Madhya Pradesh High Court
Santosh Kumar Chopda vs State Of M.P. And Ors. on 1 August, 2002
Equivalent citations: 2003(1)MPHT343
Author: Arun Mishra
Bench: Arun Mishra
ORDER Arun Mishra, J.
1. Petitioner in this writ petition is challenging the demand notices P-20 and P-14 and the orders passed by the Recovery Officer P-15 and P-16.
2. Petitioner submitted the tender for purchase of Tendu leaves for 1984 season; tenders were called for auction of Tendu leaves on 3-8-1985 at Divisional Forest Office, Seoni for Unit No. 3, Lot Nos. 1 and 2 of 1121.305 standard bags and 1122 standard bags respectively. Petitioner had offered his bid for Unit No. 3, Lot No. 1, Lakhnadone, at the rate of Rs. 125/- per standard bag and for Lot No. 2 of Unit No. 3 at the rate of Rs. 127/- per standard bag. Total price for Lot No. 1 was Rs. 1,63,212.95 paisa and for Lot No. 2 Rs. 1,65,927/-. As per terms and conditions of the tender notice before bidding, earnest money to the tune of Rs. 6,000/- was to be deposited for each lot thereafter the bid sheet was to be signed on offering the bid. Thereafter 25% of the amount was to be deposited on making of the said bid. The amount of Rs. 6,000/- was to be adjusted at the time of sanctioning the final account. Upon acceptance of the bid the bidder was required to expedite 100% of the amount by furnishing security. Petitioner deposited Rs. 12,000/- as earnest money separately against two lot. Bid of the petitioner was accepted by Conservator of Forest as per letters D-2 and D-3 dated 9-9-85 and the petitioner was asked to enter into the contract and complete all the formalities.
3. Petitioner alleges that after bidding petitioner went to the depot situated at about 27 miles away from the place of the auction Seoni and found that Tendu leaves were putrid; crispness of the leaves was totally destroyed and the same were useless for purposes of making bidis. The petitioner had informed Deputy Ranger of Forest that the entire stock of Tendu leaves had been putrefied and was of no use to the petitioner as the entire market value of the leaves stood diminished due to poor storage facility. Petitioner submits that subsequently bid amount was reduced as apparent from Annexures D-4 and D-5 dated 20th September, 1985. Petitioner did not lift the bags and submitted no reply and petitioner thought that at the most earnest money deposited would be forfeited. The respondents kept silent for about 5 months and the bid of the petitioner was cancelled on 25-1-86 as per orders D-15 and D-16; it was also informed that earnest money stand forfeited and the lot would be reauctioned at the petitioner's risk. Thereafter the reauction was held on 22-9-86 after about one year and five months of submitting tender by petitioner; tenders were initially called in the month of March, 1985 and the auction in which petitioner's tender was accepted was held on 3-8-85. The respondents raised the demand of the difference of the amount which was offered by the petitioner and fetched by the respondents in reauction held on 22-9-86. As per notice D-14 demand of Rs. 1,57,471.45 paisa was raised against both the lots.
4. Petitioner vide letter D-17 dated 7-4-88 raised a dispute regarding validity and propriety of the demand and submitted that it was raised without following the principles of natural justice and without affording opportunity of hearing to the petitioner. Without adjudicating upon the dispute raised by the petitioner as to the putrid nature of the Tendu leaves, the demand is bad in law. A revenue recovery certificate (D-7) was issued by the Addl. Tehsildar for recovery of said amount as arrears of land revenue on 29-8-1988. Petitioner submits that agreement itself is void; upset price was not settled at the auction bid and bidders agreement cannot be enforced; revenue recovery proceedings initiated under M.P. Land Revenue Code are without jurisdiction as there was no contract. It is also submitted that respondents have failed to mitigate the damage which was the duty incumbent upon the respondents. They have held reauction after one year and one month; they did not take any action immediately to cancel the bid of the petitioner; Tendu leaves are perishable commodity by their nature and reason for not fetching the good prices is that they were already rotten at the time they were put belatedly to first auction by the respondents; their quality was further deteriorated by the time reauction was held. Thus, the respondents are not entitled to raise the demand for inaction on their part and for the loss they have suffered due to their own conduct and they were not entitled to sell such rotten leaves when the auction was held on 3-8-1985.
