Syed israr masood, forest contractor,
ret ghat, bhopal vs. State of madhya pradesh [1981] insc 175 (1 october 1981)
Eradi, v. Balakrishna (j) eradi, v.
Balakrishna (j) koshal, a.d.
Misra, r.b. (j)
Citation: 1981 air 2010 1982 scr (1) 894 1981
scc (4) 289 1981 scale (3)1591
Act:
Right to repudiate a contract and for refund
of earnest money in deposit arise when variation in quantity and quality is
found on actual count between what was held out at the auction as being
available-non-production of the verification of report is hit by the doctrine
of 'suppressio veri'-condition number 3 of the sale notice, value of.
Headnote:
Pursuant to the notice dated july 22, 1960,
notifying that forest contracts will be settled by public auction, the
appellant-plaintiff attended the said auction on august 17, 1960 after having
deposited the requisite earnest money of Rs. 1,000 and furnished the solvency
certificate for the sum of Rs. 1.5 lakh. At the time of auction, the details of
the forest produce available in each coupe was announced. In the said
announcement the total number of trees of each species available in each coupe
as also their girth etc were furnished and the bids were invited on the basis
of the said information given to the intended bidders. The appellant as the
highest bidder in respect of two coupes, namely, searmau coupe c/2
"a" and "b" with a bid of Rs 69,000 for these two coupes.
Pursuant thereto, the appellant deposited on august 22,1960, Rs. 16,250 being
the balance of the first installment of Rs. 17,250, after adjustment of the
earnest money in deposit. On executing the requisite security bonds, the
appellant was directed, on October 27, 1960, to proceed to the site and sign
the "coupe boundary certificate", before the range officer for
getting possession of the two coupes.
When the appellant visited the two coupes and
conducted a detailed inspection of the trees available for extraction, he found
that the coupes did not contain the forest produce as announced at the time of
the auction. Inasmuch as the number of trees available for cutting in the two
coupes were found to be very much short of the quantity and quality of the
forest produce given out at the time of auction as being available in the two
coupes, the appellant refused to sign the boundary certificate. The forest
authorities, on january 19,1961 served a notice calling upon the appellant to
deposit the second and third installments of the bid amount and threatening
that in the event of default, the amount would be recovered as arrears of land
revenue. Subsequently a distraint notice was also issues under section 146 of
the madhya pradesh land revenue code by the tehsildar. On April 17,1961, the forest
authorities issued a notice calling upon the appellant to show cause why the
contract be not terminated and the two 895 coupes re-auctioned at his risk.
Thereupon the appellant, after serving on the, respondent a due notice under
section 80 civil procedure code, filed a suit tor recovery of the amount
deposited by way of first installment plus damages arising out of the breach of
contract. The appellant also prayed for a permanent injunction restraining the
state for taking coercive step to recover further installments. The trial court
decreed the suit as prayed for. In appeal by the respondent. State the high
court set aside the decree on the ground that the appellant did not prove that
the number of trees which were actually available for extraction in the two
coupes, according to proper marking was less than the number of trees which was
covered by the assurance given to the contractor at the time of the auction.
