Court’s Decision
The Calcutta High Court, in its Commercial Appellate jurisdiction, dismissed a writ petition challenging the decision of the Board of a major port to withdraw approval for sub-lease of port land to a third party. The Court held that the doctrine of promissory estoppel had no application where statutory procedures were not complied with, and that the lessee had no absolute right to sub-lease without the express approval of the Port Authority.
Justice Arindam Mukherjee ruled:
“If the lessor, who is also the statutory authority under the Act of 1963, refuses to grant permission to sub-let, the lessee cannot compel the lessor to grant such permission.”
Facts
The petitioner, a lessee of land under the Kolkata Port Trust (now governed by the Major Port Authorities Act, 2021), had sub-leased the land to a private company in 2006 for development and operation of a CFS (Container Freight Station), claiming permission was granted via Board Resolution dated 28.03.2006.
In 2020, the Board of the port trust passed a resolution recalling the 2006 decision, stating that it had been passed without proper authority and contrary to statutory provisions.
The petitioner challenged this recall, alleging that the 2006 resolution created a binding right and that the recall violated the principles of promissory estoppel, legitimate expectation, and Article 14 of the Constitution.
Issues
- Whether the Board’s 2006 resolution granting permission to sub-lease created a binding and irrevocable right in favour of the petitioner?
- Whether the recall of the 2006 resolution in 2020 was arbitrary and violative of Article 14?
- Whether the doctrine of promissory estoppel was applicable to prevent the Port Authority from recalling the permission?
- Whether the lessee had a legal right to sub-lease port land in contravention of lease terms or without following statutory procedure?
Petitioner’s Arguments
The petitioner argued:
- That the 2006 Board resolution granted them the right to sub-lease to a third party, which was acted upon, and formed a concluded contract.
- That the Port Authority had been receiving charges from the sub-lessee, evidencing acquiescence and approval.
- That the sudden withdrawal of approval in 2020, after 14 years, was arbitrary, unreasonable, and violative of legitimate expectations.
- That the 2006 resolution was not challenged at any prior time and had been relied upon for development works worth several crores.
- That promissory estoppel applied to prevent the State from acting contrary to its earlier assurance.
Respondent’s Arguments
The Port Authority contended:
- That the 2006 resolution was passed in excess of the authority of the Board and contrary to Clause 11(6) of the Lease Deed, which required specific permission for sub-leasing.
- That the petitioner had no vested right to sub-lease without due compliance with statutory requirements.
- That the revenue being collected was from the original lessee, and not in recognition of any rights of the sub-lessee.
- That the 2020 resolution was passed to rectify an illegality and thus not amenable to challenge on grounds of estoppel.
- That no concluded contract or leasehold right was created in favour of the sub-lessee in the absence of registration or compliance with Section 107 of the Transfer of Property Act.
Analysis of the Law
The Court analyzed the interplay between statutory lease conditions and administrative decisions. It held:
- That the lease deed specifically required prior written approval for sub-leasing.
- That the Board cannot waive statutory conditions without following due process.
- That estoppel cannot operate against express statutory provisions under the Port Trust Act and lease agreement.
The Court noted that no registered deed of sub-lease was ever executed in favour of the sub-lessee, nor was any binding tripartite agreement signed. It relied on the Transfer of Property Act and the Indian Contract Act to reject the notion of a concluded contract in this context.
Precedent Analysis
- State of Punjab v. Nestle India Ltd., (2004) 6 SCC 465
– Cited by the petitioner. Distinguished by the Court, holding that estoppel cannot be used to defeat statutory provisions or where the underlying conduct is ultra vires. - Union of India v. Godfrey Phillips India Ltd., (1985) 4 SCC 369
– Distinguished. The Court clarified that promissory estoppel must give way where statutory or public interest considerations intervene. - Kuldeep Singh v. Government of NCT of Delhi, (2006) 5 SCC 702
– Applied by the Court to hold that no estoppel can arise against the government where a representation was made without legal authority. - State of M.P. v. Narmada Bachao Andolan, (2011) 7 SCC 639
– Referred to reinforce that government action cannot be estopped where it would otherwise lead to perpetuation of illegality.
Court’s Reasoning
The Court reasoned:
- That the 2006 resolution was ultra vires and contrary to the lease terms and governing statutes.
- That no vested right had accrued to the petitioner or sub-lessee in the absence of a duly executed, registered sub-lease.
- That acts of administrative convenience, such as allowing the sub-lessee to function temporarily or collecting dues, do not create enforceable legal rights.
- That estoppel cannot be invoked against statutory provisions, particularly where there is no demonstration of detriment or clear promise made by a competent authority.
“The petitioner, by not executing a registered deed of sub-lease, has failed to show the existence of any legal sub-tenancy… mere possession or acts of facilitation do not create legal interest.”
Conclusion
The writ petition was dismissed. The Court held that the petitioner had no enforceable right arising from the 2006 resolution and that the 2020 resolution recalling the earlier permission was valid and legally sustainable. No relief was granted on the grounds of estoppel or legitimate expectation.
Implications
This judgment underscores critical principles relevant to government leases and port trust properties:
- Sub-leases of public land require strict compliance with statutory conditions and lease covenants.
- Administrative resolutions cannot override or dilute binding legal requirements.
- Promissory estoppel is not a tool to validate illegal or unauthorised actions, particularly when public interest or statutory compliance is involved.
- Long-standing informal arrangements do not translate into enforceable lease rights unless registered and legally compliant.
The decision reinforces the primacy of statutory safeguards in the management of public land and limits the enforceability of administrative assurances unless backed by proper legal process.
Referred Cases and Their Relevance
- State of Punjab v. Nestle India Ltd., (2004) 6 SCC 465 – Distinguished; promissory estoppel not applicable to ultra vires decisions.
- Godfrey Phillips India Ltd., (1985) 4 SCC 369 – Distinguished; estoppel doctrine limited when statutory breach occurs.
- Kuldeep Singh v. Govt. of NCT of Delhi, (2006) 5 SCC 702 – Applied; no estoppel where government action lacked authority.
- Narmada Bachao Andolan, (2011) 7 SCC 639 – Applied; policy rectifications to correct illegality are permissible.