5. The respondents in their return contend that Tendu leaves were of the year 1984; they were put to auction in the office of DFO, North Seoni, on 3-8-85; it was clearly mentioned that intending purchasers should inspect the Tendu leaves and satisfy themselves about the quality of Tendu leaves. No representation or dispute shall be entertained after the auction. In response to the notice, the petitioner participated in the auction and had offered his bids. Offer made by the petitioner was accepted; petitioner also signed the bid sheets agreeing to abide by the conditions of the auction sale notice and other conditions and bidders agreements were signed by him. The offer made by the petitioner was accepted by DFO which was further approved by the Conservator of Forest on 23-8-95. Petitioner did not deposit 25% of the sale amount hence the respondents were left with no option but to cancel the bid hence reauction of the lots was held. Thus, the loss which has been suffered on reauction has to be recovered from the petitioner and revenue recovery certificate for that purpose has been issued; the respondents are entitled as per terms and conditions of the tender notice of auction sale to recover the amount. It is not necessary that there should be a concluded contract as provided under Article 299 of the Constitution. Such deficits can be recovered as arrears of land revenue under the provisions of M.P. Land Revenue Code. It is not the question whether the petitioner was willing to lift the Tendu leaves or not. The question is whether the petitioner has committed breach of the terms of the tender notice or not and in case the petitioner has committed breach of the same, he is liable to make good the loss caused to the State Government. In case petitioner has offered the bids without examining the Tendu leaves petitioner has to thank himself. Record has also been produced of reauction held on 22-9-86.
6. Shri Akshay Dharmadhikari, learned Counsel appearing for the petitioner has manifold submissions. Firstly, he submits that amount cannot be recovered as arrears of land revenue as there was no concluded contract; bidders agreement itself cannot be enforced. Secondly, he submits that agreement itself is void. Thus, it is unenforceable. His last submission is that Tendu leaves are perishable commodity; the leaves were collected in the year 1984 and were put to auction in the year 1985. They had rotten by the time they were put to auction on 3-8-95. Further he submits that reauction was held highly belatedly w.e.f. 22-9-86 to 27-9-86 by which time there was no possibility of procuring good or satisfactory price for putrefied Tendu leaves thus, the respondents have failed in their duty to mitigate the loss, thus, the loss has been suffered by inaction of the respondents in not conducting the auction at an early date; liability cannot be fastened on the petitioner.
7. Shri Shashank Shekhar, learned Counsel appearing for the respondents submits that it is a case where there is no necessity of any concluded contract; there is an amendment in Section 82 of Forest Act, thus, the decision of K.P. Chaudhary v. State of M.P., AIR 1967 SC 203, is totally distinguishable; it was based on unamended provision. Now the recovery can be made on the basis of conditions on which bid is offered; he further submits that agreement is not void and amount can be recovered as arrears of land revenue; with respect to the mitigation learned Counsel submits that the respondents had written letters to the petitioner and have also tried to auction the lots on various occasions, but nothing could be done; hence the delay look place. Thus, it cannot be said that respondents have suffered the loss by their inaction. They have taken every possible step to mitigate the loss.
