M/S. Karnataka State
Forest Indus. Corpn. Vs. M/S. Indian Rocks  INSC 1834 (24 October 2008)
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 6274 OF 2008 [Arising
out of SLP (Civil) No. 24242 of 2005] M/s. Karnataka State Forest Industries
Corporation ...Appellant Versus M/s. Indian Rocks ...Respondent WITH CIVIL
APPEAL NO. 6275 OF 2008 [Arising out of SLP (Civil) No. 23148 of 2005] M/s.
Karnataka State Forest Industries Corporation ...
State of Karnataka and others ... Respondents
S.B. SINHA, J :
two appeals involving similar questions of law and fact were taken up for
hearing together and are being disposed of by this common judgment. We may,
however notice the fact of the matters involving in both the appeals
separately. Civil Appeal arising out of SLP ) No. 24242 of 2005
is a Government of Karnataka Undertaking engaged in sale of granite of seized
and confiscated granite blocks to persons who intend to purchase in the
Tender-cum-Allotment sale on "as is where is basis". The relevant
terms of the said tender were:
tender/bidder should make arrangements to obtain transit permit at his own cost
from Forest Department/KSFIC.
9. The successful
Tenderer/Bidder should pay 1/10th amount of the sale value plus taxes as
Granite Blocks 10% S.T.
(b) Sur-charge on
S.T. 15% (c) Forest Development Tax 5% (d) Income Tax 15% (e) Surcharge on
I.Tax 5% On the same day, the balance amount will be payable as follows:
2 3 (a) 50% within
15 days of the intimation of confirmation of tender.
(b) the remaining
amount shall be paid by the end of the June, 1995 or before the stones are
lifted whichever is earlier. The period of the contract shall be upto April,
11. In case of breach
of any of the conditions mentioned above, the Managing Director, KSFIC Ltd., is
at liberty to cancel the Tender/Bid amount and make materials at the risk and
cost of the original Tenderer/Bidder and the EMD/Security Deposit furnished by
the Tenderer/Bidder be forfeited. If the K.S.F.I.C. incurs any extra expenditure
in this regard the same will be recoverable from the original Tenderer/Bidder.
18. The successful
Tenderer/Bidder shall make their own arrangements for inspection of seized and
confiscated Granite blocks at their own cost located at different places in the
Ranges as the offer for sale is on. AS IS WHERE IS BASIS.
Rejection due to
colour, cracks etc. will not be entertained once the offer is submitted.
19. Sale of granite
blocks is agreed upon in good faith and K.S.F.I.C. Ltd. shall not be liable for
any damages or otherwise for failure to carryout the obligation which may be
occasioned by Act of God, War, Civil Disturbance disorders, strike etc., or
regulation of Government authorities or agencies or similar circumstances
beyond its control.
20. Breach of any of
the conditions specified supra, by the purchaser will entail forfeiture to
K.S.F.I.C. of all deposits paid by him. Further, the Granite Blocks already
paid for and lying in the field will 3 4 also be liable to be attached towards
the balance due. The Granite Blocks purchased, whether paid or not will also be
resold at the risk and cost of the original Tenderer/Bidder who will be liable
to make good to Government any loss arising out of such resale but shall not be
entitled to profits.
34. No material shall
be removed from the contract area unless it is covered by transit pass in
accordance with the rules under Section 50 of the Karnataka Forest Act, 1963.
If any problems arise while lifting the blocks from site, necessary assistance
will be provided if need be under special circumstances."
participated in the tender process. It was successful in purchase of:
(i) one lot
containing 25 blocks (Mulegundi Area), (ii) one lot containing 37 blocks
(Mulegundi Area) and (iii) one lot containing 43 blocks (Nehrudoddi Area).
total sale value of the granite sold to the respondent herein was Rs.
