Kerala High Court
C.R.Prakash vs Kerala State on 7 October, 2008
Author: S.Siri Jagan
Bench: S.Siri Jagan
IN THE HIGH COURT OF KERALA AT ERNAKULAM
OP.No. 6746 of 2000(C)
1. C.R.PRAKASH
... Petitioner
Vs
1. KERALA STATE
... Respondent
For Petitioner :SRI.M.M.ABDUL AZIZ (SR.)
For Respondent :GOVERNMENT PLEADER
The Hon'ble MR. Justice S.SIRI JAGAN
Dated :07/10/2008
O R D E R
S.SIRI JAGAN, J.
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O.P.No.6746 of 2000
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Dated this the 7th day of October, 2008
J U D G M E N T
The petitioner participated in two auctions for sale of teak poles conducted by the 2nd respondent on 14-3-1997 and 15-3- 1997 at Parambikulam Forest Range and Karimala Forest Range respectively. The auction was confirmed in favour of the petitioner for Rs.9,70,850/- and Rs.4,16,914/- respectively and the petitioner deposited Rs.20,000/- each as EMD. However, the petitioner did not lift the timber allegedly because of labour trouble and hostile attitude of the staff of the 2nd respondent. By Ext. P1 notice dated 11-12-1997 that the teak poles of the Karimala Range would be disposed of in public sale on 26-12- 1997 and the sale would be conducted at the risk and loss of the petitioner, for which loss the petitioner would be held responsible. By Ext. P2, the petitioner was directed to pay an amount of Rs.24,181/- incurred as loss by the Government in the re-auction conducted on 26-12-1997. Petitioner paid the said amount.
2. In respect of the teak poles of Parambikulam Range, Ext.P3 notice dated 16-9-1999 was received by the petitioner o.p.6746/00 2 proposing re-auction on 12-10-1999 at the risk and loss of the petitioner. Despite Ext.P4 lawyer's notice against the proposal to re-auction, the teak poles at the risk and costs of the petitioner, by Ext.P5, the petitioner was directed to pay an amount of Rs.7,34,772/- as loss allegedly sustained by the Government in the re-auction. The petitioner is challenging Ext.P5 in this original petition.
3. The petitioner urges several grounds in support of the challenge against Ext.P5. The first is that the Government being a party to the contract with the petitioner, the Government cannot unilaterally decide the factum of breach of contract or compensation. For this proposition, the petitioner relies on the following decisions:
1. State of Karnataka v. Shree Rameswara Rice Mills, AIR 1987 SC 1359.
2. Abdul Rahman v. Divisional Forest Officer, 1988 (2) KLT 290 (F.B).
3. V.P. Kunhammed v. State of Kerala & others, 1999 (2) KLJ
678.
4. Paily v. State of Kerala, 2000 (3) KLT 343.
5. Build Tech India v. State of Kerala & others, 2000(2) KLJ
142. o.p.6746/00 3
6. Mohamed Kunhi v. KSEB, 2001 (2) KLJ 678
7. Shriram Engineering Construction Co. Ltd. v. KSIDC, 2007 (2) KLT 388.
The petitioner then contends that the breach of contract was not attributable to the petitioner, since he could not lift the teak poles on account of labour trouble and hostile attitude of the staff of the 2nd respondent. According to the petitioner, when he disputes the alleged breach of contract, the respondents could not have unilaterally decided that there was breach of contract on his part. He also submits that the damages also could not have been quantified unilaterally by the respondents.
4. The second contention is that as per the conditions of the auction, on failure of the original auction purchaser to lift the teak poles after payment of the balance consideration the re- auction shall be conducted on the next date of auction in that particular depot, and the petitioner can be made liable for loss only if the said condition is complied with. According to the petitioner, as evidenced by Exts.P7, P8 and P9, there were several re-auctions at Parambikulam depot before 12-10-1999 and the 2nd respondent having failed to conduct re-auction in the next re-auction date, the conditions in the sale notification have o.p.6746/00 4 not been complied with so as to make the petitioner liable for loss caused to the Government in the re-auction. The petitioner contends that it is settled law that when a particular thing is prescribed to be done in a particular manner, it shall be done in that manner only and not in any other manner. For this proposition, the petitioner relies on the decisions of Babu Varghese and others v. Bar Council of Kerala and others, [(1999) 3 SCC 422] and Anirudhan v. Government of Kerala, [1999 (3) KLT 1].
