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Case Number

Writ Petn. No. 1989 of 2000

Attorney(S)

Kishore Shrivastava
S.K.Mukherjee

Judges

Dipak Misra, J.

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The petitioners are licence-holders running catering outlets (catering, tea-stalls, refreshment rooms) at various railway stations in the Bhopal Division. They had been operating under agreements with the Railways for over ten years and paid a fixed licence fee calculated as a percentage of sales turnover: 3% during 11-4-1984 to 31-3-1986 and thereafter 5% from 1-4-1986 up to 31-3-1999 (and were paying at 5% up to 31-3-2000). The petitioners allege their licences were renewed (renewal shown as Annexure P.2) and that they continued under such arrangements.

The Railway Board (Director (Catering)) issued a commercial circular No. 15 dated 24-6-1999 (Annexure P.3) by which the licence fee was revised to 12% of sales turnover, with rent for static units to be charged in addition. Pursuant to that circular, notices (one dated 10-12-99) were issued and an order dated 18-2-2000 (Annexure P.7) resulted in closure of the petitioners' stalls. The petitioners invoked the extraordinary jurisdiction of this Court under Articles 226 and 227 of the Constitution of India, seeking production of records, quashment of the circular, the notices and the closure order, a declaration that the 12% increase is unjust, unreasonable and arbitrary, and restraint on collection at the increased rate.

The writ petition was heard and ultimately dismissed by the Court; the petition was disposed of without any order as to costs.

Legal Issues Presented

Whether the Railway Board's commercial circular dated 24-6-1999 (and consequent notices/orders) revising the licence fee to 12% of sales turnover (plus rent for static units) is arbitrary, unreasonable or illegal and therefore liable to be quashed by writ of certiorari.
Whether the increase to 12% breached the policy factors set out in the earlier circular dated 2-1-1987 (i.e., whether those factors had to be applied when fixing the new rate).
Whether the licensees are bound, under Clause 33 of their agreement, to pay any increase in licence fee as fixed by the Administration, including arrears, and whether that clause makes the Administration's decision final and binding.
Whether the doctrine of quid-pro-quo applies to this licence-fee fixation and, if not, whether that affects the legality of the revision.

Arguments of the Parties

Petitioners' Arguments

The circular of 24-6-1999 enhanced the licence fee to 12% of sales turnover (with rent to be charged separately), but did not disclose the basis or rationale for choosing 12%.
The criteria set out in the Railway Board circular dated 2-1-1987 (factors such as existing rent/licence fee, number of vendors, importance of station, location of stall, passenger traffic variation, size of stall, items permitted, etc.) were not considered while fixing the revised rate, rendering the fixation arbitrary and unreasonable.
There was no demonstrated nexus between the increase and relevant factors such as escalation in the price of groceries or station-specific passenger traffic.
Unauthorized private entrepreneurs have been allowed into the catering market, petitioners were not permitted expansion of staff, and additional regulatory burdens (hygiene standards, prohibition of certain sales) affect their business; yet these factors were not accounted for in the new fee.
The petitioners argued the increased rate was exorbitant and lacked rationale, and sought quashment of the circular, notices and the closure order.

Respondents' Arguments

The licence-fee fixation prior to 1-7-99 followed earlier policy guidelines (letters dated 2-1-87 and 21-4-84), but the Railway Board's policy dated 24-6-99 modified earlier policy and, with effect from 1-7-99, the revised policy fixes licence fee at 12% of annual sales turnover with rent for static units in addition.
Percentage of turnover had not been revised since 21-4-84, while prices of items (tea, coffee, etc.) had been enhanced repeatedly; the new flat rate accounted for price rise and the long interval since previous revision.
The Railways provide prime location floor space; market-equivalent charges would be several times higher, and thus the revised fee is not arbitrary or unjust.
Clause 33 of the standard agreement binds licensees to pay any increase fixed by the Administration during the agreement period, including arrears, and makes the Administration's decision final and binding on the licensee; renewal documents informed licensees that rates could be revised and leviable from the date of revision.
Sales turnover should be analysed on a yearly basis, and the circular contains provisions for static units and other categories; mineral water was not to attract additional licence fee after 1-7-99, while seasonal items like ice-cream may attract extra fee.
Counsel for the respondents contended the doctrine of quid-pro-quo is inapplicable (this is not a service but a licence for space), and relied on decisions from the Bombay High Court (Nagpur Bench and Main Seat) supporting the view that the enhancement is not exorbitant and not open to interference under Article 226.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Vinod v. Divisional Railway Manager, W.P. No. 1045/2000 (High Court of Judicature at Mumbai, Nagpur Bench) — order dated 3-7-2000	Held that enhancement of licence fee was not exorbitant and was consonant with the general rise in prices; the Railway was justified in enhancing the licence fee.	The Court referred to this decision and expressed respectful agreement with its conclusion that the rate fixation was not exorbitant, using it to support the view that the Railway's revision was justified in view of price rise and the long interval since the last revision.
Writ Petition No. 1850/2000 (Bombay High Court, Division Bench at Main Seat, Bombay) — order dated 18-12-2000	Held the petition devoid of substance; the principle of quid-pro-quo is inapplicable to licence fees for providing space; the enhancement was not exorbitant; uniform policy justification and not fit for interference under Article 226.	The Court relied on and adopted the reasoning of this Division Bench decision, agreeing that quid-pro-quo does not apply and that the enhancement was not a ground for judicial interference under Article 226.