21,24,574.85. Out of the aforementioned sum, admittedly, the respondent on or
about 11.07.1995 had deposited a sum of Rs. 11,84,447.90. The balance amount
due to the appellant from the respondent was Rs. 9,40,126.55. In terms of the
said tender, the respondent was required to pay not only 10% of the value of
the goods but also taxes and 4 5 other statutory dues paid by the appellant
herein. Appellant has paid an amount of Rs.6,85,642/- being the royalty amount,
Forest Development Tax, Karnataka Sales Tax and Surcharge on Karnataka Sales
allegedly refused to pay the amount to which it was said to be otherwise liable
in terms of Clause 8 of the terms and conditions of the tender.
appears to be a dispute as regards the amount payable by the respondent on the
aforementioned account insofar as whereas according to the appellant the amount
of granite including tax and other statutory liabilities in respect of 10
blocks of granite which had been received by the respondent and transported by
it is Rs. 3,25,193.90; according to the respondent, the total amount of goods
received was Rs. 2,39,969.35.
that the contract was not concluded within the stipulated period of time as the
entire payment was not made by June, 1995 or before lifting of the stones
whichever is earlier, as envisaged under Clause 9(b) of the terms and
conditions of the tender.
the Government of Karnataka was approached. A question was also raised in the
Legislative Assembly. The Principal Secretary, Forest, Ecology and Environment
Department, Government of Karanataka issued a letter on or about 16.01.1996,
which reads as under:
to Karnataka State Forest Industries Corporation Ltd., for the sale of
Confiscated Granite Block through Tender.
With reference to the
above subject, a copy of the Letter dated 14.12.1995 received from the Chairman
& Managing Director, KSFIC Ltd., is here with enclosed. The KSFIC Ltd., has
sold the Granite Blocks which were seized by the Forest Department, through
public auction during the month of March 1995. Since the Granite scandal is
under enquiry of Legislative Committee, it was decided not to confirm the said
In the meanwhile the
Chairman & Managing Director of the Corporation reported to the Government
that the purchasers are pressurizing for issue of transit permit to lift the
Granite Blocks or refund their amount. They also requested the Government to
bring these facts to the notice of the Legislative Committee.
Since the Joint
Legislative Committee has objected for issue of transit permit by the Forest
Department and also KSFIC Ltd., to granite blocks as there was no provision for
the same in the KMMC Rules, 1994, the Government has suggested to the KSFIC
Ltd., to take action with regard to transfer the Granite blocks to the
Department of Mines and Geology and for refund of amount to the bidders (copy
enclosed). But, directed to keep the Granite blocks in safe custody 6 7 till
the decision of the Joint Legislative Committee.
I have been directed
to bring the contents of the Corporation letter and the Government suggestion
to the Corporation thereon, to the notice of the Joint legislative
as there exists a dispute with regard to its correct translation, we may also
notice the text of the said letter from the judgment of the learned Single
Judge, which reads as under:
this, the President and Managing Director of the Corporation reported to the
Government that the purchasers are insisting on the Corporation to issue permit
for transportation of granite and also to refund the amount received from them.
The Corporation has also prayed for bringing the said matter to the notice of
the Joint House Committee.
Since the Joint House
Committee has objected the issue of permits by the Forest Department as well as
by the Corporation and since there is no provision for the same in K.M.M.C.
Rules, 1994, Government has directed the Corporation to take appropriate action
for transferring the granite blocks which are under its custody to the
Department of Mines and Geology and also to return the amount (liable to be
refunded) to the concerned bidders, which is already collected from them. But,
it has further directed to preserve the granite stones safely till the decision
of the Joint House Committee."
is, however, stated that the appellant did not agree to the aforementioned
suggestions/direction of the State and responded thereto stating that it was
not feasible to refund the sale price. It had been stated that necessary permit
should be directed to be issued in this behalf. By its letter dated 2.12.1996,
appellant requested the respondent to remit the balance amount, stating:
requested to remit the balance amount of the total purchase value of the
Granite Blocks purchased by you in the auction sale conducted by the KSFIC Ltd.
during the Month of March - 1995."
