Dismissed

A.K.Muhammed v. State of Kerala

Kerala HC21 Jun 2010SA/251/1995

Case brief

AI extract

What is this about?

Appeals filed by the Plaintiff and the State challenging lower appellate court decisions regarding forest timber auction defaults. The Court held that a contract arises upon bid confirmation, allowing the State to recover losses via revenue recovery under Section 79 of the Kerala Forest Act despite alleged quantity shortages known by the bidder.

What did the court decide?

Second Appeal SA No. 251/95 dismissed and trial court decree restored. Second Appeal SA No. 340/99 allowed and lower appellate judgment set aside.

A.K.Muhammed Vs State of Kerala — Landlord and Tenant | Kerala HC (2010)

¶1

IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶2

PRESENT :

¶3

THE HONOURABLE MR. JUSTICE P.BHAVADASAN

¶4

MONDAY, THE 21ST JUNE 2010 / 31ST JYAISTHA 1932

¶5

SA.No. 251 of 1995()

¶6

----------------------------

¶7

A.S. NO.184/1992 OF VTH ADDL. DISTRICT COURT, ERNAKULAM O.S. 121/1984 OF PRL. SUB COURT, PARUR.

¶8

SECOND APPELLANT/ APPELLANT IN A.S. - PLAINTIFF :

¶9

------------------------------------------------------------------------------------

¶10

A.K.MUHAMED, PROPRIETOR, STARWOOD INDUSTRIES, THAIKATTUKARA, ALUVA PAKUTHY.

¶11

BY ADV. SRI.K.GEORGE VARGHESE KANNANTHANAM

¶12

RESPONDENT/ RESPONDENT/ DEFENDANT:

¶13

------------------------------------------------------------------

¶14

STATE OF KERALA, REPRESENTED BY THE DISTRICT COLLECTOR, CIVIL LINES, THRIKKAKARA, ERNAKULAM.

¶15

BY SPL.GOVERNMENT PLEADER (FORESTS)SRI.M.P.PRAKASH

¶16

THIS SECOND APPEAL HAVING BEEN FINALLY HEARD ON 21/06/2010 ALONG WITH S.A.NO.340 OF 1999, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

¶17

tss

¶18

P.BHAVADASAN, J.

¶19

S.A No. 251 of 1995 & 340 of 1999 -------------------------Dated this the 21st June, 2010

¶20

J U D G M E N T

¶21

Common issues arise for consideration in these appeals which have been heard together and therefore they are being disposed of by a common judgment. S.A No.340/1999 is filed by the state in O.S No.1383/88 before the Principal Munsiff's Court, Irinjalakuda. S.A No. 251/95 is by the plaintiff in O.S 121/1984 before the Sub Court, North Parur.

¶22

The facts are almost identical. It is not in dispute that the Forest Department issued a notification dated 22/12/1981 informing about the sale of forest timber. Plaintiff in both the suits bid in the auction and bids were confirmed in their favour. Intimation was received on 12.1.83 which showed that apart from the E.M.D paid they had to remit further amounts as per

¶23

the notification and the terms of the notification. The bidders defaulted to make the payments due from them and the result was that in both the cases the state was

¶24

S.A No. 251 of 1995 & 340 of 1999

¶25

¶26

compelled to re-auction the timber.

¶27

In S.A No.340/99 the plaintiff had bid for an amount of Rs. 5,33,650/- whereas in S.A 251/95 the plaintiff had bid for a sum of Rs. 1,34,817/22. Further amounts were not deposited and also they also did not remove the timber. In the re-auction in both the cases the State fetched much less amount than the bid amount offered by the plaintiffs. Taking aid of Section 79 of the Kerala Forest Act., the State sought to take steps to realise the loss they had suffered in the re-auction by resorting to revenue recovery proceedings. At that point of time the plaintiffs approached the Court seeking a decree of permanent injunction and other reliefs against the State. The short case putforward by the plaintiffs was even though they had bid in the auction and were the highest bidders, when they took steps to remove the timber, they found the quantity of the timber was much less than what had been notified. Therefore they did not deposit the balance amount.

¶28

S.A No. 251 of 1995 & 340 of 1999

¶29

¶30

The state resisted the suit pointing out that even

¶31

going by the terms of notification and other conditions, it was made clear that whoever intends to bid in the auction can inspect the timber and satisfy himself about the quantity and quality. The notification clearly stated that after having bid in auction and their bid accepted, they cannot complain either about the quantity or low quality.