5. Thirdly, the petitioner contends that even if the respondents are entitled to claim damages, they had a duty to mitigate damages by conducting the re-auction within a reasonable time as provided under the Explanation to Section 73 of the Contract Act. He relies on the decision of this Court in M/s. Bismi Abdulla & sons v. The Regional Manager, F.C.I., [AIR 1987 Kerala 56] in support of the said proposition. He submits that in that decision, a delay of 4= months for re-sale was held fatal for the recovery of damages and in this case, the delay was 2 years and 7 months, because of which the demand is liable to be held to be unsustainable.
o.p.6746/00 5
6. On the above contentions, the petitioner seeks the following reliefs:
"(a) issue a writ of Certiorari quashing Exhibit P5:
(b) declare that the petitioner is not liable to pay any amount to the respondents under Ext.P5.
(c) stay the operation of Ext.P5 till the disposal of the Original Petition."
7. The Special Government Pleader (Forests) opposes the prayers with the help of the counter affidavit filed on behalf of the respondents. He would submit that unlike other contracts, where a statute prescribes a liability the Government can enforce that liability as provided in the statute even without resorting to independent assessment. According to him, Section 79 of the Kerala Forest Act empowers the Government to recover all moneys under any contract relating to timber or forest produce including any sum recoverable thereunder for breach thereof or in consequence of its cancellation or under the terms of a notice relating to the sale of timber or forest produce by auction or by invitation of tenders issued by or under the authority of a Divisional Forest Officer, which only had been done by Ext.P5. He points out that in Abdul Rahman's case (supra) relied on by the petitioner himself, such a right in the Government has been o.p.6746/00 6 recognised by the Full Bench of this Court. He also relies on a Single Bench decision in Sudarsanan v. D.F.O & another, 1999 (2) KLJ 241, on the subject which was rendered following the Full Bench decision (supra). He further submits that such a power has been given to the 2nd respondent in the conditions of sale, Ext.P6 relied on by the petitioner himself also. He submits that the reasons stated for not honouring the contract are patently unsustainable, since other purchasers who had bid in the same auction had lifted the timber purchased by them after paying the balance sale price. According to him, there was no labour strike or prevention by staff as alleged and that even otherwise labour strike does not frustrate a contract as held in State of Kerala v. Paily chandy 1984 KLT 260. He further contends that once there is power on the respondents to recover damages as per Section 79 of the Kerala Forest Act, the other issues raised by the petitioner regarding damages, which involve ascertainment of facts on evidence, have to be agitated by him in a suit filed for the purpose, for which a writ petition cannot be entertained.
7. I have considered the rival contentions in detail.
8. The first question to be decided is as to whether the o.p.6746/00 7 Government can unilaterally hold that the petitioner has committed breach of contract and on that basis assess the damages payable for such breach of contract without an independent authority deciding the same. No doubt the decisions relied on by the petitioner categorically hold that the Government cannot. For coming to that conclusion, it is not necessary to refer to all those decisions. But, I note that in Abdul Rahiman's case (supra) a Full Bench of this Court had carved out an exception in the case of a statutory liability with particular reference to Section 79 of the Kerala Forest Act, under which Section the action in this case has also been taken. The Full Bench has held thus in paragraphs 23, 24 and 25 of that decision:
'23. In the present case, no contractual liability can be enforced as there was no contract complying with Article 229 of the Constitution. There was no statutory contract as the provisions of the Kerala Forest Act and the rules made thereunder do not provide for the creation of any such contract. However, a statutory liability, distinct from a contractual obligation is fastened on the parties under S. 79 of the Forest Act which reads thus:-
"79. Recovery of money due to Government:- All money, other than fines, payable to the Government under this Act or any rule made thereunder, or on account of timber or forest produce, or of expenses incurred in the execution of this Act in respect of timber or forest produce, or under any contract relating to timber or forest produce including any sum recoverable thereunder for the breach thereof or in consequence of its cancellation or under the terms of a notice relating to the sale of timber or forest produce by auction or by invitation of tenders, issued by or under the authority of a Divisional Forest Officer, and all o.p.6746/00 8 compensation awarded to the Government under this Act may, if not paid when due be recovered under the law for the time being in force, as if it where an arrear of land revenue."
