispute centered on the fact that "in September 2004 had invited applications for usage of spaces on license basis at metro stations on pre- determined rates on first cum first served basis" and for which the Petitioners "were allotted the specified area for which they were liable to pay license fee at pre-determined rates on per sq.mtr. basis". When these licences expired DMRC asked, in the case of one of the Petitioners, payment of enhanced license fee @ Rs.2500/- p.sq.mtr/p.m. for renewal of the licence which was challenged by the Petitioner as being exorbitant and not based upon any rational or logic in as much as it constituted a 600 percent increase in the original license fee of Rs.400/- p.sq.mtr/p.m.

The DMRC sought to justify its action by stating that in the interim period of three years its had "re-classified metro stations into categories A, B and C depending upon commercial viability and income from kiosks located in the said stations." The High Court agreed, holding that the "categorization has been done keeping in view not only the total ridership but also the overall demand and other factors like the commuter profile in a particular location, demand of kiosks in the area, attractiveness of the area due to commercial and residential areas nearby. As per the chart filed by the respondent-DMRC, there has been re-categorization of the metro stations and some metro stations have been upgraded or down-graded" and therefore the "categorization of different metro stations into category A, B and C and fixation of different license fee for the said metro stations cannot be held to be arbitrary."

More so, the High Court noted;
The respondent-DMRC is performing a public function by operating metro in the city of Delhi. The travel fare has to be kept low and attractive so that large number of persons can utilize public transport. The respondent-DMRC is earning money by giving kiosks on license fee basis at the railway stations. The license fee earned augments and adds to the income of DMRC and is a relevant factor while fixing fares/ticket charges. 
The petitioners are commercial traders/retailers who have taken space on license fee basis because they find it to be a viable business proposition. The license fee has to be fixed on the basis of market forces. The petitioners cannot claim any concession or right to concession in fixing of license fee. It may be appropriate here to mention that several others similarly situated license holders have agreed to and have executed license agreement on the basis of the enhanced license fee.
On the question of fixation or quantum of costs or rate of license fee, court’s power to interfere while exercising power of judicial review under Article 226 of the Constitution of India is limited. In policy matters relating to costs and fixation of license fee, the State has wide discretion and flexibility especially when it relates to commercial properties. (Refer, Bareilly Development Authority versus Ajay Pal (1989) 2 SCC 116; Sheela Wanti versus Delhi Development Authority (2002 7 SCC 135). License fee/costs can be struck down only if it is contrary to the contract and is per se arbitrary and discriminatory when different license fees are being charged from identically situated persons without any rationale. The explanation and reasoning given by the respondent DMRC does not disclose arbitrariness and discrimination.
... Kashmere Gate station is a well known and is frequented not only by the railway commuters but also by others who go to the said area for shopping purposes and to visit inter-state Bus Terminal. The metro station at Kashmere Gate is a prime property in the said area and the Inter-state Bus Terminal which is one of the largest in the country is also located next to it. The respondent-DMRC has therefore justified why Kashmere Gate station has been classified as category A station. Respondent-DMRC has also justified why Rithala, Netaji Subhash Place and Inderlok stations have been classified as category A stations due to their locations which are high in demand and have commercial viability. Also, Netaji Subhash Place and Inderlok stations have special features like malls and shopping centres.
The contention of the petitioners that some of the allottees, who happen to be multi-national conglomerates, have withdrawn their bids because of high license fees may be correct, however this does not answer the contention of the respondent-DMRC that there are several others who are paying the same license fee in the same location from where the petitioners are running their kiosks. In case benefit of lower license fee is granted to the petitioners, the respondent-DMRC will be compelled to grant the same benefit to others. The petitioners like others enjoy considerable flexibility as per the terms of the license deed, in respect of products they can retail. The license deed provides that a license holder can use the space for commuter related services like bookshops, communication services, mineral water, medical shops, etc. Kiosks are therefore not allotted for one particular or specific retail item. The license holders can change the usage within the specified categories and commuter related services.