Allowing the appeal by certificate under
article 133 (1) (a) of the constitution, the court,
Held: 1. While condition number 3 in the sale
notice (ex. D/d) will operate to prevent the contractor from claiming any
damages or compensation from the state government on the ground that the
details of the quantity of the forest produce were subsequently found to be incorrect,
it will not preclude him from repudiating the contract on its being found that
there was substantial variance between the particulars furnished at the time of
the auction regarding the quantity and quality of timber that will be available
for extraction in the concerned coupes and the quantity etc. Of tree growth
actually found to be available on the site. [902 d-f] 2: 1. It has been clearly
established by the evidence in this case that a very substantial quantity of
timber standing on the bank of nalla had been marked for extraction and
numbered and the auction sale had been held on the basis that the highest
bidder would be entitled to fell and remove all those trees. But by the time
the coupes were allowed to be inspected by the auction purchaser, that area was
declared to be "reserved", with the result that there was a complete
prohibition against the felling of any timber therefrom. This has substantially
altered the very foundation of the contract and hence it was perfectly open to
the plaintiff to repudiate the contract and claim a refund of the amount
deposited by him as a part payment of the purchase price. [902 f-h] 2: 2. The
subject-matter of the auction sale was the totality of the trees which were
marked for cutting in the two coupes. Since a substantial number of the marked
trees was contained in the area which was subsequently declared as
"reserved", it is inevitable that there was a corresponding
diminution in the total quantity of timber which was announced as available for
cutting at the time of the auction sale. [903 a-c] 2: 3. The appellant has
fully proved his claim for the refund of the amount paid by him by way of the
first installment of the sale price by examining himself as p.w. 2 and also
through p.ws. 3 to 6, all of whom had inspected the coupes subsequent to the
auction sale. The oral testimony given by them is further corroborated by the
statements contained in ex. P-l, p-3, p-5, p-6 and p-8. Further the sworn
evidence of respondent's own witnesses (d.w. 2 and d.w. 3) and the suppression
of their two inspection reports from the court confirmed the right to repudiate
the contract and ask for a refund. [899 h, 900 a-e] 896 2: 4. That the
criticism made by the high court that the argument by the appellant-plaintiff
was the result of an after-thought is wholly unjustified and erroneous is clear
from a mere reference to ex. P-1. The correct factual position is that the
plaintiff had categorically complained to the department that a substantial
area containing the forest produce. Which had all been originally marked for
sale, had been subsequently "reserved" with the result that the
quantity of timber available for extraction had become substantially reduced.
[901d e, h, 902a]
Civil appellate jurisdiction: civil appeal
no. 2060 of 1970.
From the judgment and order dated the 26th
august, 1969 of the madhya pradesh high court in first appeal no. 100 of 1965
harbans singh for the appellant.
Gopal subramaniam, d.p. Mohanty and r.a.
Shroff for the respondent.
The judgment of the court was delivered by
balarrishna eradi, j. This appeal by certificate granted by the high court of
madhya pradesh under article 133 (1) (a) arises out of a suit-regular civil
suit no. 7-a of 1963-on the file of the first additional district judge, bhopal
instituted by the appellant herein against the state of madhya pradesh, for
recovery of a sum of Rs. 29,500 from the defendant by way of refund of the
first installment of the sale price deposited by the plaintiff with the forest
department of the defendant-state pursuant to an auction of two forest coupes
held on august 17, 1960, together with damages alleged to have been sustained
by the plaintiff on account of alleged breach of contract by the defendant. The
plaint contained a further prayer that the defendant should be restrained by a
permanent injunction from taking any steps to recover from the plaintiff the
second and third installments of the sale price for which the two coupes had
been knocked down in favour of the plaintiff at the auction sale.
The trial court held that the plaintiff is
entitled to recover from the defendant Rs. 17, 500 by way of refund of the
first installment of the sale price of the two coupes, but rejected the
plaintiff's claim for recovery of damages.
Accordingly, a decree was passed in the
plaintiff's favour for recovery of Rs. 17,500 with proportionate costs. The
plaintiff's prayer for the relief of permanent injunction was also granted by
the trial court.
897 the state (defendant) carried the matter
in appeal before the high court of madhya pradesh. The high court took the view
that the plaintiff's claim for refund of the first installment of the sale
price was unsustainable inasmuch as he had not proved that the number of trees
which were actually available for extraction in the two coupes, according to
the proper markings, was less than the number of trees which was covered by the
assurance given to the contractor at the time of the auction. As regards the
relief of permanent injunction, the high court held that from the notice (exh.
P-7) issued by the concerned divisional forest officer to the plaintiff on
april 17, 1961, it was seen that the government had indicated to the plaintiff
its intention to terminate the contract before the second installment had
become due and hence the only right which the government thereafter had was to
realise from the plaintiff the deficiency, if any, occasioned by a resale of
the two coupes. In this view, the high court held that the government had no
longer the right to claim from the plaintiff the balance of the sale
consideration represented by the second and third installments and that the
decree for permanent injunction granted by the trial court did not, therefore,
call for any interference. Accordingly, the appeal filed by the defendant was
allowed in part by the high court and the decree granted to the plaintiff by
the trial court for recovery of Rs. 17,500 was set aside. Hence, this appeal by
the plaintiff.
