SHANGRILA FOOD PRODUCTS LTD. AND ANR V. LIFE INSURANCE CORPORATION OF INDIA AND ANR INSC 776; 1996 SCC 54; 1996 JT 522; 1996 SCALE 289

Name of the case: Shangrila food products ltd. and Anr V. Life insurance corporation of India and Anr Year decided: 21 March, 1996 Facts: The Petitioner, Shangrila Food Products Ltd and another party(the lessee) filed this suit against the Respondent, Life Insurance Corporation of India(LIC) and another party(the lessor). The problem centered on the non renewal of a lease agreement for certain premises between the appellant (lessee) and the respondent (lessor).Upon the expiry of the lease, Shangrila Food Products Ltd. sought renewal of the agreement in accordance with the renewal clause as per the lease agreement, but LIC denied the renewal of this lease, citing various reasons. Issue: 1. The issue was whether LIC’s refusal to renew the lease was arbitrary and is it violating article 14 of the Indian Constitution, which guarantees equality before the law and protection against arbitrary state action. Decision: The court upheld the refusal of the lease renewal by LIC , through the reasoning that the contract between them had clauses which support LIC’s decision. Majority Decision Reasoning: • The court observed that the lease agreement had renewal clause stating “on mutually agreed terms”, so the lessee doesn’t have absolute right to demand renewal. • LIC, a statutory corporation, was not prevented from acting in its commercial interests ,provided its actions were not arbitrary or in any kind of discrimination • There was no violation of article 14,as the decision was neither arbitrary nor discriminatory • The court found no evidence that LIC acted unfairly and unreasonably in declining to renew the lease. Dissenting Opinion Reasoning: There was no dissenting opinion in this case. the decision was delivered unanimously. Impact of the case: This case reaffirmed that public authorities like LIC can prioritize commercial interests in managing their assets, provided that their actions are fair and non-arbitrary.