the said request was not acceded to. Appellant allegedly issued various other
letters to the same effect on 29.01.1997, 25.04.1997 and 30.06.1997. Ultimately
by its letter dated 5.06.1999, the appellant informed the respondent to
immediately remit the amount and lift the granite blocks by 30.06.1999 failing
which, it was threatened, the amount deposited shall be forfeited, stating:
request you to kindly make immediate arrangements for remitting balance amount
and lift the granite blocks purchased by you in Tender-cum-Auction-Sale held
during the 8 9 month of March-1995 within 30th June 1999 without any further
delay. If we do not hear anything from your side within the time stipulated,
action will be initiated to forfeit all deposit amount paid by you as per
clause (11), (16) and (20) of the Tender Conditions, which may please be
filed a writ petition, which was marked as Writ Petition No. 27456 of 1999. It
is not in dispute that those permits were not granted in favour of the
respondents. Respondents in their writ petition while contending that the
agency of the appellant was terminated, stated :- "8. It is humbly
submitted that the petitioner has paid sum of Rs.11,84,447.90 towards the cost
of granite blocks. The petitioner after paying the huge amount of
Rs.11,84,447.90 requested the Respondent to obtain the mineral dispatch permit
from the Department of Mines and Geology for transporting the granite blocks.
After receipt of the money the Respondent did not pursue the matter in obtaining
the mineral dispatch permits from the department of transport the granite
blocks. The effort of the petitioner to convince the Respondent to obtain the
mineral dispatch permit did not yield and result and the Respondent failed to
obtain the mineral dispatch permits in terms of Rule 42 of the Rules.
9. It is humbly
submitted that the Respondent Corporation appointed the Jadhav, Range Forest
Officer to issue the permits. The said Range Forest Officer has issued permits
which are termed as fake permits. Several persons appear to have transported
the granite blocks on those fake 9 10 permits. Under those circumstances the
Karnataka Legislative Assembly constituted Committee of legislators to go into
the question of fake permits issued by the said Jadhav. It may also be relevant
to mention that the criminal case was filed against various persons and the
matter was handed over to the COD of Police for investigation. It is also
relevant to mention that both the houses of the legislature was rocked by the
fake permits scandal.
10. It is humbly
submitted that the Legislative Committee which was appointed for the purpose of
looking into the fake permits has took (sic) a decision that the entrustment of
selling of the seized and confiscated granite blocks in favour of the
Respondent Corporation should be dispensed forthwith thereby terminating the
agency given to the Respondent. The Government on the instructions of the
Legislators Committee cancelled the agency that was given to the Respondent and
instructed the forest corporation to return the granite blocks to the
department of Mines and Geology (sic) is the owner of those Granite blocks.
Only for the purpose of selling those granite blocks it was entrusted to the
Respondent Corporation. The Corporation ceased to have its power or
jurisdiction to continue to sell the granite blocks with effect from
The true copy of the
Government Notification dated 16.01.1996 is produced herewith as
ANNEXURE-C." In the aforementioned premise, it was inter alia prayed :- b)
ISSUE an order, direction or writ in the nature of Mandamus, directing the
Respondents to implement the Government Order Annexure-C dated 16.01.1996.
10 11 c) ISSUE an
order, direction or in the nature of mandamus, directing the Respondents to
refund sum of Rs.9,44,478.55 together with interest calculated at 18% in terms
of the Government order dated 16.01.1996 Annexure-C."
filed its counter-affidavit in the said writ petition.
also filed an additional affidavit, stating:
"10. It is relevant
to submit here that the petitioner should have completed the entire tender cum
auction transaction by the end of 15th July 1995 by making payment of taking
delivery of the entire granite blocks purchased as per Respondent letter dated
26.06.1995 at ANNEXURE R14.
petitioner delayed the same. In fact, the petitioner should have completed all
these transactions before the issue of Government letter dated 16.01.1996 at
Annexure-C. The Respondent cannot be blamed for failure and delay of the petitioner
in not completing the transaction before the Government letter dated
16.01.1996. In fact, the petitioner in letter dated 19.04.1997 expressed
willingness to take the granite as per ANNEXURE-R15. Then Respondent sent a
letter dated 28.4.1997 as per ANNEXURE-R16 to the Deputy Conservator of Forest.
Inspite of reminder dated 30.06.1997 as per ANNEXURE-R17 the petitioner has not
complied with the directions in payment of the balance amount. This Respondent
is entitled to forfeit the entire amount as per clause ....illegible ..... the
tender for failure of the petitioner in not paying amount and taking 11 12
delivery of the goods within the stipulated time.
petitioner cannot blame this Respondent.