The challenge to the demand of higher licence fees as compared to the earlier years was therefore found by the High Court to be without merit. On the further argument of the petitioners that they had 'legitimately expected' the fees to remain on the same stand-point as earlier, the High Court held that "the plea of legitimate expectation raised by the petitioners has no merit. There is no past conduct of the respondent-DMRC on which the petitioners rely. The initial period of the license has expired and it is the first case of allottees claiming renewal/re-allotment. Further legitimate expectation by itself only entitles a party to fair hearing and is not a legal right to ask for issue of Mandamus to re-allot and extend the license period." The Court further noted the settled legal position to this regard as under;
In India Tourism Development Corporation and Another (supra), the Court dealt with the doctrine of legitimate expectation. It was observed that legitimate expectation is not a legal right but a benefit, relief or a remedy which may ordinarily flow from a promise or an established practice. The term “established practice” refers to regular, consistent and practicable certain conduct, process or activity of the decision making authority. However, the expectation should be legitimate i.e. logical, reasonable and valid. As legitimate expectation is not a right, it is not legally enforceable as such and is given a class just above “fairness in action” but below promissory estoppel. The said principle was referred in Ram Pravesh Singh versus State of Bihar, (2006) 8 SCC 381, wherein the Supreme Court has observed that legitimate expectation can only entitle a person to seek opportunity to show cause before the expectation is dashed or ask for explanation as to the cause of denial.
Learned counsel for the petitioners heavily relied upon the decision of the Delhi High Court in C.P. Mittal and others versus Union of India 2007(9) AD (Del) 330. In this decision, a single Judge of this Court had struck down enhancement of license fee by 102% payable by PCO operators in the railway station platform. In the said case, the PCO operators were given agency as a measure of rehabilitation and on compassionate basis like disability and unemployment. The allotment was a social welfare measure. In these circumstances, it was observed that standard of highest bidding would be inappropriate because the underlining social welfare measure would be undermined. With regard to the facts, the Court considered it to be unconscionable to have a take it or leave it attitude adopted by monopolistic State, especially when the bargaining powers of the petitioners therein was unequal. The State must act reasonably and in a non-arbitrary manner even in contractual and commercial subjects. The ratio of the said decision does not support the petitioners who are pure and simple commercial persons and are engaged in profit making activities. Lower license fee in fact, will cause prejudice to the social purpose for which the respondent-DMRC has been established i.e. to provide public transport in Delhi at a reasonable cost. Subsidizing commercial establishments of the petitioners for their personal gains at the cost of DMRC’s revenue would violate Art.14 of the Constitution of India.
In DSIDC versus Yashpal Madan 148 (2008) DLT 642 it was held that a decision in respect of pricing should not be arbitrary or irrational and only relevant factors should be taken into consideration. In the said case, Division Bench of this Court has held that it would be wrong to conclude, that the cost of land as demanded was not appropriate. Actual expenditure had been incurred by DSIDC towards the cost of development. The decision in the case of Palika Palace Traders Association versus New Delhi Municipal Corporation (Writ Petition No.937/2000 decided on 7th February, 2002) is also inapplicable to the present case in hand as in the said case the allotment was made as a rehabilitative measure to persons who were squatting. The allotment was to accommodate squatters and allotment was made on no loss- no profit basis. In the case of Indian Oil Corporation versus Union of India, (Writ Petition (Civil) No. 3823/1992 decided on 29th November, 2006) it was held that the lease rent was increased arbitrarily on the assumption that the business was profitable but the said assumption was arbitrary in the absence of any material and therefore was struck down. ...
In fact, the Supreme Court in Style (Dress Land) versus Union Territory, Chandigarh, (1999) 7 SCC 89 upheld the increase in lease money from Rs.2,671/-p.m. to Rs.14,000/-p.m. after expiry of the earlier lease period. Referring the stand taken by Union territory of Chandigarh that the shops in question were occupied by private individuals and some of them were further let-out, the Supreme Court agreed that the State Authority was entitled to charge market rent and the same was justified, reasonable and constitutional. The judgment of the High Court was upheld and it was held that the procedure adopted and made basis for enhancing the rent to market value cannot be said to be arbitrary, discriminatory or unreasonable. In the said case, the Supreme Court also reiterated the principle that inaction in respect of some individual/tenants cannot be made basis for setting aside action initiated against others. Similarly in Chandigarh Administration versus Jagjit Singh (1995) 1 SCC 745 it has been held that if an order in favour of a third person is found to be contrary to law, such illegal or unwarranted order cannot be made the basis for issuing a writ compelling the authority to repeat the illegality or to pass another unwarranted order. In such cases, a party cannot urge violation of Article 14 of the Constitution alleging discrimination.

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