¶32

In both the suits the respective courts raised necessary issues and evidence was adduced. The trial court in both the cases dismissed the respective suits. Plaintiff in the suit from which S.A 340/99 arises filed an appeal before the Sub Court, Irinjalakuda as A.S 148/92 and the plaintiff in S.A 251/95 filed an appeal as A.S.184/92 before the District Court, Ernakulam. The District Court, Ernakulam dismissed the appeal confirming the judgment of the trial court. Hence the plaintiff filed Second Appeal before this Court. However, the other appeal i.e. A.S.148/92 which arose from the suit O.S.1383/88 was allowed and the plaintiff was given a decree. Aggrieved by the same, the State has filed S.A 340/99.

¶33

¶34

S.A No. 251 of 1995 & 340 of 1999

¶35

Sri.Prakash, the learned Government Pleader appearing on behalf of the State pointed that there was no justification in granting a decree in O.S No.1383/88 by the lower appellate court. The attention was drawn to three grounds relied on by the lower appellate court to hold in favour of the plaintiff. He contended that three points relied on by the lower court are clearly unsustainable in law. The judgment and decree of the lower appellate court cannot be sustained. Reference was made to the relevant notification for auction, Section 79 of the Kerala Forest Act and the decisions reported in Abdul Rahiman Vs. Divisional Forest Officer [1988 (2) KLT 290], Badriprasad Vs. The State of Madhya Pradesh & Another [AIR 1966 SCC 58], Varghese Vs. D.F.O, Trichur [2003 (1) KLT 892]. It is pointed out that reliance placed by the lower appellate court in K.P.Chowdhry Vs. State of Madhya Pradesh & Others [AI.R 1967 SC 203] to decree in favour of plaintiff is wrong and the principles laid down in the decisions have not been understood properly by the lower appellate court.

¶36

¶37

S.A No. 251 of 1995 & 340 of 1999

¶38

On the other hand, the learned counsel

¶39

appearing for the respondents pointed out that they had intimated the concerned authorities about the short fall in quantity and there was breach on the part of the state. Therefore, they are not liable to pay the amount as claimed by the State. It is also pointed out by the appellant in S.A 251/95 that Section 79 of the Kerala Forest Act have no application to the facts of the case on hand claiming damages as the claim is based on a breach of contract.

¶40

The bidder in the auction cannot dispute that in the notification published on 22.12.1981 the terms and conditions of the auction were clearly specified. Clauses 5 and 10 reads as follows:

¶41

"5. ല�� ത�ടങ�നത�ന�മ�ന� ല��ക�രന

¶42

തര�ത�ര�ക�� ഇനവ�� ലനര�ട�കണ" ല#�ദ%ട&ട� ടക�ല'ണത�ണ". അത�ല ലമ��' പര�ത�കള ല��

¶43

S.A No. 251 of 1995 & 340 of 1999

¶44

¶45

ടതര%ട&ട�ത�യ ത0യത� മ�തല ല��ത�ല പ�ട�ച തട�കളക�� മററ �� അഗ� മ6�ലമ� ടവ'ട&�ക� ടക�ലണ� മററ� വല ക�രണവ-�� ന�-നഷ� സ�ഭവ�ച�ല ആ നഷത�ന � സരക�ര യ�ടത�ര � തരത�� ഉതരവ��യ�യ�ര�ക�നതല.

¶46

ല�� വ�ള� ലകടയ�ള ല�� കഴ�ഞ��ടന

¶47

ന�ലCപ�ച�ട�' ന�രതദ�വ%� കഴ�ച� #�ക�യ�' ത�ക ഒട�ക�ടക�ല'ണത�ക�ന�. ഏററവ�� ക�റഞ മ6ന�ട��ന� ത�ക 500 ര6പയ�� ഏററവ�� ക6ട�യ മ6ന�ട��ന� ത �ക 5000 ര6പയ��

¶48

ആയ�ര�ക�നത�ണ".യഥ�രH മ6ന�ട��ന� ത�ക 5000 കഴ�ച�' ര6പ ക6ട �ത��യ�� 5000 ര6പയ�ല ന�രതദ�വ%� കഴ�ച�' #�ക� സ�ഖ% ഒട�ക�യ�ല മത�യ�ക�നത�ണ". ല��സ�ഖ% 500 ര6പലയ� അത�ല ക�റലവ� ആടണങ�ല മ�ഴ�വന സ�ഖ%യ�� അല&�ള

¶49

തടന ഒട �ലകണത�ക�ന�. അത�ന� വ0ഴ"J വര�ത�യ�ല തലസ�#നമ�യ തട�കള �ടട ല��

¶50

¶51

S.A No. 251 of 1995 & 340 of 1999

¶52

ഈട� തട�ടയ സ�#ന�ച�ടണങ�ല ല��വസ� ദപലത%ക� ഒട�ലകണ ത�ക അവയ�ടട വ��യ�ടട മ6ന�ട��ലന� 5000 ര6പലയ� ഏത�ലണ� ക�റടവന� വച�ല ആ ത�കയ�ല ന�ന" ന�രതദ�വ%� ക�റച� വര�ന ത�കയ�യ�ര�ക��.