Court's Reasoning and Analysis

The Court proceeded through a series of factual and legal determinations:

Contractual Obligation under Clause 33: The Court closely examined Clause 33 of the licence agreement (Annexure P.1). It quoted the clause which expressly obliges the licensee to pay any increase in rates fixed by the Administration during the continuance of the agreement, including payment of arrears immediately on demand, and states that the Administration's decision in regard to rates shall be final and binding on the licensee. On that basis the Court found it clear that licensees had contractual obligation to pay revised rates fixed by the Administration.
Content and Effect of the 24-6-1999 Circular: The Court reproduced paragraph 5 of Commercial Circular No. 15 dated 24-6-1999 which fixes revised licence-fee rates (12% of sales turnover for refreshment rooms, 15% in case of pantry cars) and specifies that rent of static units may be charged in addition, and that the revision is effective from 1-7-1999. The Court noted that the circular calls for annual analysis of sales turnover and provides for different categories (static units, trolleys, etc.).
Relation to Earlier Policy (2-1-1987): The petitioners argued the 1987 circular's enumerated factors must be applied. The Court rejected the contention that the 1987 circular continued to bind fixation whenever a later circular had set a new policy. The Court held that rates and rent are to be fixed according to the latest circular; thus the 24-6-1999 circular, as the latest policy statement, governs.
Assessment of Arbitrariness and Exorbitance: The Court considered whether 12% was exorbitant or lacked rationale. It observed that Railway Administration had not revised licence fees for about 12 years and there had been price rise in general. The Court found support in contemporaneous decisions of the Bombay High Court which held similar enhancements not exorbitant and noted the Administration's intention to adopt a uniform policy. The Court agreed that given time lapse and price rise, the rate fixed in the 1999 circular was not objectionable.
On Quid-Pro-Quo and Applicability of Judicial Interference: The Court accepted the submission (as adopted by prior decisions) that the principle of quid-pro-quo is inapplicable to licence-fee fixation for provision of space on railway property and that such administrative fixation is not readily open to interference under Article 226 where it is not shown to be arbitrary or exhorbitant.
Conclusion from Combined Considerations: Taking together the contractual clause binding licensees to revised rates, the policy change effected by the 1999 circular, the explanatory paragraph in the circular, the time-lapse and general price rise, and persuasive High Court precedents, the Court found no illegality or arbitrariness warranting interference and thus found no substance in the writ petition.

Holding and Implications

Holding: The writ petition was dismissed. The Court's core ruling may be summarized as: DISPOSED OF — the petition is dismissed without any order as to costs.

Implications:

Direct effect on the parties: The petitioners' challenge to the Railway Board's circular dated 24-6-1999, the notices issued pursuant thereto, and the order of closure dated 18-2-2000 failed; the petitioners remain contractually bound to pay licence fees as revised by the Administration (12% of sales turnover for specified categories) together with rent where applicable and arrears as per Clause 33, and the administrative revision stands operative from 1-7-1999.
Broader legal impact: The Court did not state that it was laying down any new precedent; it expressly aligned with existing High Court decisions which found the enhancement non-exorbitant and unsuitable for interference under Article 226. No novel legal principle was announced by this opinion beyond application of contract clause and acceptance of the administrative policy change.

Note: This summary is composed exclusively from the content of the provided opinion and does not add, infer or extrapolate facts or legal conclusions beyond those expressly contained in that opinion.