11. Inspite of all
this, and without prejudice to the various contentions, the Respondent humbly
submits that, if the petitioner pays the balance amount of Rs.9,40,426.55 and
penalty immediately as per conditions of sale, this Respondent is ready and
willing to complete the sale transactions by obtaining necessary permits from
the concerned authorities as is being done in the case of other bidders who
have paid full value after 16.1.1996 Annexure-C.
learned Single Judge of the High Court by its order dated 19.02.2001 allowed
the writ petition directing the appellant - Corporation to refund a sum of Rs.
3,75,905.35 with interest from the date of issuance of the letter, stating :
"8. In view of
terms of Auction notice, if the balance amount of the sale considerations is
not paid, the sale could not have been confirmed and a forfeiture would have
resulted. The forfeiture would have been unconditional but for the intervention
of Annexure C, where the owner of goods sold, called upon the agent to refund
the excess amount. The agent has to abide by the instructions of the Principal.
He has to deal with the estate of his principal as he commands.
9. A perusal of
Annexure H shows that the Respondent has collected whatever tax is due under
the sale and prima facie there is no scope for 12 13 fresh demand. Besides,
the petitioner cannot also dispute its liability to pay the stipulated tax, it
being a condition of sale. In these circumstances, there is a no justification
in the demand made by the Respondent in Annexure H. In such circumstances,
Annexure H is quashed. There will be direction to the Respondent to refund the
amount, a sum of Rs.3,75,905.35 with the interest from the date of Annexure C.
The right of the Respondent to claim any damage sustained from its principal is
left open. W.P. is disposed of."
writ appeal preferred there against by the appellant has been dismissed by
reason of the impugned judgment.
Civil Appeal arising
out of SLP (C) No. 23148 of 2005
No.3, on 6th March, 1995, participated in the tender-cum- auction sale and was
a successful bidder in respect of 3 lots of granite containing 75 granite
blocks. It again participated in the tender auction on 14th March, 1995 and was
declared successful in respect of 41 granite blocks. The total sale value of
the granites purchased by respondent No.3, according to the appellant, was
Rs.21,91,234.60 ps. Out of said amount, it deposited a sum of Rs.11,47,149.77.
The sale price included various taxes/royalty.
released 31 granite blocks of the value of Rs.5,92,556.57 ps. Vide its letter
dated 28th June, 1995 appellant requested the respondent No.3 to lift the
remaining granite blocks after remitting 100% of the total purchase value plus
taxes on or before 15th July, 1995 failing which the amount already deposited
was threatened to be forfeited.
No.3 filed a writ petition before the Karnataka High Court being Writ Petition
No.25613 of 1996 praying inter alia for issuance of direction to issue permits
for lifting the granite blocks. Appellant did not object to the release of the
granite blocks towards which payments had already been made. While issuing Rule
on 19th September, 1996 the High Court gave an interim direction which reads as
under :- "There shall be an interim direction to Respondents 4 and 5 to
issue Mineral Despatch Permits to Petitioner for transporting the granite block
purchased by the Petitioner from first Respondent and released by the first
Respondent, without requiring payment of any royalty charges."
Vide its letter dated 3rd October, 1996 and 29th November, 1996, the appellant
requested the respondent No.3 to remit the balance amount and lift the granite
blocks purchased by it. However, no transit permit was issued.
respondent was not prepared to pay the balance of amount to get the granite
blocks released and once again requested the appellant to refund the balance
amount deposited by it.
writ petition being W.P. (C) No. 7611 of 1997 was filed by respondent No.3 to
refund the payment made by it amounting to Rs.5,54,593/- with interest and
further not to insist for making payment of balance bid amount.
the High Court by its judgment dated 21st October, 1997 directed :- "13. For
the reasons stated, the relief sought for by the petitioner company in this
writ petition cannot be granted by this Court. The only relief that can be
granted to the petitioner-company is to direct the respondent Corporation to
consider the request that may be made by the petitioner - Company for refund of
a sum of Rs.1,51,594.06 ps., if terms and conditions of tender-cum-auction sale
notification permits for such refund within two months from the date of request
that may be made by the petitioner company and secondly, if the petitioner
company deposits the balance of sale consideration for purchase of granite
blocks, the respondent-corporation is directed to lift the balance or rough
granite blocks which it had 15 16 purchased in the auction sale without
insisting on the payment of interest on the balance of amounts or for
production of proof of payment of royalty under KMMC Rules, 1994."