The facts of the case on which there is no
dispute are as follows. On july 22, 1960, the forest department of the state
government of madhya pradesh published in the state gazette a notice notifying
for general information that forest contracts of east bhopal, forest division
will be settled by public auction to be held by the divisional forest officer
at sader manjil, bhopal on august 17, 1960.
The plaintiff attended the said auction after
having deposited the requisite earnest money. At the time o the auction, the
respective range officers announced the details of the quantities of the forest
produce available in each coupe. In the said announcement, the total number of
trees of each species available in each coupe as also their girth etc., were
announced by the concerned range officers and the bids were invited on the
basis of the said information given out to the intended bidders. The plaintiff
was the highest bidder in respect of two coupes, namely, searmau coupe c/2
"a" and "b". The plaintiff's bid of Rs. 69,000 for those
two coupes was accepted by the auctioning officer and pursuant thereto, the
plaintiff deposited on august 22, 1960 Rs. 16, 250 being the balance of the
first installment of Rs. 17,250 after adjustment of the 898 earnest money
already deposited. The plaintiff also produced a solvency certificate and
executed the requisite security bonds. On october 27, 1960, the plaintiff was
informed by the concerned divisional forest officer that the security bonds
furnished by the plaintiff were accepted and that the contract in respect of
the two coupes was sanctioned in his favour by the chief conservative officer
of forests. By the said communication, the plaintiff was directed to proceed to
the site and sign the 'coupe boundary certificate' before the range officer for
getting possession of the two coupes.
The plaintiff's case is that when, in pursuance
of the aforesaid intimation, he visited the two coupes and conducted a detailed
inspection of the trees available for extraction, he found that the coupes did not
contain the forest produce as announced at time of auction, that a very large
number of big trees which had been marked for felling and given serial numbers
did not bear hammer marks either at the breast height or at the bottom, with
the result that the contractor was debarred under the rules from felling those
trees, that similarly a large number of trees which were hammer marked had not,
however, been given serial numbers and that a large number of trees situated
along the bank of a nala in coupe no. 2 "b" which had been marked for
felling and had been serially numbered were found to have been subsequently
"reserved" with the result that it was no longer open to the
contractor to cut any of those trees. The plaintiff states that the aforesaid
vital discrepancies and irregularities were pointed out by him to the range
officer and inasmuch as the number of trees available for cutting in the two
coupes was found to be very much short of the quantity and quality of
the-forest produce given out at the time of auction as being available in the
two coupes, he refused to sign the boundary certificate. Thereafter,
correspondence concerning the matter passed between the plaintiff and the
department, but notwithstanding joint inspections of the site and deliberations
the parties could not reach any agreement. The plaintiff took the stand that
unless the department was ready and (; willing to put him in possession of the
forest produce conforming to the quantity and quality of timber announced at
the time of the auction, he was entitled to repudiate the contract and claim a
refund of the amount remitted by him by way of first installment of the sale
price. The forest department issued a notice to the plaintiff on april 17,
1961, calling upon him to show cause why the contract should not be terminated
and the two coupes reauctioned at the 899 plaintiff's risk. In the meantime, on
january, 19, 1961, the plaintiff had been served with a notice requiring him to
deposit the second installment of Rs. 17,250 and threatening that in the event
of failure to comply with the said demand, the amount will be recovered as
arrears of land revenue.
Subsequently, the forest authorities of the
state initiated action for recovering from the plaintiff the sum of Rs. 34,500
purporting to be the second and third installments of the sale price, and a
notice of demand under section 146 of the madhya pradesh, land revenue code was
issued to the plaintiff by the tehsildar, bhopal. Thereupon, the plaintiff
instituted the present suit praying for the relief aforementioned, after
serving on the defendant a due notice under section 80, code of civil
procedure.