24. There is corresponding provision in the Revenue Recovery Act in S.68 providing that all sums declared by any other law for the time being in force, to be recoverable as arrear of public revenue due on land, may be recovered under the provisions of the Revenue Recovery Act.
25. Thus under S.79, all money payable to the Government under the terms of a notice relating to the sale of timber or forest produce by auction or invitation of tenders issued by or under the authority of a Divisional Forest Officer, if not paid, when due could be recovered under the law for the time being in force as if it were an arrear of land revenue. In the present case, the Government was only claiming an amount under this statutory provision, thus enforcing a statutory liability. There is no constitutional embargo under Article 299 to enforce this statutory obligation."
Thereafter, after referring to several decisions of this Court on the subject, the Full Bench finally concluded thus:
'30. We, are, therefore, of the view that in this case, the Government was competent and perfectly justified in taking steps under the Revenue Recovery Act, to recover "the amount due under the terms of a notice relating to the sale of timber by auction", in enforcement of a statutory liability created under S.79 of the Forest Act. No writ of prohibition of mandamus can issue prohibiting or forbearing the respondents from taking proceedings under the Revenue Recovery Act for recovery of the loss sustained by the Government consequent on the default committed by the petitioner. The demand notice is also not liable to be quashed as it was issued by a competent authority and with jurisdiction. The parties have been able to retain with them the amount payable to the Government all these seven years. They cannot expect anything more. There are no merits in both the Original Petitions and they are dismissed; but, in the circumstances of the case, no costs."
The said decision applies on all fours to the fact situation in this case. In fact the Supreme Court decision in Rameswar Rice Mills' case (supra) recognises the right of the Government to o.p.6746/00 9 assess damages where the breach of conditions is admitted or it is not disputed.
8. Further, in Ext.P6 conditions of auction, which is relied upon by the petitioner himself to prove another point, it is stipulated thus in Clauses 4(b) and 6(a):
The petitioner has participated in the auction subject to the above conditions also. Although these clauses may not be independently sufficient to prove the point raised by the respondents, read with Section 79 of the Kerala Forest Act and the Full Bench decision in Abdul Rahiman's case (supra), the same are sufficient to hold that the petitioner cannot contend that the Government does not have powers to assess the damages for breach of contract.
9. Of course, the petitioner has a contention that, the Government can do so only where the breach of contract is admitted by the auction purchaser and not otherwise. The submission of the petitioner is that the petitioner has disputed that he has not committed any breach since his inability to lift the timber was on account of labour trouble in the depot and the o.p.6746/00 10 non-co-operation of the staff of the 2nd respondent. I am unable to countenance this contention also for more than one reason.
To hold that in every case where the auction purchaser disputes the factum of breach of contract, the Government should be held to be deprived of the right to assess damages would be to render Section 79 totally otiose. It would be very easy for any auction purchaser to say that he disputes that there is any breach of contract. According to me, that denial should prima facie appear to be genuine and bona fide. It can be demonstrated easily in this case that there is no bona fides whatsoever in the contention of the petitioner. His only contention is that he was prevented from lifting the timber on account of labour trouble and non-co- operation of staff of the 2nd respondent. If the petitioner had complied with the other conditions and all what remained was lifting of the timber, perhaps, his contention was worthy of consideration. The petitioner has no case that he had paid the balance sale consideration and approached the 2nd respondent for lifting the timber. Without paying the balance sale consideration, the petitioner's contention is totally hollow. Further, apart form that hollow allegation, the petitioner has not chosen to provide o.p.6746/00 11 any material whatsoever in support of his averment. On the other hand, the 2nd respondent has in the counter affidavit, with the help of Exts.R2(b) and R2(c) proved that other auction purchasers who participated in auctions on the same day had lifted timber purchased by them after paying the balance sale consideration. Further, the petitioner himself admits that he had paid the loss assessed by the 2nd respondent in respect of the auction at Karimala depot, which is an indirect admission of breach of contract. In such circumstances, I have no hesitation to hold that the blank denial of breach of contract by the petitioner is for the sake of denial, only to escape from the liability and there is absolutely no bona fides whatsoever in such denial. Therefore, on the basis of that denial the powers conferred on the respondents under Section 79 of the Act cannot be denied to them.