¶53

The above clauses clearly show that the persons who intended to bid in the auction had to satisfy themselves about the quality and quantity of the timber before they participated in the bid. It is also made clear that once the bid is accepted, no complaint in this regard will be entertained.

¶54

As per clause 10, if the bid is offered to the highest bidder 1/3rd of the amount has to be deposited as per the provisions. It is not disputed that in both these

¶55

S.A No. 251 of 1995 & 340 of 1999

¶56

¶57

cases the subsequent amounts have not been paid.

¶58

The lower appellate court in S.A 340/99 placed reliance on the decision reported in K.P.Chowdhry Vs. State of Madhya Pradesh & Others [AI.R 1967 SC 203] holding in favour of the appellant before it. Before going further into the matter the three reasons given by the lower appellate court in S.A 340/99 may be referred to:

¶59

"Thus as discussed above the case of the defendants suffers from three infirmities. One is that there was no concluded contract, the breach of which will give a right or cause of action, the second is that the Government cannot unilaterally fix the amount of damages in the absence of a contract for liquidated damages and the competent civil court has to assess the amount of damages, and the third infirmity is that the defendants have no case in the pleadings or in evidence that there had been a fall in the market value of timber during the period between the first auction and the re-auction as a result of which alone the timber happened to be sold for a lesser amount."

¶60

The first contention arise for consideration is to the decision reported in K.P.Chowdhry Vs. State of Madhya Pradesh & Others [AI.R 1967 SC 203]. The decision relied

¶61

S.A No. 251 of 1995 & 340 of 1999

¶62

¶63

on by the first appellate court can have no application to the facts of the case. It is to be noticed that the decision was concerned with the ingredients necessary to attract Article 209 of the Constitution of India. It was in that context, the observations relied on by the lower appellate court were made by the Apex Court. However, the lower appellate court has failed to notice para 11 of the judgment which reads as follows:

¶64

"11. This brings us to the second question, namely, whether the amount can be recovered under any other provision of law as arrears of land revenue. In this connection learned counsel for the State has referred us to S.82 and S.85 of the Indian Forest Act. The question whether the amount can be recovered either under S.82 or under S.85 of the Indian Forest Act read with the rules framed thereunder has not been investigated by the High Court. The view of the High Court that Rr.28 and 29 of the Forest Contract Rules apply after a contract in writing has been executed appears to be correct. But the question whether the State can still recover the amount as arrears of land revenue by virtue of the conditions of auction, even though Rr.28 and 29 do not apply has not been investigated. This question will require investigation before the petition can be finally disposed of. The appellant had claimed in para 17 of the petition that the claim of the State for recovery of the deficiency on re-sale was not covered under any other provisions of law so as to make it recoverable as arrears of land revenue. That

¶65

S.A No. 251 of 1995 & 340 of 1999

¶66

¶67

question has still to be investigated and it would be for the State to show whether the amount can be recovered under any provision of law or rules relating to forest contracts. So the matter will have to be remanded for further investigation on these lines."

¶68

It is therefore clear that in cases covered by the provisions of the Forest Act the decision may not have much application.

¶69

That takes us to Section 79 of the Forest Act on which considerable reliance is placed by the learned Government Pleader. Section 79 of the Forest Act reads as follows:

¶70

"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 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 were an arrear of land revenue."

¶71

S.A No. 251 of 1995 & 340 of 1999

¶72

¶73

Provision is an enabling one and enables the Government to recover the amount mentioned under the law due as if it was arrears of land revenue. The question as to when a contract comes into existence in case of auction sale was considered in the decision reported in Badriprasad Vs. The State of Madhya Pradesh and another [AIR 1966 SC 58]. In Paragraph 28, it is observed as follows:

¶74

"We are therefore of opinion that the sale of the forest produce to respondent No.2 was finalised on the date of sale subject of course to the acceptance of his bid by the competent authority, the Chief Conservator of Forests and that the fact that the Chief Conservator signed the deed on May 3, 1957, does not make the sale effective from the date of his signature. His signature do not ratify any action of the Divisional Forest Officer which he took beyond his competence, but simply complete the execution of the deed of contract and relate back its execution to the date on which the sale took place and the contractor and the Forest Officer had signed the document."