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M.T & Sons And Others v. Union Of India And Others

1. Invoking the extraordinary jurisdiction of this Court under Articles 226 and 227 of the Constitution of India the petitioner has prayed for calling for the entire record from the possession of the respondents which is led to the issuance of impugned Circular dated 26-4-99 and notices dated 10-12-99 and further to issue writ of certiorari for quashment of the circular, the notices and also the order dated 18-2-2000, Annexure P.7. A further prayer has been made to declare that the increase of 12% of the licence fees by the Railways is unjust, unreasonable and arbitrary and to restrain the respondents from collecting at the increased rate.

2. Sans unnecessary details, the facts which are essential for disposal of the present writ petition are that the petitioners are holding licences for catering, tea stall, refreshment rooms at various Railway Stations in Bhopal Division. They have been undertaking the contract for more than last 10 years. They have entered into agreements with the Railways with regard to running the catering, tea stall and refreshment rooms. The petitioners were required to pay a fixed licence fee under the contract to railways.

Earlier with effect from 11-4-1984 to 31-3-1986, a lump sum licence fee for catering licence was fixed at the 3% of the sales turnover including the rent of the location of the stall at the Railway Platform. The said licence fee of 3% was increased to 5% with effect from 1-4-86 and remained as such till 31-3-99. The licence fee at the rate of 5% of Sales turnover was continued up to 31-3-99. The petitioners have deposited licence fee up to 31-3-2000. An agreement, entered into by the Railways with one Om Prakash Agarwal has been brought on record as Annexure P.1. It has been pleaded that though the period stipulated in the agreement has expired yet the petitioners have been allowed to continue with the contract as the licences have been renewed. The order of renewal has been brought on record as Annexure P.2. It has been set forth that as per Annexure P.2 the licence in question has been renewed up to 31-3-2002. According to the writ petitioners they were paying the licence fee at the rate of 5% which was the fee demanded by the respondents. However, the respondent No. 3 the Director (Catering), Railway Board, has issued a commercial circular bearing No. 15 dated 24-6-99, Annexure P.3, purporting to revised rate of licence fee. As per the said circular, the licence fee stands enhanced to 12% of sales turnover. It is pleaded that the circular does not reveal any provision for payment of rent of location of stall at the platform and it is nowhere mentioned on what basis the licence fee has been increased. It has been stated that earlier the licence fee was 5% including the rent of the stalls at the Railway platform whereas by the said circular, the Contractor is liable to pay the rent excluding the licence fee of 12%. In pursuance of the aforesaid circular respondent No. 4 has issued the impugned notice dated 10-12-99 to the petitioners by which the petitioners are being compelled to pay the enhanced licence fee. It has also been stated that in pursuance of the said notices, the stalls of the petitioners have been closed by order dated 18-2-2000, Annexure P.7.

3. It is urged in the petition that the Railway Board vide its circular dated 2-1-87 had laid down certain criteria for fixation of lump sum licence fee. It has been categorically mentioned in the said circular that while fixing the licence fee certain factors, namely, existing rent and licence fee, number of vendors, salesman, workers, bearers allowed, importance of station from the point of view of passengers traffic and demand for items sold, location of the stall at the station, variation of passenger traffic, number and nature of items permitted to be sold, size of the stall/refreshment room, structure etc., are to be taken into consideration. In case of pantry car/dining car, importance of trains, by which the pantry car/dining car is attached and the number of meals, which are required to be served during journey and in the case of pantry car/dining car, it should be considered if the contractor is to be allowed cooking of meals inside the pantry car or is required to pick up casseroles, 'thalies' from the station. It has been put-forth that the aforesaid factors have not at allbeen taken into consideration while issuing the circular number 115 dated 24-6-99.

4. It has been contended that the increase in the licence fee by 12% cannot be said to be reasonable as the criteria enumerated in the circular dated 2-1-87 have not been adhered to while increasing the licence fee. It is further pleaded that the decision to increase the licence fee should have a direct nexus with the factors like escalation in the price of groceries and also the traffic of passengers available at the particular railway station. It is urged that certain unauthorised private entrepreneurs have been allowed to venture their catering business and nothing has been done to stop the same. The petitioners on various occasions approached the Railway Authorities seeking permission to increase the strength of their staff for expansion of their business activities, but the same has not been allowed. It has been urged that the petitioners are under obligation to maintain hygenic and pollution fee (free) conditions while extending catering services and presently the railway authorities have prohibited sale of cigerattes and 'pan' at the railway platform and for sale of mineral water and ice-creams, the contractors are required to pay additional licence fee separately which is not justified. The location of particular stall has not been taken into consideration while fixing the licence fee. With these averments prayer has been made to declare the circular dated 26-4-99 as arbitrary and unreasonable.

