Dismissed¶105

K. Sreedhara Reddy v. the Conservator of Forests and Ors.

Supreme Court12 Sept 19751975 INSC 209 · [1976] 1 S.C.R. 7701975 INSC 209

Case brief

AI extract

What is this about?

K. Sreedhara Reddy v. Conservator of Forests (SC, 12-09-1975), C.A. Nos. 814-815 of 1968 (Krishna Iyer, J.): validity of penalty under r. 29 Forest Contract Rules (Hyderabad Forest Act 1355 F, ss. 44, 79) for excess felling; natural justice — opportunity before quantification held sufficient; construction of rr. 29, 30, 31 — termination under r. 30 is condition precedent to realisation, not imposition; staged scheme: detect breach, investigate, hear party, quantify penalty, terminate if grave, realise last; Art. 133 certificate appeals dismissed; parties to bear own costs; amounts: Rs. 11,426 loss, Rs. 11,250 penalty, Rs. 23,088 total.

What did the court decide?

No relief to the appellant; appeals dismissed, with a direction that the parties shall bear their own costs throughout. ¶105

K. Sreedhara Reddy versus the Conservator of Forests and Ors. — Supreme Court (1976) — LawSathi Research

What the court decided

AI extract

Outcome

No relief to the appellant; appeals dismissed, with a direction that the parties shall bear their own costs throughout.

¶105

Issue for consideration

Whether the penalty in the two cases was validly imposed under r. 29 — in particular, whether the termination of the contract for breach of conditions mentioned in rule 29 should precede the impost of penalty. +1 more

¶66

Court's answer

Termination of the contract under r. 30 is a condition precedent to realisation of the penalty from the contractor, not to its imposition; realisation is different from imposition — the forest authorities quantify and impose the penalty, and realisation follows termination.

¶82

Ratio / Principle

In the absence of a statutory exclusion of natural justice, any exercise of power prejudicially affecting another must be in conformity with the rules of natural justice.

¶68

Key takeaways

On the facts of both contracts there was no foundation for the grievance on the score of natural justice: an opportunity was afforded to the appellant before finally quantifying the penalty to be levied, but the appellant did not avail himself of it.ratio¶25
On a true construction of rr. 29 and 30 read together, once a breach is detected the authorities must investigate the nature and degree of damage, give the affected party a reasonable opportunity, ascertain and quantify the penalty, and then terminate the contract if the breach is grave enough; realisation, the last procedure, can in no case be before the termination of the contract.ratio¶97

Detailed headnote1 paragraphs

Supreme Court of India (Krishna Iyer, J., for the court; Gupta and Fazal Ali, JJ.), September 12, 1975 — Civil Appeals Nos. 814-815 of 1968, by certificate under Art. 133(1)(a) and (b) from the Andhra Pradesh High Court (Writ Appeal Nos. 71 and 72 of 1964, decided 7th September 1966). A forest contractor who excess-felled trees beyond the permitted number under two contracts with the State of Andhra Pradesh was levied, after show-cause notices and offers to check the stumps in the coupe which he did not avail, both the loss caused by illicit cutting and a penalty under r. 29 of the Forest Contract Rules (framed under ss. 44 and 79, Hyderabad Forest Act, 1355 F); the contracts were thereafter terminated under r. 30 and the sums realised by revenue recovery. Held, dismissing the appeals: (i) in the absence of statutory exclusion, any exercise of power prejudicially affecting another must conform to natural justice, but here reasonable opportunity was afforded before final quantification of the penalty and was not availed, so there was no violation; (ii) on a true construction of rr. 29 and 30 read together, the authorities must proceed in stages — detect the breach, investigate its extent and the damage caused, give the affected party a reasonable opportunity, ascertain and quantify the penalty, then terminate the contract if the breach is grave; realisation can in no case precede termination, but termination under r. 30 is a condition precedent to realisation, not to imposition, realisation being different from imposition; (iii) the penalty orders were right and the Division Bench correctly allowed the State's appeals; parties to bear their own costs throughout.