8. The last submission about mitigation raised by the learned Counsel is being taken up for consideration first. It is not in dispute that Tendu leaves are perishable commodity; they become useless with lapse of time. Petitioner has made an averment in the writ petition in para 7 that the Tendu leaves when put to auction on 3-8-85 were already rotten and putrid. This fact, petitioner discovered subsequent to the auction. Though it was the duty of the petitioner to inspect the lots before offering the bid and petitioner cannot be heard to say subsequently that he failed to inspect the quality of Tendu leaves before offering the bid on 3-8-85. However, the fact remains that the averment made in the writ petition in para 7 has not been traversed by the respondents. In the return they are silent as to the quality of Tendu leaves; when they were put to auction. Tendu leaves were of the season 1984 and they were put to auction after about one year. Obviously their quality had diminished by the time they were put to auction on 3-8-1985. When the respondents are dealing in such commodity they are bound to take expedient steps with expediency considering the perishable nature of the commodity which in the instant case they have failed to take. The bid offered by the petitioner on 3-8-85 was accepted after more than a month on 9-9-85 and after about two months a letter was written to show cause why the bid offer be not cancelled. Ultimately, after five months of auction the bid was cancelled in January, 1986 by that time in whatever shape the Tendu leaves were their quality was bound to diminish further and surprisingly they were ultimately reauctioned between 22-9-1986 to 27-9-1986 after one year and fifty days of the auction dated 3-8-1985, In the reauction which was held in September, 1986 Tendu leaves were not proper in quality; ultimately they were sold at throw-away price at the rates Rs. 50.86 and Rs. 50.05 as per standard bag.
9. The duty to mitigate is upon the respondents as held by the Apex Court in M. Lachia Setty and Sons Ltd. v. The Coffee Board, Bangalore, AIR 1981 SC 162. The Apex Court has observed that the non-defaulting party is not expected to take steps which would injure innocent persons. In substance the question would be one of the reasonableness of action taken by the non-defaulting party to mitigate the loss. This decision has to be born in mind by adjudging the quantum of damages which non-defaulting party is entitled to receive.
10. In Murlidhar Chiranjilal v. Harishchandra Dwarkadas and Anr., AIR 1962 SC 366, the Apex Court has emphasized the principles on which damages in cases of breach of contract are calculated. The first principle is that as far as possible he who has proved a breach of bargain to supply what he contracted to get is to be placed, as far as money can do it, in as good a situation as if the contract had been performed, but this principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damages which is due to his neglect to take such steps. The Apex Court referred to British Westinghouse Electric and Manufacturing Co. Ltd. v. Underground Electric Ry. Co. of London, 1912 AC 673. This principle also follows from the law as laid down in Section 73 of the Contract Act read with explanation thereof. It must be proved in order to claim the damages, in case of breach of contract that any damage eventually arose in usual course of things.
11. The Apex Court has considered in Mohammad Gazi v. State of M.P., 2000(4) M.P.H.T. 169 = (2000) 4 SCC 342, the case of contract for Tcndu leaves which was awarded by State of M.P. to Shri Mohd. Gazi; stay order was granted by the High Court in writ petition filed by another tenderer whose writ was not accepted which prevented Mohd. Gazi from collecting Tendu leaves for which he has deposited earnest money; he was not made a party in the writ petition. By the lapse of time the Tendu leaves become useless; the action of State of M.P. by an order compelling Mohd. Gazi to execute the contract and to deposit the balance contract price was challenged by Mohd. Gazi before the High Court; prayer was also made to refund the earnest money. The Apex Court held that as the Tendu leaves are perishable commodity and by lapse of time they will perish. High Court's order was held to be bad in law. The Apex Court emphasized that the Tendu leaves are perishable commodity and become useless by lapse of time. To that extent there is force in the submission of learned Counsel for petitioner.
12. If the Tendu leaves are not lifted within early, they will perish. This fact cannot be denied that value of Tendu leaves goes down with the lapse of time. In the instant case, in my opinion, firstly owing to the delay of five months in cancelling the bid offered by the petitioner and subsequently the reauction took place in September, 1986; the reauction should have been completed in the year 1985 itself. Thus, for the value which has been obtained in the reauction dated 22-9-86 which has been held highly belatedly, considering the nature of commodity in question, in my opinion, the respondents in the facts and circumstances of the case are not entitled to recover the difference of the loss caused to them except forfeiture of the earnest money which was deposited by the petitioner; total sum of Rs. 12,000/-. The submission of respondent's Counsel that reauction was held time to time in March/May/June, 1986 firstly no plea is raised in return; secondly the reauction was held in March, 1986 after August, 1985 was highly belated; considering the perishable nature of commodity. It is also not on record that the due publicity was made for reauctions held in March/May/June, etc. when nobody turned up to participate in reauction.