10. The next contention raised by the petitioner is that when the conditions of auction specifically stipulated that on failure of the auction purchaser to pay the balance sale price and lift the timber the re-auction shall be made in the next auction date, without doing the same, no damages can be realised from o.p.6746/00 12 the petitioner. Before going into the contention, I must hold that the reliance of the petitioner on Babu Varghese's case (supra) and Anirudhan's case (supra) are misplaced since they relate to acts prescribed in a statute. Here, the petitioner has no case that any statute prescribes the mode of re-auction and there was failure to conduct the re-auction in the manner so prescribed. As such, I am unable to hold in favour of the petitioner on the basis of those decisions. I cannot hold that since clause 6(a) of Ext.P6 stipulates that the re-auction shall be on the next auction date, the respondents are estopped from realising damages from the petitioner. That is an enabling provision to conduct re-auction and realise loss caused to the Government as provided in Section 79 of the Kerala Forest Act. Simply because the re-auction was not conducted on the next date of auction the statutory right of the respondents under Section 79 cannot be held to be lost for ever.
11. The next contention is on the basis of the Explanation to Section 73 of the Indian Contract Act and the decision of the Division Bench of this Court in Bismi Abdulla & Sons' case (supra). The submission is that it was the duty of the o.p.6746/00 13 respondents to mitigate the damages by conducting the re- auction at the earliest, especially when Ext.P6 stipulates that it shall be in the next auction date. The petitioner, with the help of Exts.P2 and P7 to P9 seeks to show that in the very same depot there were several re-auctions before 12.10.1999 and the delay of 2 years and 7 months in conducting the re-auction in the petitioner's case is fatal to the claim of the respondents, especially in view of the Division Bench decision in Bismi Abdulla and Sons' case wherein 4= months' delay in conducting re-auction was held to be fatal to the claim for damages. After reading the said decision, I am not satisfied that such delay would totally disentitle the respondents for damages, although it is held that re-sale must be conducted within a reasonable time from the date of breach. In fact, in that case, the Division Bench ultimately held that the plaintiff is entitled to nominal damages. Therefore, delay would only affect the quantum of damages and not the right to realise damages. Further, whether there is delay and whether the delay would affect the quantum of damages would all depend upon the commodity, the market conditions, the prejudice caused to the o.p.6746/00 14 person on whom breach is alleged etc. The delay as such would not extinguish the right of the respondents to recover damages. The petitioner should show prejudice caused to the petitioner on account of the delay to sustain a contention on the basis of Section 73 of the Indian Contract Act. Those are all matters to be proved by adducing evidence. In this case, the respondents have explained the delay in paragraph 4 of the counter affidavit thus:
"4. It is agreed that the re-auction of the materials purchased on 14.3.1997 by the petitioner was delayed due to mistake of the field staff in not informing Divisional Forest Officer in time, about the default by the petitioner. For this separate action against the staff responsible for this lapse is being contemplated. However, it is brought to the kind notice of the Honourable Court that the materials in question were of teak (Tectona grandis), which is one of the most durable hardwood timber species. As such the quality of the materials did not deteriorate at the time of auction. Lesser price was got during re-auction due to depressed market condition at the time of re-auction which can be seen as a normal market fluctuation for a product sharply dependent on demand and supply sources of market."
These disputed questions of fact cannot be decided on the basis of affidavits in an original petition. Therefore, necessarily, the parties have to be relegated to their remedy by way of a suit. Since the power of the respondents to assess the damages has been upheld by me, and it is the petitioner who is disputing the quantum, it is the petitioner who has to challenge the same in a o.p.6746/00 15 properly constituted suit.
In view of my above findings, I dismiss the original petition without prejudice to the right of the petitioner to seek his remedies in a suit, if he can maintain one at this distance of time.
Sd/-
sdk+ S.SIRI JAGAN, JUDGE
///True copy///
P.A. to Judge
o.p.6746/00 16
S.SIRI JAGAN, J.
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O.P.No.6746 of 2000-C
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J U D G M E N T
7th October, 2008