¶1

770

¶2

¶3

+- -

¶4

K. SREEDHARA REDDY

¶5

¶6

THE CONSERVATOR OF FORESTS AND ORS.

¶7

September 12, 1975

¶8

[V. R. KRISHNA IYER, A. C. GUPTA ANDS. MURTAZA FA2;AL ALI, JJ.]

¶9

¶10

H'!derabad Forest .Act-Forest Contract rules-Rule 29-30-3l-Whether tenninatio;z vf contract to precede i111po~ition of penc.J.ty-Natural Justice.

¶11

Theappellant&Forest Contractor fell'dtrees in excess of the perrnitted numberaut¹horisedby th·contract entered intobyhimwith the State of AndhraPradesh. Certain penalty was in1posedonthe appellant under rule 29ofhe_Forest Contract Rules framedinexercise of the powers conferred byHyderabad Forest Act. The Forest Officer foundthatthe appellant felled more trees and, therefore. gave a show cause notice totheappellant. The appellant prayed for re-enumerationofthe trees givenfromthe forest. }Ie was given an opportunity which wasnotavailed by himtocheck. the stun1ps in the coupeasdesired by him. Consequently, a penalty wasJev1red. There- after, the contract was terminated. Afterthe termination of the contract the process for recovery of the penalty was startred. Rule29reads as under : (1)Penaltyonterminationofa contract for breachofconditions:-- Everyfore91:contract shallbein writing in theformannexedheto and shall contain a provision whereby the forest contractorbindhim- self to do all the duties and acts required to be done byorunderthe, contract, and convenants thathre.and his servants and agents shall abstain from all the acts forbiddenbyorunder such contract. (2)The sums to be mentionedin aforest contractaspayable in case ofa breachofany such stipulation shall not exceed one-quarterofthe total consideration to be paid bythe·contractor, and shall be recoverable in accordance\Viththe provisionsofthe Hyderabad Forest Act1355F andofthis rule.	C D E
Providedthatwhere such considerationi5 not an ascertained amount the forest officer executing the contract!!-hallmakeanestimate ofthe total amount that would be payableifthe contract were fully complied with, and such estimate shall be deemedtobeforthe purpose of this sub-rule. the total consideration to be Paidbythe contractor. (3)This sum shallberealized from the contractorifthe contract has been duly terminated in accordance with the provision3 of rule30, and then only under the written orderofthe forest officer executins the contract."	F
TheappeIIant filed a Writ Petition in the HighCourtchallenging the vali- dityofthe impositionofthe penalty.Thelearned Single Judge allowedthe Writ Petitionbutthe·Division Bench allowed the appeal filed by the State.

Theappellant&Forest Contractor
fell'dtrees in excess of the perrnitted
numberaut¹horisedby
th·contract entered intobyhimwith the State
of
AndhraPradesh.
Certain penalty was in1posedonthe appellant under rule
29ofhe_Forest Contract Rules framedinexercise of the powers conferred
byHyderabad Forest Act.
The Forest Officer foundthatthe appellant felled
more trees and, therefore. gave a show cause notice totheappellant.
The
appellant prayed for re-enumerationofthe trees givenfromthe forest.
}Ie
was given an opportunity which wasnotavailed by himtocheck. the stun1ps
in the coupeasdesired by him.
Consequently, a penalty wasJev1red.
There-
after, the contract was terminated.
Afterthe termination of the contract the
process for recovery of the penalty was startred.
Rule29reads as under :
(1)Penaltyonterminationofa contract for breachofconditions:--
Everyfore91:contract shallbein writing in theformannexedheto
and shall contain a provision whereby the forest contractorbindhim-
self to do all the duties and acts required to be done byorunderthe,
contract, and convenants thathre.and his servants and
agents
shall
abstain from all the acts forbiddenbyorunder such contract.
(2)The sums to be mentionedin aforest contractaspayable in case
ofa breachofany such stipulation shall not exceed one-quarterofthe
total consideration to be paid bythe·contractor, and shall be recoverable
in accordance\Viththe provisionsofthe Hyderabad Forest Act1355F
andofthis rule.