The High Court also
opined :- "Pursuant to such confirmation of sale, Petitioner- Company has
already lifted granite blocks worth Rs.4,40,562.50 ps. and the taxes paid in
full on the entire sale value has already been deposited with the State and
Central Government. Therefore submits, the only amount that is remaining with
the third respondent- Corporation is a sum of Rs.1,51,554.05 ps. The learned
counsel further submits that the third Respondent-Corporation is prepared to
refund the aforesaid amount, if the Petitioner-Company so desires. "
to or in furtherance thereof a representation for refund of Rs.1,51,594.05 ps.
was made. However, the appellant by its letter dated 15th November, 1999
rejected the said request. Aggrieved, the third respondent filed a writ
petition before the High Court which was numbered as W.P. 45825 of 1999 praying
inter alia for the following reliefs :- "i) issue a writ of certiorari or
any other writ order or direction quashing the letter/order bearing No.
TEC-II/Sale/GNR/94-95/99- 2000 dated 15.11.1999 passed by the 3rd Respondent
16 17 ii) issue a
writ of mandamus or any other writ order or direction directing the 3rd
Respondent to refund a sum of Rs.1,51,594.05 with interest @ 18% per annum from
the date of deposit till the date of refund.
iii) issue a writ of
mandamus or any other writ order of direction directing the respondents 1 and 2
to refund a sum of Rs.95,088.60 deposited by the 3rd Respondent on account of
Forest Development Taxes on the unreleased granite blocks.
iv) issue a writ of
mandamus or any other writ order or direction directing the Respondent No.5 to
refund the amount of Rs.1,36,689.90 deposited by the 3rd Respondent on account
of Sales Tax and Surcharge on the unreleased granite blocks.
v) issue a writ of
mandamus or any other writ order or direction directing the Respondent No. 6 to
refund the sum of Rs.1,78,290.60 deposited by the 3rd Respondent on account of
Income Tax on the unreleased granite blocks.
regards further performance of the contract as well as release of the amount,
the appellant in its counter-affidavit before the High Court stated:- "8.
IN REPLY TO PARA NO. 5: It is pertinent to note that the prayer of the
petitioner in the earlier writ petition bearing No. 25613/96 there is 17 18 no
whisper of the claim of refund. Further there is no prayer for refund of the
granite blocks. When the Petitioner has sought for a direction for the issue of
dispatch permits it is not now open to the Petitioner to make the claim for
refund. Further, the submission made on behalf of this Respondent that it has
no objection to release the blocks corresponding to the payment made cannot be
interpreted to mean that the granite blocks worth Rs.5,54,593.22 should be
released. It is pertinent to note that even before the filing of the earlier
Writ Petition, the Petitioner had lifted 29 granite blocks.
It is submitted that
the application produced at Annexure-G is not brought to the notice of this
respondent. It appears to have been rejected as the Petitioner did not pay the
balance consideration towards 85 granite blocks and consequently as this respondent
also could not pay the same to the fourth respondent."
"11. IN REPLY TO
PARA-8: Out of Rs.11,47,149.32 paid by the petitioner a sum of Rs.5,62,063.25
is towards the applicable taxes.
What remains is
Rs.5,85,086.07 which is to be adjusted towards the value of the granite blocks.
Out of this the
Petitioner has already lifted 176.225 Cmt. of granite blocks in Yadamarahalli-
III worth Rs.4,40,562.50 ps. The remaining amount is Rs.1,51,594.05. In the
absence of any indication by the petitioner, this amount cannot be adjusted to
any of the remaining lots. As the petitioner has not indicated to which lot
this amount has to be adjusted, the question of releasing the granite blocks
corresponding to the payment does not arise at all. It is incorrect to say that
the petitioner has deposited the necessary amount without any lapses. The watch
and warde 18 19 and maintenance of the granite blocks purchased by the
petitioner in the auction is the responsibility of the petitioner. As the terms
and conditions of tender notification do not provide for the refund of the
amount, petitioner's request could not be conceded to. Against the order, dated
19.8.1999 passed by the learned Single Judge in W.P. No. 7611/97, the
petitioner filed W.A. No. 8250/99.
withdrew this Appeal."
learned Single Judge of the High Court by his order dated 26th September, 2002
allowed the writ petition. While quashing the letter dated 15th November, 1999
directed to refund the moneys stated at Prayer Nos. 2, 3,4 and 5 of the
appellant filed a writ appeal which was dismissed by the impugned order.