¶75

A reading of the above issue clearly shows that it is not necessary that a formal contract should be entered into for a valid contract come into existence. The moment the auction sales are confirmed, the contract

¶76

S.A No. 251 of 1995 & 340 of 1999

¶77

¶78

comes into existence. Therefore, the first ground relied on by the lower appellate court in A.S. 148/1992 cannot be accepted.

¶79

It is very clearly stated in the notification that in case of default on the part of the auction bidders to pay balance amount the State is empowered to take steps for re-auction. It is also very clearly mentioned that in such cases if on re-auction, the State suffers any loss, that can be levied from them. It is with the knowledge of these specific conditions in the notification that the petitioner involved in these proceedings had bid in the auction. Having not deposited the amounts due from them and having compelled the state to go in for a re-auction causing the State to suffer loss, they cannot now be heard to say that they are not liable to pay the amount or that it cannot be realised from them by resorting to revenue recovery proceedings. They cannot take shelter under the plea that unless the amount is quantified, no amount can be recovered from them. The quantum of damages is impliedly specified in the notification itself and

¶80

S.A No. 251 of 1995 & 340 of 1999

¶81

¶82

independent assessment is unnecessary.

¶83

Yet another contention was that the plaintiff in the respective suits were not bound to pay the balance amount since there reduction in the quantity of timber also cannot be countenanced. On recalling tender notification one may note that it was specified that person who intended to bid in the auction had to satisfy themselves about the quantity and quality.

¶84

PW1 was examined in O.S No.1383/98 from which S.A No.340/99 has arisen has stated about the reduction in quantity of timber. It is interesting to note to almost the questions put to him he pleads ignorance. Whatever that be, he cannot turn round to say that due to the short fall in timber, he is not liable to pay the balance amount and also that he cannot be made liable for the loss incurred by the State in re-auction.

¶85

One of the contentions raised was that Section 79 of the Kerala Forest Act have no application to the facts of the case. It is pointed out that it is based on a contract and therefore Section 79 is excluded. One fails to

¶86

S.A No. 251 of 1995 & 340 of 1999

¶87

¶88

understand the above contention, it is very clear that contract is implied. It empowers the State to do certain things under certain circumstances. When the person knowing well the conditions of auction decided to participate and is declared as successful bidder, he is bound to comply with the conditions. As already noticed, the moment sale is confirmed, contract comes into existence and that contract specified the amounts that can be recovered from the bidder in case of re-auction. In such contingencies, Section 79 has been applied. Going on Section 79 it would appear that no grounds were available to the bidder to decline payment.

¶89

The shortage of quantity, which is the main ground urged by the respective plaintiff, is not available to them at all.

¶90

Learned Government Pleader appearing for the respondents in S.A No.340/99 placed reliance on the decision reported in Mohammed Basheer Vs. State of Kerala [2003 (3) KLT 478]. Reliance is placed on paragraph 5, which reads as follows:

¶91

S.A No. 251 of 1995 & 340 of 1999

¶92

¶93

"It is trite that the question as to whether there is a breach of terms of the notice inviting tender or not should be adjudicated by an authority declared to be competent therefor. In a case where there is a dispute as to whether a damage has occurred, a finding of fact in that behalf must be arrived at by the competent authority, whereafter the amount of damages should be quantified. Such quantification of damages must also be in consonance with the terms of the relevant rules."

¶94

A reading of the above decision shows that it has no application to the facts of the case. That was the case where no concluded contract had come into existence and it is under those circumstances, it was held that the issue regarding as to who committed breach has to be adjudicated and so also the quantum independently. In the case on hand, as already noticed, going by the provisions and principles laid down in various decisions, the contract had come into existence and contract also specified the loss that would be recovered from the bidders.

¶95

Issue on hand is covered by the decision reported in Abdul Rahiman Vs. Divisional Forest Officer

¶96

S.A No. 251 of 1995 & 340 of 1999

¶97

¶98

[1988 (2) KLT 290]

¶99

In the result, S.A 340/99 is allowed. The judgment of the lower appellate court is set aside and the decree of the trial court is restored. S.A. 251/95 is without merits and is accordingly dismissed. Parties will suffer their costs.

¶100

P.BHAVADASAN, JUDGE

¶101

¶102

S.A No. 251 of 1995 & 340 of 1999

¶103

¶104

S.A No. 251 of 1995 & 340 of 1999

¶105