C
D
E

Providedthatwhere such considerationi5
not
an
ascertained
amount the forest officer executing the contract!!-hallmakeanestimate
ofthe total amount that would be payableifthe contract were fully
complied with, and such estimate shall be deemedtobeforthe purpose
of this sub-rule. the total consideration to be Paidbythe contractor.
(3)This sum shallberealized from the contractorifthe contract
has been duly terminated in accordance with the provision3 of rule30,
and then only under the written orderofthe forest officer executins
the contract."

TheappeIIant filed a Writ Petition in the HighCourtchallenging the vali-
dityofthe impositionofthe penalty.Thelearned Single Judge allowedthe
Writ Petitionbutthe·Division Bench allowed the appeal filed by the State.

..,

•-:'.Ji. G

Jn an appeal by certificate, it w<i.s contended by the appellant before this Court that the termination of the contract for breach of conditions m-entioned in rule 29· should precede the impost of penalty. It was further contended that tho principles of natural justice were violated. The respondent contended that ascertaining the amount which is to be levied as a penalty need not be preceded by the t'ermination of the contract.

¶20

' *~

¶21

Dismissing the appeal,

¶22

¶23

HELD : 1. It is clear that in the absence of a statutory exclusion of natural justice any exercise of ,power prejudicially affecting another must be in confol'· mity with the rules of natural justice. In the present case, we are satisfied

¶24

K. s. REDDY v. CONSERVATOR OF FORESTS (!Krishna Iyer. J.) 771'.

¶25

A that there is no foundation for the grievance of the appellant on the score of natural justice since an opportunity was afforded to the appellant before· finally quantifying the penalty to be levied but the appellant did not avail him~ self of the opportunity. (773-E-F]

¶26

2. On a true construction of ru1e 29 once a Forest Authority detects a breach it must investigate thie, extent and estimate, the nature and degree of· damage caused bv the breach. If it is serious they must proceed to ascertain B the <;um to be fiXed as penalty. In doing this, a reasonable opportunity must be given to the affected party. After that, the penalty shall be quantified and· the contract shall be tern1inated in the event the authorities come to the conclu:.. sion that the breach is grave enough for that drastic step. Once the contract' is termir.atcd the last procedure is realisation which can in no case be before· the termination of the contract. [7741-I, 775 AMB.]

¶27

¶28

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 814-815 of 1968.

¶29

From the Judgment and Order dated 7th September, 1966 of the· Andhra Pradesh High Court in Writ Appeal Nos. 71 and 72 of 1964· respectively.

¶30

R. V. Pillai, for the appellant.

¶31

¶32

P. Ram Reddy and G. N. Rao, for the respondents.

¶33

The Judgment of the Court was delivered by

'~-

KRISHNA IYER, J. A forest contractor-the appellant-who had allegedly excess felled trees beyond the permitted number under two contracts entered into by him with the State of Andhra Pradesh, was directed by the Conservator of Forests-the first respondent-to suffer two levies. One item represented the loss sustained by the State on account of the illicit cutting and the other was a penalty imposed under r. 29 of the Forest Contract Rules (for short, the Rules) issued in exercise of the powers conferred under ss. 44 and 79 of the Hyderabad Forest Act, 1355F (for short, the Act).

¶42

The factual story out of which the legal controversy springs may be narrated in simple terms. Admittedly, the appellant was granted two forest contracts to fell and remove a specific number of trees from government forest, iri accordance with the Act and the Rnles. The· Contracts were of two years' duration ending with 31st December 1960. It was found by the Forest Officers that the appellant contractor had felled more trees and so he was given a notice calling for his explanation about this detected breach of condition.

¶43

In C.A. 814 of 1968 such notice was issued on June 25, 1960 but no explanation was forthcoming. So the Conservator determined the amount representing the loss caused by the unauthorised cutting of trees. On July 22, 1960 the District Forest Officer informed the appellant that the Conservator of Forest, who is the appropriate authority under the Rules, had fixed Rs. 11,426/- as representing the loss sustained by Government and Rs. 11,250/- as penalty under r. 29. The contractor, thereupon, prayed for re-enumeration of the

¶44

[1976] 1 S.C.R.