Admittedly, the auction sale was of the right
to cut the trees which had been marked and numbered in the entire area covered
by the two coupes in question. Details regarding the quantity and quality of
timber available for cutting in the respective coupes were announced by the
concerned range officers at the time of auction and it was on the basis of the
said information that the participants in the auction were invited to bid. The
trial court as well as the high court have concurrently found that an assurance
had been given by the department at the time of the auction that the two coupes
contained the specified quantity of timber of different varieties and girth and
that the details then given were as set out in the tabular statement appended
to paragraph 3 of the written statement of the defendant.
The plaintiff (examined as p.w. 2) and p.ws.
3 to 6 all of whom had inspected the coupes subsequent to the auction sale have
sworn that the quantity of the timber that was actually available for cutting
in the two coupes was considerably less than the quantity announced at the time
of the auction.
The oral testimony given by them is
corroborated by the statements contained in exhibits p 1, p-3, p-5, p-6 and
p-8, which are copies of the various representations made by the plaintiff to
the offices of the forest department after he found out on inspection of the
coupes that there was vast divergence between what was announced at the time of
the auction as the quantity of the timber available for cutting from the two
coupes in question and the quantity that was actually found to be available.
Even though the then sub- divisional forest officer, who was examined as d.w.
2, has stated in the evidence that after receipt of the plaintiff's complaint, he
inspected the coupes and submitted a detailed inspection report to the
divisional forest officer, the defendant did not produce the said report in
court, it has also 900 come out in the evidence of d.w. 3, who was the forest
guard in the area concerned at the relevant time, that he had submitted to the
range officer a report containing details of the timber available for cutting
in the two coupes. The aforementioned two reports would have been of valuable
assistance in determining the extent of shortfall, if any, in the quantity of
timber actually available for cutting in the coupes when compared with the
particulars given out at the auction. The non-production of the two reports by
the dependant, who alone was in possession of the documentary evidence capable
of throwing light on the subject-matter of this crucial issue, assumes
significance in view of the admission made by d.w. 3 that during his inspection
of the coupes pursuant to the complaint received from the plaintiff he had
found that there were some trees which had been numbered for cutting but had
not been hammer marked, that there were some other trees which contained hammer
marks only at one place instead of at the base as well as at breast height, as
required under the rules, and that there were still some other trees which had
been marked by hammer but had not been assigned any number. The inspection
report prepared by this witness which has been suppressed is a very material
document since the witness has sworn that he had actually counted and noted the
precise number of trees in respect of which such irregularities were found to
have been committed. Another important admission made by this witness is that
there was some truth in the complaint of the plaintiff with respect to the
'reservation' of the nala.
The evidence clearly shows that there was a
large number of trees of different varieties situated on the bank of a nalla in
coupe no. 2 "b" and they had been hammer marked and serially numbered
for cutting and removal. At the time of the auction sale, the department had
treated these trees as being available for extraction by the contractor and it
was on that basis that the particulars regarding the total quantity of timber
belonging to different species available for cutting in the two coupes were
announced to the bidders. However, subsequently, the area comprising the bank
of the said nalla was declared as "reserved", with the result that
there was a prohibition against cutting of the trees from the said 'reserved'
area. The plaintiff in his evidence, as p.w.2, has stated that there were about
300 teak trees in the area forming the bank of the nalla and that the value of
those trees would amount to between Rs.
10,000 and Rs. 12,000. Though three officers
of the forest department were examined on the side of the defendant, the
aforesaid testimony given by the plaintiff has not been controverted by them,
901 notwithstanding the aforesaid facts brought out in the a evidence, the high
court summarily rejected the plaintiff's contention based on the factum of
reservation of the trees standing on the bank of nalla by stating as follows:
"but there is nothing in the plaintiff's
complaints to the department at any stage alleging that this reservation had
been made after the auction had taken place. The idea appears to be an
after-thought.