Shyam Diwan, learned senior counsel appearing on behalf of the appellant urged
:- (i) The purported order dated 16th January, 1996 contained in the letter
from the Principal Secretary to Government, Forest Ecology & Environment
Department and addressed to the Secretary, 19 20 Karnataka Legislative
Assembly, a copy whereof was sent to the Chairman & Managing Director of
the appellant-Corporation, does not contain any direction which can be said to
be binding on the appellant and in that view of the mater, the impugned
judgment cannot be sustained.
(ii) For the purpose
of issuance of a Writ of or in the nature of mandamus it was obligatory on the
part of the writ petitioner to show the existence of a legal right in itself
and a corresponding legal duty in the respondent and in view of the fact that
no such legal right having been found to be existing in favour of respondent,
the impugned judgment is liable to be set aside.
(iii) The High Court
could not have exercised its jurisdiction under Article 226 to enforce a
contract qua contract, particularly when the same involved disputed questions
being bound by the terms and conditions of tender, could not have been given
any relief in derogation thereof.
Vikas Rojipura, learned counsel appearing in Civil Appeal arising out of SLP
(C) No. 24242 of 2005 and Mr. P. Vishwanatha Shetty, 20 21 learned senior
counsel appearing in Civil Appeal arising out of SLP (C) No.23148 of 2005 on
the other hand, :- (i) No disputed question of fact being involved in the Writ
Petitions, the High Court could exercise its discretionary jurisdiction even in
a matter governed by contract qua contract.
(ii) The action of
the State in all situations including contractual matters must be fair and
keeping in view the fact that the appellant had taken a wholly unfair stand,
this court should not interfere with the impugned judgment.
(iii) In any event,
as in the appeal arising out of SLP ) No. 23148 of 2005 the appellant itself
agreed to refund a sum of Rs.1,51,554.05 it cannot be permitted to go back on
its promise and refuse to enforce the same particularly when the other
respondents against whom directions had been issued, including the State of
Karnataka and income tax authorities have accepted the judgment.
the confiscated granite blocks belonged to the State of Karnataka. They did not
belong to the appellant-Corporation. Appellant was merely appointed as an agent
of the State. It is only in that capacity the 21 22 tender was issued by it.
We may notice that although in terms of the said tender, the concerned
respondents and others were bound to deposit the price of the granite blocks as
also the amount of tax payable there under ;
one of the essential
conditions there for, as quoted above, was issuance of permits to transport the
a part of the contract was completed. It is furthermore not in dispute that
some granite blocks were transported by using forged transit permits. A huge
scam was unearthed. Questions were raised in the Assembly. A Committee was
appointed. It is pursuant to the report of the Committee that was appointed by
the Karnataka Legislative Assembly that the policy of the State changed. It
terminated the agency of the appellant. It was only while doing so, the
directions contained in the said letter dated 16th January, 1996 were issued.
agree with the contention of Mr. Divan that such a direction which does not
have any statutory force is not binding upon the appellant but herein strictly
we are not concerned with such an issue. 22 23
Diwan relied on Bharat Sanchar Nigam Ltd. And another v. BPL Mobile Cellular
Ltd. and others, [ 2008 (8) SCALE 106 ] wherein it has inter alia been held :-
"They might have been published by some publisher but indisputably they
are not statutory in nature. They have not been framed under any statute. The
Indian Telegraph Act or the Rules framed thereunder do not provide for issuance
of such circulars. The circular letters collected at one place are loosely
called rules. They, as noticed hereinbefore, are meant for office use only. The
directions contained in the said circular letters are relevant for the officers
who are authorized not only to grant licences but also enter into contracts and
prepare bills. The circular letters having no statutory force undoubtedly would
not govern the contract. If some authorities have violated the terms of the
said circulars, they might have committed misconduct, but when a contract is
entered into, the parties shall be bound thereby."