¶45

772

¶46

SUPREME COURT REPORTS

¶47

trees cut from the forest by his application, dated foly 30, 1960. He was informed by the forest authori~ics, by communication dated August 24, 1960 to check the stumps in the coupe as desired by the petitioner before September 15, 1960. This opportunity was also not availed of by the appellant. Consequently, the Conservator levied a penalty, as earlier proposed. Thus there were two items (i) the loss caused by illicit cutting; (ii) the penalty imposed under the rules for breach of conditions of the contract. There were three small amounts of fine also, all together resulting in a sum of Rs. 23,088.00. Eventually, the contract was terminated on December 28, 1960 under r. 30 of the Ru!es. Long later, in January 1962, the amount stated above was sought to be realised by revenue recovery process by the Tahsildar, by his attachment order, dated January 8, 1962. Thereupon a writ petition was filed by the appellant challenging the demand. He succeeded before the lear11ed Single Judge but a Division Bench, in appeal carried by the State, reversed this order and the appellant has invoked the jurisdiction of this Court under Art. 133(1) (a) and (b) of the Constitution.

¶48

Jn C.A. 815 of 1968 a similar excess felling by the same contractor was detected by the concerned officials and notice was issued to the appellant to explain how he had felled 255 trees in excess of the contractual figure. The appellant denied the illicit felling whereupon a date was fixed for checking the coupe in his presence, as requested by him. The contractor however did not avail himself of the opportunity so afforded despite a second date for inspection being fixed to suit his convenience. Eventually the Conservator of Forests fixed the loss sustained by government on account of the illicit felling ·of trees and also the penalty for breach of the conditions of the con· tract. This was done on October 16, 1960 and the appellant was asked to pay the sum by notice dated October 28, 1960. On the same date, the lease was also terminated.

¶49

Long later, on January 9, 1962 proceedings for realisation of the amounts were initiated by the Tahsildar. This step drove the contractor to move a writ petition, which shared the fate, at the single Judge's level and in appeal, of the sister writ petition already adverted to. In the same manner he has moved this Court in appeal, by certificate.

¶50

Two points were urged by Mr. R. V. Pillai, learned counsel for the appellant, one relating to the loss assessed and sought to be realised by the State under the two contracts on account of excess felling, the other relating to the imposition of penalty under r. 29 and its validity. The first point docs not survive because in both the writ petitions which were disposed of together by a common judgment the learned Single Judge rejected the contention with the observation 'I find no substance in the arguments advanced in this behalf ... No provision was brought to my notice which disentitles the government to collect those items'. If the appellant had been aggrieved by the negation of his plea under this head he should have challenged it in appeal which he did not. Thus the matter has become final and he cannot, in this Court, revive it at all. There is only a single question that therefore deserves our consideration.

... ~

G '

¶60

¶61

-~- ,...

¶62

K. s. REDDY v. CONSERVATOR OF FORESTS (Krishna Iyer, J.) 773

r- --J-.

A Was the penalty in the two cases imposed validly ? The learned Single Jndge held, on a study of rr. 29 and .31 that the impost was illegal for reasons which we find difficult to accept. The Division Bench, in appeal, disagreed with the learned Single Judge for reasons which are unclear although our conclusion concurs with theirs. The rules regnlating the consequence of a breach of the conditions of forest contracts were originally promulgated in Urdu in the Hyderabad State B but we have been handed up the Manual of Civil Laws, Andhra Pradesh, which contains those mies in English. Rule 29(3) reads sligl1tly obscurely but, in the absence of the original Urdu rules, we have to make-do with the English version.