The mere oral statement of the plaintiff and
his witnesses that this marking for reservation had taken place after the
auction, on the basis that they did not see these markings about reservation of
the trees near the nalla when they had gone to that forest on earlier
occasions, are wholly insufficient to come to the conclusion that the nalla
area had been reserved after the auction.'' the aforesaid reasoning is based
entirely on the assumption that in one of the complaints preferred by the
plaintiff before the department officers, it had been alleged by him, that the
reservation of the trees on the bank of nalla had been made after the auction
had taken place. A mere reference to exh. P-l is sufficient to show that the
aforesaid assumption made by the high court is wholly erroneous. Exh. P-l is a
copy of the representation dated december 28, 1960 submitted by the plaintiff
to the divisional forest officer (east), bhopal. In paragraph 4 thereof, the
plaintiff had stated as follows:
"that the applicant inspected the coupe
in or about the first week of november 1960 to give the coupe boundary
certificate as is required under clause 2 of the draft agreement deed. During
this inspection the applicant was surprised to know that there were numerous
irregularities committed in the marking of trees and huge area containing the
forest produce marked for sale in the said coupe was subsequently
reserved." (underlining supplied) thus, the correct factual position is
that the plaintiff had categorically complained to the department that a
substantial area containing the forest produce, which had all been originally
marked for sale, had been subsequently 'reserved', with the result that the
quan- 902 tity of timber available for extraction had become substantially
reduced, the criticism made by the high court that the argument advanced by the
plaintiff was the result of an after-thought, was therefore not justified.
We may at this stage refer to condition no. 3
in the sale notice (exn. D/l) on which strong reliance was placed on behalf of
the respondent. That condition reads:
"the details of quantities of forest
produce announced at the time of auction are correct to the best of the
knowledge of the divisional forest officer but are not guaranteed to any extent
the intending bidders are, therefore, advised to inspect on the spot the
contract area and the produce they intend to bid for with a view to satisfy
themselves about its correctness. No claim shall lie against the state
government for compensation or any other relief, if the details of the
quantities are subsequently found to be incorrect".
In our opinion, the trial court was perfectly
right in its view that, while the said condition will operate to prevent the
contractor from claiming any damages or compensation from the state government
on the ground that the details of the quantity of the forest produce were
subsequently found to be incorrect, it will not preclude him from repudiating
the contract on its being found that there was substantial variance between the
particulars furnished at the time of the auction regarding the quantity and
quality of timber that will be available for extraction in the concerned coupes
and the quantity etc. Of tree growth actually found to be available on the
site. It has been clearly established by the evidence in this case that a very
substantial quantity of timber standing on the bank of nalla had been marked
for extraction and numbered and the auction sale had been held on the basis
that the highest bidder would be entitled to fell and remove all those trees.
But by the time the coupes were allowed to be inspected by the auction-
purchaser, that area was declared to be "reserved", with the result
that there was a complete prohibition against the felling of any timber there from.
This has substantially altered the very foundation of the contract and hence it
was perfectly open to the plaintiff to repudiate the contract and claim a
refund of the amount deposited by him as a part payment of the purchase price.
903 we are unable to agree with the view
expressed by the high a court that "the plaintiff cannot succeed unless he
proved that, even after excluding the trees standing on the reserved area, the
rest of the forest did not have sufficient number of trees which would satisfy
the assurance given at the time of the auction". The subject matter of the
auction sale was the totality of the trees which were marked for cutting in the
two coupes. Since a substantial number of the marked trees was contained in the
area which was subsequently declared as "reserved", it is inevitable
that there was a corresponding diminution in the total quantity of timber which
was announced as available for cutting at the time of the auction sale.
We do not, therefore, find it possible to
agree with the reasons stated by the high court for refusing the plaintiff's
prayer for refund of the amount paid by him by way of the first installment of
the sale price. The conclusion recorded by the trial court on this issue was perfectly
correct and the high court was in error in interfering with the said finding.
We notice, however, that a slight mistake has
crept into the judgment and decree of the trial court, inasmuch as the amount
of the first installment refund has been wrongly mentioned therein as Rs. 17,500,
whereas the amount actually paid by the plaintiff by way of the first
installment was only Rs. L7,250. A modification to this extent is, therefore,
called for in the decree passed by the trial court.
This appeal is accordingly allowed, the
judgment and decree passed by the high court are set aside and those of the
trial court are restored subject to the modification that the amount
recoverable by the plaintiff from the defendant shall be only Rs. 17,250 and
not Rs. 17,500 as stated in the trial court decree. In all other respects, the
decree passed by the trial court will remain in tact. The respondent
(defendant) will pay the costs of the piaintiff in this court as well as in the
high court.
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