It was furthermore
observed :- "25. In view of the aforementioned law laid down by this
Court, there cannot be any doubt whatsoever that the circular letters cannot
ipso facto be given effect to unless they become part of the contract. We will
assume that some of the respondents knew thereabout. We will assume that in one
of the meetings, they referred to the said circulars. But, that would not mean
that they are bound thereby. Apart from the fact that a finding of fact has
been arrived at by the TDSAT that the said circular letters were not within the
knowledge 23 24 of the respondents herein, even assuming that they were so,
they would not prevail over the public documents which are the brochures,
commercial information and the tariffs."
the same effect are the observations made by this Court in M/s. New Bihar Biri
Leaves Co. and others v. State of Bihar and others, [ (1981) 1 SCC 537 ],
stating :- "46. At the time of inviting Tenders in the prescribed Form or
inviting purchasers to bid at the publication, all tenderers or bidders are
treated equally in the sense that they can offer their rates or bids subject to
the statutory conditions including the impugned provisions. While accepting the
highest Tender of rates per standard bag or the highest bid, it is not possible
to classify the purchasers whose offers/bids have been accepted into 'honest'
purchasers and 'dishonest' purchasers. Everybody whose offer or bid is
accepted, is assumed to be honest."
are, however, concerned herein with a different situation.
Transport of granite
blocks was subject to issuance of transit permits. Such transit permits are
granted in terms of the provisions of Rule 42 of the Karnataka Minor Mineral
Concession Rules, 1994.
question that arises for consideration is as to whether the State in exercise
of its power under Article 162 of the Constitution of India could issue a
binding direction so as to confer a legal right on a third party having regard
to cancellation of contract of agency by the State in favour of the appellant
letter dated 16th January, 1996 is to be treated as a communication from a
Principal to an Agent. As an agent of the Government of Karnataka, the
appellant, which, itself is a `State' within the meaning of Article 12 of the
Constitution of India, was bound to act thereupon. It is true that it had
responded to the aforesaid communication of the State dated 16th January, 1996
stating its own reasons therefor. In its letter dated 29th January, 1966
addressed to the Secretary, Forest Ecology and Environment, it was stated :-
"The KSFIC Ltd. is facing financial crunch and incurring heavy loss since
2-3 years due to decline of day to day activities. It is very painful to say
that even there is no fund for payment of the employees salary for the month of
The Units of the
KSFIC Ltd. at Mysore, Shimoga and Dandeli are also facing same problems and
even they have not paid the salary of their employees since last 2-3 months due
to non availability of funds. The subject was also 25 26 discussed in the
recently held Board meeting of KSFIC on 19.12.1995 and the financial position
was made known to the Board Members. The decision to take up granite trade by
KSFIC was taken only after thorough discussion in the Board for nearly half a
dozen times. The seized granite blocks were auctioned by the Corporation with
the full knowledge of Government of Karnataka to the Hon'ble Minister of
Forests and the Forest Development. In fact Forest Department gave the full
support for this activity. Moreover the Mines and Minersals Department can
dispose in the public auction only those minerals which are seized under
sub-section (4) of 21 of the Act and sub-rule (6) of 43 and minor Minerals left
at the quarry after expiry of termination of lease or licences. In this instant
case granite blocks are seized under provision of Section 62 of Karnataka
Forest Act and this can be disposed off only under Cchapter 12 of Karnataka
Forest Rules, 1963.
