Arbitrary Action Violates Article 14: The Court held that CIDCO’s actions were arbitrary and violated the principles of equality under Article 14 of the Constitution. The termination of the lease and imposition of additional conditions were not justified, especially given the Petitioner’s substantial investment and the external factors causing the delay.

Discretionary Powers Must Be Exercised Fairly: The Court emphasized that while CIDCO had discretionary powers to grant extensions, such powers must be exercised fairly and not arbitrarily. The failure to consider the Petitioner’s genuine difficulties and the economic conditions amounted to an abuse of discretion.

Public Interest and Economic Development: The Court noted that the development of the Star Hotel was in the public interest and contributed to the economic development of Navi Mumbai. Terminating the lease and re-auctioning the plot would not serve the public interest, especially given the lack of investors in the market.

The Court set aside CIDCO’s termination notice and orders demanding additional lease premium and Bank Guarantee. The Petitioner was granted an extension of three years to complete the project, subject to payment of the additional lease premium for the period from 01.07.2016 to 30.06.2018, along with interest, and furnishing a Bank Guarantee of Rs. 5 Crore. CIDCO was directed to restore possession of the plot to the Petitioner and execute a modified lease agreement.

Major Acts:

1. Constitution of India (COI), Article 226 & 227 – Writ Jurisdiction – Judicial Review of Administrative Action – Arbitrariness – Violation of Article 14 – Equality Before Law – Natural Justice.

2. Maharashtra Government (Premises) Eviction Act, 1956 – Procedure for Eviction – Non-compliance by CIDCO.

Subjects:

• Lease Premium – Additional Lease Premium – Waiver – Extension of Time – Bank Guarantee – Termination Notice – Show Cause Notice – Restoration of Possession – Public Interest – Arbitrary Action – Foreign Direct Investment (FDI) – Economic Development – COVID-19 Pandemic.

• CIDCO (City and Industrial Development Corporation of Maharashtra Ltd.) – New Town Development Authority – Policy BR No.11628 – Extension of Construction Period – Discretionary Powers – Commercial Transaction – Judicial Scrutiny.

Facts:

1. Nature of the Litigation:

   • The Petitioner, M/s. PVP Star Hotels Pvt. Ltd., challenged the termination of its lease agreement by CIDCO for a plot in Navi Mumbai, intended for constructing a Star Hotel. The Petitioner sought an extension of time to complete the project without paying additional lease premium and without furnishing a Bank Guarantee.

   • The Respondents, CIDCO and the State of Maharashtra, terminated the lease due to the Petitioner’s failure to complete the project within the stipulated time, citing violations of the agreement terms.

2. Who is Asking the Court and for What Remedy?:

   • The Petitioner filed a writ petition under Article 226 & 227 of the Constitution of India seeking:

     • Quashing of the Show Cause Notice (30.09.2016), Termination Notice (24.04.2017), and subsequent orders demanding additional lease premium and Bank Guarantee.

     • Restoration of possession of the suit plot, which CIDCO had taken back on 17.04.2018.

     • Extension of time to complete the project without additional lease premium or Bank Guarantee.

3. Reason for Filing the Case:

   • The Petitioner argued that the delay in completing the project was due to external factors, including the economic slowdown and delays in infrastructure projects like the Navi Mumbai International Airport, which were crucial for the hotel’s development.

   • CIDCO’s actions were alleged to be arbitrary, discriminatory, and in violation of Article 14 of the Constitution.

4. What Has Already Been Decided Until Now?:

   • CIDCO had initially granted an extension of time but imposed conditions, including payment of additional lease premium and furnishing a Bank Guarantee.

   • Later, CIDCO withdrew the extension and terminated the lease, taking possession of the plot.

Issues:

1. Whether CIDCO’s termination of the lease agreement and demand for additional lease premium was arbitrary and violative of Article 14 of the Constitution?

2. Whether the Petitioner was entitled to an extension of time to complete the project without paying additional lease premium or furnishing a Bank Guarantee?

3. Whether CIDCO’s actions were in violation of the principles of natural justice and the Maharashtra Government (Premises) Eviction Act, 1956?

Submissions/Arguments:

• Petitioner’s Arguments:

  • The delay in completing the project was due to factors beyond their control, including the economic slowdown and delays in infrastructure projects.

  • CIDCO had granted similar extensions to other parties without imposing additional lease premium or Bank Guarantee, making their actions discriminatory.

  • The Petitioner had invested over Rs. 100 Crore in the project and had not gained any pecuniary benefit from the delay.

  • CIDCO’s termination of the lease was arbitrary and violated the principles of natural justice.

• Respondent’s Arguments:

  • The Petitioner failed to comply with the terms of the lease agreement, including the obligation to complete the project within the stipulated time.

  • CIDCO had the discretion to impose conditions for extension, including additional lease premium and Bank Guarantee.

  • The termination was in the public interest, as the Petitioner’s failure to develop the plot deprived the city of essential amenities.