13. Next submission of learned Counsel for petitioner that condition of bid cannot be enforced in the absence of concluded contract is based on decision of K.P. Chaudhary (supra), in which the Apex Court has considered the unamended provision of Section 82 of the Forest Act. Section 82 has been amended by Madhya Pradesh Act No. 9 of 1965 after decision of K.P. Chaudhary (supra). Section 82 as amended runs as under :--
"82. Recovery of money due to Government.--All money other than fines, payable to the State Government under this Act, or under any rules made thereunder or, on account of timber or other forest produce, or under any contract relating to timber and other 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 other forest produce by auction or by invitation of tenders, issued by or under the authority of a Forest Officer and all compensation awarded to the State Government under this Act may, if not paid when due, be recovered, under the law for the time being in force as if it were an arrear of land revenue."
14. It is clear from bare reading of Section 82 that any amount due under the terms of a notice relating to the sale of timber or other forest-produce by auction or by invitation of tenders, issued by or under the authority of a forest officer, the amount can be recovered as an arrear of land revenue. Thus, the decision of K.P. Chaudhary (supra), which is based on unamended Section 82 of the Forest Act which has been amended subsequently by the State Act is of no avail to the cause espoused by the learned Counsel for the petitioner. In my opinion, the terms of tender notice can be enforced and the amount fallen due on loss being caused on reauction can be recovered as arrear of land revenue. Similar is the view taken in Girdharilal v. State of M.P., 2000(1) M.P.H.T. 693 = 2000(3) MPLJ 307, distinguishing K.P. Chaudhary (supra) and other decisions.
15. Learned Counsel has also placed reliance on Rajendra Kumar Verma v. State of M.P. and Ors., 1972 MPLJ 648, in which it was held that in absence of concluded contract, terms of tender notice could not be enforced, but the provision of Section 82 as amended by Act No. 9 of 1965 was not considered by this Court and question was decided on a different set of facts. Thus, that decision cannot be an authority on the point which is in question in the present case.
16. The submission raised by learned Counsel for petitioner that agreement itself is void under Sections 6 and 7 of Sale of Goods Act, 1930, cannot be accepted. The factual matrix for invoking Sections 6 and 7 of Sale of Goods Act is that Tendu leaves are used for manufacture of Bidis; when petitioner had inspected the leaves they had perished in the commercial character and they failed to answer to the description of Tendu leaves. Thus, the contract/agreement itself would be held void. As already discussed above, it was the duty of the petitioner to have inspected Tendu leaves before offering the bid for whatever value they were there. Thus, it cannot be said that the auction itself was bad in law. If petitioner was careless in not inspecting Tendu leaves before offering his bid, he cannot invoke the aid of Sections 6 and 7 of Sale of Goods Act.
17. The contention of the learned Counsel that it was not open to accept the bid below the upset price as such forfeiture of even earnest money is bad in law, is not tenable. It is open to respondents to accept the offer even below the upset price.
18. However, respondents were negligent themselves in making the reauction and allowed Tendu leaves to be diminished. Thus, are not entitled to recover the loss. However, forfeiture of earnest money is absolutely proper in the facts and circumstances of the case.
19. Resultantly, the demand notices Annexures D-14 and D-20 and the orders passed by the Recovery Officer Annexures D-15 and D-16 are quashed. Forfeiture of earnest money is held to be proper.
20. Writ petition is allowed to the extent indicated above. In the facts and circumstance, costs on parties.