¶67

¶68

There are two types of penalties which we may conveniently designate as 'major' and 'minor', in the contemplation of the Forest c Rules. Rule 29 deals with the major penaliies while r. 31 relates to minor penalties. Where the breach of the conditions of the contract coillffiitted by the forest contractor is serions, tile contract itself is to be terminated and a substantial penalty is to be imposed which 'shall not exceed one quarter of tile total consideration paid by the contrac- tor'. If the breach is of lesser significance, then the autilority may not propose to terminate the contract on account tilereof bu, may D recover a portion of the 'whole penalty provided for in r. 29' not exceeding Rs. 100/-. In short, if the contravention is grave, the contract is cancelled and a heavy penalty imposed but if the breach is inconsequential tile contract continues but a lighter penalty is imposed. 1n the present case it is apparent that the authorities term'. nated the contract and it is equally clear tllat tile breach was serious. Rilie 31 which deals witll trivial breaches and lighter penalties is E inapplicable. The only question then is whether the exercise of the power to impose a penalty under r. 29 has been (a) in compliance with natural justice; and (b) in fulfilment of the conditions precedent for the exercise of the power. The facts we have set out earlier make it clear that an opportunity had been afforded in the case of botii the contracts before finally quantifying the penalty to be levied but the contractor did not avail hinlself of the opportunity. While it F is clear that in the absence of a statutory exclusion of natural justice any exercise of power prejudicially affecting another must be in conformity with the rules of natural justice, we are satisfied that in the prc•ent case there is no foundation for the grievance of tile petitioner on this score.

¶69

'The substantial issue is as to whether the termination of the con-

¶70

G tract for breacl;t of conditions should precede the impost of penalty. According to Shri Pillai, that is the meaning of r. 29 read in the light of r. 30( 3). There is seeming varbal support for this contention but a closer scrutiny pricks the bubble. Rule 29 may well be read at this 8tage :

¶71

''29. (1) Penalty on termination of a contract for breach of

¶72

H conditions.-

¶73

Every forest contract shall be in wntmg in the form annexed hereto and shall contain a provision whereby the

¶74

[1976] 1 S.C.R.

¶75

774

¶76

SUPREME COURT REPORTS

¶77

¶78

forest contractor binds himself to do all the duties and acts required to be done by or under the contract, and covenants tltat he and his servants and agents shall abstain from all the acts forbidden by or under such contract.

¶79

(2) The sums to be mentioned in a forest contract as payable in case of a breach of any such stipulation shall not exceed one-quarter of the total consideration to be paid by the contractor, and shall be recoverable in accordance with the provisions of the Hyderabad Forest Act 1355 F .and of this rule :

¶80

Provided that where su.ch consideration is not an ascertained amount the forest officer executing the contract shall make an estimate of the total amount that would be payable if the contract were fully c;omplied with, and such estimate shall be deemed to be,. for t.he purpose of this sub-rule, the total consideration to be paid by the contractor.

¶81

( 3) This sum shall be realized from the contractor if the contract has been duly terminated in accordance with the provisions of rule 30, and then only under the written order of the forest officer executing the contract."

¶82

:Shri Ram Reddy, for the respondent, urges that ascertaining the amount which is to be levied as a penalty need not be preceded by 1he termination of the contract. Indeed, according to him, it is only if there is an investigation of the nature of the breach, the quantum .of loss inflicted .on the State and other circumstances that a decision as to whether the contract should be terminated or not can be taken. If it is found that the breach of condition be wilful and the damage substantial, the penalty will be imposed under r. 29 and a decision will be taken for termination of the contract. However, the sum fixed as penalty shall not be realised from the contractor until th~ .contract has been duly terminated in accordance with the provisions of r. 30. This is because you cannot keep a contract alive and claim that a grave breach of conditions has been committed. That would be too inconsistent a stance for the State to adopt. It is true that the termination of the contract under r. 30 is a condition precedent to realisation of the penalty from the contractor but realisation is ·different from imposition. The forest authorities quantify and impose the penalty. The revenue authorities as well as the forest authorities adopt the various steps prescribed in r. 30(3) for realisation of the sum. In the present case it was the Tehsildar who sought to realise the penalty and he did this after the contract was terminated. Indeed, r. 30(3) uses the expression 'recover' which is in consonance with 'realise' in r. 29(3).