5. A return has been filed by the answering respondents contending, inter alia, that prior to 1-7-99 the licence fee was fixed as per policy guidelines issued by Ministry of Railways (Railway Board), New Delhi letter No. 82/TGIII/11 dated 2-1-87 read with the policy guidelines issued vide Railway Boards letter No. 82/TGIII/600/1 dated 21-4-84. However, with effect from 1-7-99 the revision of catering licence fee was done by the respondent No. 4 as per policy guildelines issued by Railway Board on 24-6-99. According to the policy guidelines 12% of licensee's annual sales turnover and rent of re-freshment room/stall is to be taken into consideration while determining the catering licence fee and accordingly the said fee was determined. It has been pleaded that percentage of sales turnover was not enhanced after 21-4-84 for the purpose of determining the licence fee whereas the rates of tea, coffee and other eatable items have been enhanced several times after 21-4-84. It has been putforth that Railways have provided floor space to licensees at Railway stations which are prime locations. According to the respondents if licensees have to run a similar stall or shop in the market where he could have similarly large number of customers he would have required to pay several times more money than what he would pay the Railways even at enhanced yearly licence fee. It is stated that fixation of the licence fee is neither arbitrary nor unjust. It has been pointed out that renewal was done in favour of M/s. Omprakash Gupta & Sons and not in favour of Shri O. P. Agarwal, and Clause 33 of the agreement clearly stipulates that the licensees agrees to the payment of any increase in the rate fixed by the administration from time to time during the continuance of the agreement and also agrees to pay the administration licence fee and rental at the rates revised by the administration pursuant to this clause with effect from the date of the revised rate that has been brought into force notwithstanding that the licensees is informed of the revised licence fee and rental after the date from which such revised rates become effective under the said clause. The licence fee and rental shall be paid by the licensee at the rate fixed or revised together with arrears of licence fee and rental immediately on demand. It is further put forth that M/s. Om Prakash Gupta & Sons, catering licensee, Hoshangabad was clearly informed that the existing licence fee can be revised which will be leviable from the date of revision. It has been clarified that as per the circular dated 24-6-99 12% of licensee's annual turnover and rent of static units were to be taken into consideration for computing the licence fee. It has been further putforth that the policy dated 2-1-87 has been modified by policy dated 24-6-99 and, therefore, the earlier policy has no force in law. It has been setforth that the revision of licence fee has been done in accordance with the policy guidelines issued by the Railway Board and there has been no violation of the same. With regard to payment of licence fee, in respect of mineral water it has been stated that licensees are not required to pay additional licence fee for mineral water with effect from 1 -7-99 but as far as additional licence fee for the sale of Ice-Cream is concerned, it has been putforth that the same is an extra item permitted during summer and, therefore, additional fee is charged.

6. A rejoinder has been filed by the petitioners stating that the return is silent with regard to the manner of fixation of the increased licence fee except stating that the same has been fixed as per the circular in question. It is also urged that there is no nexus which is sought to be achieved while imposing the licence fee at such an exorbitant rate.

7. I have heard Mr. Kishore Shrivastava, learned Counsel for the petitioners and Mr. S.K. Mukherjee, learned Counsel for the respondents.

8. It is submitted by Mr. Shrivastava that increase of the licence fee is absolutely exorbitant and there is no rationale behind it. It is urged by him the circular dated 24-6-99 is arbitrary as no reasons have been spelt out in fixing 12% of sale turnover. Learned Counsel has drawn the attention of this Court to circular dated 2-1-87 contained in Annexure P. 8 highlighting that the relevant factors which have been enumerated in the said circular have not been taken into consideration while determining the licence fee vide circular contained in Annexure P.3 and hence, such fixation is unjustified in law.

Mr. Mukherjee, learned counsel for the respondents, on the contrary, has contended that the earlier circular has lost its force by the new circular which provides a particular flat rate as licence fees taking into consideration the price rise and the sale in the railway stations and such fixation cannot be regarded as arbitrary. Learned counsel for the railways has also submitted that the circular stipulates sales turnover to be analysed on yearly basis and has made provisions in case of static units and, therefore, it cannot be said that the circular is unguided. The learned counsel has also submitted that the concept of quid-pro-quo is not attracted to cases of this nature and, therefore, the fixation of licence fee cannot be termed as unreasonable. He has also relied on certain decisions rendered by the High Court of Mumbai at Nagpur Bench as well as at Main Seat at Bombay.

