{"id":325234,"date":"2024-06-27T17:00:50","date_gmt":"2024-06-27T11:30:50","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=325234"},"modified":"2024-07-02T15:36:24","modified_gmt":"2024-07-02T10:06:24","slug":"hotel-legitimate-expectation-not-met-madras-hc-sets-aside-order-rejecting-srm-hotel-request-renewal-land-lease-fresh-terms","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2024\/06\/27\/hotel-legitimate-expectation-not-met-madras-hc-sets-aside-order-rejecting-srm-hotel-request-renewal-land-lease-fresh-terms\/","title":{"rendered":"\u2018Hotel\u2019s legitimate expectation was not met\u2019, Madras HC sets aside order rejecting SRM Hotel\u2019s request for renewal of land lease on fresh terms"},"content":{"rendered":"
\n

Madras High Court:<\/span> In a writ petition filed by SRM Hotels Private Limited to direct the Principal Secretary, Tourism, Culture and Religious Endowments to pass an appropriate order to renew the lease in respect of the property G.R. Swaminathan, J. has set aside the impugned order and directed the Principal Secretary to grant personal hearing to SRM Hotels, and consider all their contentions and pass a speaking order on merits and in accordance with law.<\/p>\n

Background:<\/p>\n

When the Tamil Nadu Government invited applications for setting up a five star and budget accommodation to house delegates attending the 8th World Tamil Conference at Thanjavur in January 1995, SRM Hotels was one of the applicants, and were chosen for developing the site. Thereafter, a Government Order -Information and Tourism Department was issued calling upon the Managing Director, Tamil Nadu Tourism Development Corporation Limited (TTDC) to enter into an agreement with SRM Hotels and hand over the site. After SRM Hotels was given possession of the aforesaid site, they built a four-star hotel. The annual lease amount was fixed at Rs.3,85,275\/- and it was revisable once in three years. It was to be fixed at 7% of the market value. The lease period was 30 years. Thus, the lease period ended on 13-06-2024. During the lease period, dispute arose as regards the quantum of lease amount. SRM Hotels submitted representation seeking renewal of the lease on fresh terms. The Principal Secretary rejected the request via the impugned order. Challenging the same, this writ petition came to be filed.<\/p>\n

Issue:<\/p>\n

Whether the manner in which the SRM Hotels request was dealt with, can be said to be in order or in the process the SRM Hotels legitimate expectation was dashed?<\/p>\n

Analysis and Decision:<\/p>\n

The Court took note of Clause 4(c) of the agreement and noted that SRM Hotels is not entitled to claim renewal of the lease. But if the Tamil Nadu Government were to direct renewal of lease, the SRM Hotels was obliged to comply with the same, subject to there being consensus ad idem<\/span> in respect of the lease amount.<\/p>\n

The Court noted that the aforesaid clause employs expressions such as ‘not entitled’ and ‘claim’. This can only mean that while the SRM Hotels is not entitled to demand renewal as a matter of right, they are at liberty to approach the government for renewal. Thus, the Government has a central role in the matter.<\/p>\n

Discussing the concept of legitimate expectation and said that the concept is still evolving.When a reasonable request is made, it has to be properly considered. That one’s reasonable request will receive proper consideration can definitely be one’s legitimate expectation.<\/p>\n

After taking note of High Court of Australia in Minister of State for Immigration and Ethnic Affairs<\/span> v. Teoh<\/span>1<\/sup><\/a><\/span>, the Court said that expectation of fair treatment does not require prior knowledge of past practice. If something is to be as it ought to be, and the outcome is not in accord with the normative standard, then, the applicant can assail the order on the ground of breach of legitimate expectation, that fair procedure was not adopted.<\/p>\n

The Court noted that SRM Hotels had invested Rs.60 crores for constructing the hotel. When the project started in 1994, the land was not a commercial hub. SRM Hotels has raised loans to the tune of Rs.80 crores. As many as 500 persons are in employment. SRM Hotels specific stand is that unless the lease is renewed for twenty more years, the investments made by them could not be made good. SRM Hotels, therefore sought renewal request way back in the year 2010 for outright purchase, which was rejected. Now, SRM Hotels prayer is for renewal for twenty more years.<\/p>\n

The Court said that this is a case of public — private partnership. The object of the Government should be to encourage entrepreneurship and business. A broad and benevolent approach is called for in such cases without compromising on the revenue interest of the Government.<\/p>\n

The Court said that SRM Hotels justifiably entertained belief that they would be called for negotiation. Thus, the Secretary to the Government was obliged to invite SRM Hotels and hold discussions to resolve the issue.<\/p>\n

The Court also said the Government should aim to get the best returns on the land and the building.<\/p>\n

The Court said that “consultation with the affected individual lies at the heart of legitimate expectation. Without involving SRM Hotels at all, the impugned order came to be passed. It is virtually non-speaking. It merely parrot like it reiterates the covenant in the contract. That is not what the Principal Secretary was supposed to do<\/span>.”<\/p>\n

The Court said that in transactions involving the economic interests of the applicant\/licensee\/lessee, the officials are expected to act as benevolently as possible. The authority may be unable to fulfil the substantive expectations of the applicant. But at least, there could be consultation and hearing so that the possibility of amelioration could be considered.<\/p>\n

The Court noted that SRM Hotels was not invited for a discussion. The contentions set out in SRM Hotels renewal application were not considered. Even if the authority was not able to accede to SRM Hotels request, they should have been given an opportunity to demonstrate that they and not TTDC are better equipped to run the hotel.<\/p>\n

The Court remarked that Principal Secretary appears to have approached the issue with a closed mind. Therefore, the Court held that procedurally, the SRM Hotels legitimate expectation was not met. The content of the substantive expectation is left open for the present.<\/p>\n

[SRM Hotels Private Limited v. Principal Secretary to the Government of Tamil Nadu, 2024 SCC OnLine Mad 2503<\/a>, Order dated 21-06-2024<\/span>]<\/p>\n<\/div>\n\n

1.<\/a> (1995) 183 CLR 273<\/p>\n","protected":false},"excerpt":{"rendered":"

“SRM Hotels should have been given an opportunity to demonstrate that they and not TTDC are better equipped to run the hotel.”<\/p>\n","protected":false},"author":67512,"featured_media":314802,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,10],"tags":[70294,70289,33519,2567,70290,70292,70293,70291],"class_list":["post-325234","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-highcourts","tag-economic-interest","tag-land-lease","tag-legitimate-expectation","tag-Madras_High_Court","tag-srm-hotels","tag-tamil-nadu-tourism-development-corporation-limited","tag-ttdc","tag-world-tamil-conference"],"yoast_head":"\n\u2018Hotel\u2019s legitimate expectation was not met\u2019, Madras HC sets aside order rejecting SRM Hotel\u2019s request for renewal of land lease on fresh terms | SCC 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