¶83

We think that the true meaning of rr. 29 and 30, read together, is that the forest authorities must move from stage to stage in the following manner. Once they detect a breach, they must investigate to understand and estimate, the nature and degree of damage caused :by tbe breach. If it is serious, they must proceed to ascertain the

D •

G ~

' -i- .-1

K. s. REDDY v. CONSERVATOR OF FORESTS (cKrishna Iyer,!.) 775

¶94

,; -

¶95

~ )r

¶96

¶97

A sur.1 to be fixed as penalty. In doing this, a reasonable opportunity must be given to the affected party. After that the penalty shall be quantified and the contract shall be terminated, in the event of the authorities coming to the decision that the breach is grave enough for that drastic step. Once the contract is terminated, the last procedure is realisation which can in no case be before the termination of the contract. The realisation of the penalty may be in one or other of

¶98

i) the ways set out for recovery under r. 30. Cf course, if the breach is of a venial nature, r. 31 is attracted, the contract is continued and only a small portion of the penalty envisaged in r. 29 is collected.

¶99

The view we have taken of the scheme of the rules leaves us in

¶100

no doubt that the order of penalty is right and the judgment of the Division Bench is correct in the conclusion and the appeals, in the

¶101

C result, must fail. The circumstances are such that the litigation is purely induced by the obscure official translation of r. 29 from Urdu to English with an obvious omission o[ 'not'. This and the other attendant features of the case persuade us to direct that the parties shall bear their costs throughout.

• •

V.M.K.

Appeals dismissed.

Procedural history

How this case reached the court

AI extract

Order under challenge
Judgment and Order dated 7th September, 1966 of the Andhra Pradesh High Court in Writ Appeal Nos. 71 and 72 of 1964, whereby the Division Bench allowed the State's appeal and reversed the learned Single Judge who had allowed the appellant's writ petitions.¶29
Andhra Pradesh High Court (Division Bench) · 7th September, 1966
Prior proceeding
Appellant was granted two forest contracts of two years' duration ending 31st December 1960 to fell and remove a specific number of trees; Forest Officers found he had felled more trees and gave him a notice calling for his explanation.¶42
Prior proceeding
C.A. 814 of 1968: show-cause notice issued on June 25, 1960; no explanation was forthcoming.¶43
Prior proceeding
By communication dated July 22, 1960 the District Forest Officer informed the appellant that the Conservator of Forest had fixed Rs. 11,426/- as loss sustained by Government and Rs. 11,250/- as penalty under r. 29.¶43
Prior proceeding
Appellant prayed for re-enumeration of trees cut (application dated July 30, 1960); by communication dated August 24, 1960 he was told to check the stumps in the coupe before September 15, 1960; this opportunity was not availed of.¶47
Prior proceeding
Penalty levied as earlier proposed; contract terminated on December 28, 1960 under r. 30 of the Rules.¶47
Prior proceeding
In January 1962 the Tahsildar sought to realise the amounts by revenue recovery process, attachment order dated January 8, 1962.¶47
Prior proceeding
Writ petition filed challenging the demand; the learned Single Judge allowed it but the Division Bench, on the State's appeal, reversed; appeal to this Court by certificate under Art. 133(1)(a) and (b).¶47
Prior proceeding
C.A. 815 of 1968: similar excess felling detected; notice issued to explain felling of 255 trees in excess of the contractual figure; appellant denied illicit felling; dates fixed for checking the coupe at his request (including a second date to suit his convenience) were not availed of.¶48
Prior proceeding
Conservator of Forests fixed the loss and the penalty on October 16, 1960; payment demanded by notice dated October 28, 1960; lease terminated on the same date.¶48
Prior proceeding
Realisation proceedings initiated by the Tahsildar on January 9, 1962; the writ petition shared the fate of the sister writ petition at the single Judge's level and in appeal; appeal moved in this Court by certificate.¶49

K. Sreedhara Reddy v. the Conservator of Forests and Ors.

Case brief

What is this about?

What did the court decide?

K. Sreedhara Reddy v. the Conservator of Forests and Ors.

Case brief

What is this about?

What did the court decide?

Why is it important?

What the court decided

Issues for consideration

Statutes considered

Procedural history

Parties & counsel

Coram

Case details

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