Hence, we request you
to kindly prevail upon the Joint Legislative Committee and Mines and Geology
Department to issue necessary permits for the remaining Blocks to KSFIC Ltd. as
per the rules in force. There is no alternative left for the KSFIC Ltd. to make
arrangement for issue of transit permits through Mines and Geology Department
to the purchasers for lifting the remaining blocks purchased by them in Tender
cum auction sale as the KSFIC Ltd. Is totally unable to refund the deposit
amount to the purchasers in the circumstances explained above." 26 27 But
there is nothing to show that the Government of Karnataka acted thereupon or
withdrawn its direction contained in its letter dated 16th January, 1996.
plea which was raised, therefore, was not a legal plea but a plea for show of
compassion expressing its inability to refund the amount because of financial
constraints. Its response to the State was not based on legal premise but it
was based on its own difficulty. If the agency had been terminated and had not
been restored, we would not know under what authority the appellant had been
asking respondents to perform their part of contract.
any view of the matter there is nothing on the records to show that the State
of Karnataka and particularly the Joint Committee of the Karnataka Legislative
Assembly directed grant of transit permits for transportation of granite
blocks. If such permits had been granted, it might have been obligatory on its
part while issuing the notice upon the concerned respondents to direct lifting
of the remaining blocks of granites enclosing therewith copies of the said permits,
but in absence thereof, it is idle to contend, on the one hand that the
respondents were bound to perform their 27 28 part of the contract and on the
other that although they have asked for supply of permits, as per rules, they
did not obtain the same.
is also guilty of suppressio veri and suggestio falsi. Its action in the entire
matter appears to be wholly unfair. It was in a dominant position in terms of
the provisions of the contract but then in a case of this nature when its
authority to continue to deal with the granite blocks came to be questioned, it
was obligatory on its part to clear its position in this behalf. We have no
words to express our displeasure also in regard to the conduct of the State. It
did not take a positive stand. As a principal, the State of Karnataka was also
obligated to disclose the entire facts before the High Court.
ordinarily a superior court in exercise of its writ jurisdiction would not
enforce the terms of a contract qua contract, it is trite that when an action
of the State is arbitrary or discriminatory and, thus, violative of Article 14
of the Constitution of India, a writ petition would be maintainable. ( See ABL
International Ltd. v. Export Credit Guarantee Corpn. of India Ltd. [ (2004) 3 SCC
cannot be any doubt whatsoever that a writ of mandamus can be issued only when
there exists a legal right in the Writ Petition and a corresponding legal duty
on the part of the State, but then if any action on the part of the State is
wholly unfair or arbitrary, the superior courts are not powerless. Reliance
placed by Mr. Divan on G.J. Fernandez v. State of Mysore and other, (  3
SCR 636 ) is not apposite. In that case itself it was held :- "Thus under
Art. 162 the State Government can take executive action in all matters in which
the legislature of the State can pass laws. But Art. 162 itself does not confer
any rule making power on the State Government in the behalf." G.J.
Fernandez (supra) was considered in ABL International Ltd.
the concession made by the counsel for appellants in the earlier round of
litigation also cannot be lost sight of. A specific concession was made. It may
be that no specific direction was issued by the High Court therein, but the
stand taken by it was clear and unequivocal.
Shyam Divan, when questioned, had very fairly submitted that the conduct of the
counsel who had appeared on behalf of the appellant in the earlier round of
litigation is not in question and it cannot be said that he acted beyond his
such a stand had taken in the earlier round of litigation we fail to see any
reason as to why the concession made by it should not be given effect to. If a
right has accrued to the respondents for maintaining a writ so as to compel the
State to give effect to an earlier order passed by the Court as has been held
by this Court in the case of Commissioner, Karnataka Housing Board v. C.
Muddaiah, [ (2007) 7 SCC 689, the same should not be denied to respondent
in view the facts and circumstances of the case in its entirety and having
regard to the legal propositions as noticed hereinbefore, we are of the opinion
that these are not the cases in which this Court should exercise its
discretionary jurisdiction under Article 136 of the Constitution of India. The
appeals are dismissed with costs. Counsel's fee assessed at Rs.50,000/- in each
......J. ( S.B. SINHA )
( CYRIAC JOSEPH )
31 32 IN THE SUPREME
COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. OF 2008 [Arising
out of SLP (Civil) No. 24242 of 2005] M/s. Karnataka State Forest Industries
Corporation ...Appellant Versus M/s. Indian Rocks ...Respondent WITH
CIVIL APPEAL NO. OF 2008 [Arising out of SLP (Civil) No. 23148 of 2005] Dear
Brother Cyriac Joseph, Draft Judgment in the aforementioned matter is being
sent herewith for your perusal and kind consideration.
With kind regards,
[S.B. Sinha] J.
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