The Karnataka High Court clarified that Karnataka State Electronics Development Corporation being an instrumentality of the State, cannot act unreasonably and claim for prevailing rate of the plot of land by inserting a clause unilaterally in a standard form of contract.

The Writ Petition before the High Court was filed under Articles 226 & 227 of the Constitution for issuance of a direction to quash the Letter issued by the Respondent Corporation to the Petitioner asking for the present allotment rate of the land. The Petitioner also sought a direction to be given to the Respondent to execute a sale deed in favour of the Petitioner.

The Single-Judge Bench of Justice Suraj Govindaraj said, “A mere change in the name of the company, in my considered opinion, cannot lead to the Respondent seeking for payment of prevailing rate of the plot. The change in the name could be necessitated on account of various factors, which is a business exigency on part of an allottee of the land.”

Advocate M.V. Sundararaman represented the Petitioner while Advocate Nishanth A.V. represented the Respondent.

Factual Background

The petitioner company, earlier known as Infotech Enterprises, providing various software services and being desirous of setting up a computer software development project had applied for allotment of a site to the Respondent. A Lease-cum-Sale agreement came to be executed for a period of six years and all the payments were made by the Petitioner.

The Petitioner called upon the Respondent to execute the necessary sale deed but after a delay of nearly three years, the Respondent replied to the Petitioner alleging that the Petitioner had changed its name without obtaining prior approval. The Respondent issued a letter to the Petitioner stating that the allotment could continue only if the Petitioner were to make payment of the present allotment rate at the rate of Rs.2,250 per square feet, within the next four months. The petitioner challenged the said letter before the High Court.

Issue

The main issue before the Bench was whether the change of the name of a Public Limited Company, would amount to a breach of the terms of Clause 3(r)(i) or 3(r)(ii) of the Lease-cum-Sale agreement.

Reasoning

The Bench took note of the fact that Clause 3(r)(ii) of the Lease-cum-Sale Agreement said that the lessee shall not change the name/product without the previous written consent of the lessor or any officer authorized by the lessor and such consent shall be granted by the lessor subject to the condition that the lessee has to pay a prevailing rate of the plot.

In this case, no reason or justification had been made out, as to how a change in the name of the company or even the name of the product would have a bearing on the lease entitling the Respondent seeking for payment of the prevailing rate of the plot. It was also observed that such condition was completely unreasonable.

“The state and its instrumentalities are required to encourage and facilitate businesses, the petitioner having invested huge amounts of money and put up a construction of 2,40,000 sq feet, which has provided employment to thousands of people, the same would be in the interest of the state that such businesses are encouraged so that more employment as also more business is generated”, it said while further adding, “Respondent being an instrumentality of the State, in my considered opinion, cannot act in such an unreasonable manner and claim for prevailing rate of the plot by having inserted the said clause unilaterally in a standard form of contract.”

As per the Bench, a change in the name of the Petitioner was no ground to hold that the respondent was entitled for the prevailing rate of the plot. Thus, the Bench allowed the Petition and quashed the letter issued by the Respondent.

Cause Title: Cyient Ltd. v. Karnataka State Electronics Development (Neutral Citation: 2024:KHC:53035)

Appearance:

Petitioner: Advocate M.V. Sundararaman

Respondent: Advocate Nishanth A.V.

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