9. To appreciate the rival submissions raised at the Bar I have perused the agreement contained in Annexure P.1. Though in the writ petition the said agreement has been described to have been entered by the Railways with one Shri O.P. Agarwal, on a perusal of the same it appears that it has been entered into by the Railways and M/s Om Prakash Gupta and Sons which is the petitioner No. 2 in the present writ petition. A part of Clause 33 of the said agreement reads as under :

'The licensee further agrees to the payment of any increase in the rate fixed by the Administration from time to time during the continuance of the Agreement and also agrees to pay the Administration Licence fee and rental at the rates revised by the Administration pursuant to this clause, with effect from the day the revised rate has been brought into force notwithstanding that the licensee is informed of the revised licence fee and rental after the date from which such revised rates become effective under this Clause. The licence fee and rental shall be paid by the Licensee at the rate fixed or revised together with arrears of licence fee and rental ...under this clause immediately on demand. The decision of the Administration in regard to the rate fixed or revised shall be final and binding on the licensee."

10. On a perusal of the aforesaid clause it is graphically clear that the licensee is under obligation to pay licence fee at the rate fixed or revised together with arrears of licence fee under said clause immediately on demand and the decision of the administration on that regard is final and binding on the licensee. The Commercial circular No. 15 came into existence on 24-6-1999. The paragraph 5 of the said circular reads as under:

"The revised rates are applicable subject to condition that with the revisions of rates the licence fee should also be revised to 15% in case of pantry cars and 12% of sales turnover, in case of refreshment rooms being managed by licencees. This revision of licence fee will also take into effect from 1-7-1999 in all cases including refreshment rooms, static units, stalls, trolleys selling different commodities like snacks, tea/coffee, juice/milk items, curio items etc. etc. Zonal Railways may, therefore, revise licence fee accordingly w.e.f. 1-7-1999 and arrange their recovery from the licencees. Sales turnover may again be analysed on yearly basis. In case of static units like Refreshment Rooms building/equipment rent may be charged as per extant instructions in addition to the licence fee which is 12% of sales turnover"

11. Submissions of learned counsel for the petitioners is that fixation of 12% as the licence fee in addition to the rental is absolutely excessive, exhorbitant and hence, arbitrary. In this context 1 may profitably refer to the decision rendered in the case of Vinod v. Divisional Railway Manager in W.P. No. 1045/2000 by the High Court of Judicature at Mumbai, (Nagpur Bench). In the said case a Division Bench by order dated 3-7-2000 held as under :

'The petitioners are licenced vendors at Rly. Station. They have approached this Court impugning the decision of the Railway in enhancing their licence fee. We do not find that the petitioner have any case. Enhancement of the licence fee is not exhorbitant. It is in consonance with rise trend in price in general. The Railway has justified in enhancing the licence fee."

12. Another Division Bench at Bombay in Writ Petition No. 1850/2000 on 18-12-2000 passed the following order :

"In our opinion the petition is devoid of any substance. The principle of quid-pro-quo is absolutely inapplicable because this is not service but licence fee charged for providing space on the Railway property. After considering the charges which are permitted it is not possible to hold that the enhancement in licence fee is in any way exhorbitant. Enhancement has been effected after a long time in view of the decison of the Railway Board to take uniform policy in respect of all the licenced stalls. Petitions raising similar challenges being writ petition Nos. 1044 of 2000, 1045 of 2000 and 1046 of 2000 filed before the Nagpur Bench are dismissed summarily, In our opinion this is not a fit case for interference under Article 226"

13. I am in respectful agreement with the aforesaid view. It is worth noting here that Mr. Kishore Shrivastava learned counsel for the petitioner tried to impress upon this Court that the circular of 1987 providing the guidelines for fixing the licence fee has not been kept in view while bring into existence the circular dated 24-6-1999. The aforesaid contention has an intrinsic flaw in it. The rent and licence fee are not fixed on the basis of 87 circular but on the basis of the latest circular. The latest circular has fixed a particular, rate. As has been held the Bombay High Court fixation of the rate is not exhorbitant. This Court cannot be oblivious of the fact that there has been price rise and the Railway Administration has increased licence fee almost after 12 years. Keeping in view the time factor and price rise, I do not find any fault in the rate fixed in the circular contained in Annexure P.3.

14. Resultantly, I do not find any substance in the writ petition and the same is dismissed without any order as to costs.

M.T & Sons And Others v. Union Of India And Others

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioners' Arguments

Respondents' Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

M.T & Sons And Others v. Union Of India And Others

Comments