Gajjan Mal Mohan Lal And Others v. State Of Himachal Pradesh And Others

1. The facts giving rise to this writ petition may be stated briefly. On 28-2-1952, the Conservator of Forests, Himachal Pradesh, Simla Circle, respondent 3, held an auction at Himachal Dham, Simla, in respect of trees standing in Lot No. V of Lower Bushalir Forest Division. The petitioners made the highest bid of Rs. 50,100/- and, accordingly, it was knocked down in their favour. A sum of Rs. 5,010/- was deposited by the petitioners as earnest money at the fall of the hammer, in accordance with the verms and conditions of the auction. The auction was to be confirmed by the Chief Conservator of Forests, Himachal Pradesh, respondent 2. On such confirmation being notified, the petitioners were bound to execute an agreement and to deposit a security of 10 per cent of the auction money within a period of fifteen days, under the conditions of auction.

2. The petitioners' case is that when the timber of the dry Fir trees were floated down the river, a very serious defect therein came to their notice, rendering the timber absolutely useless for building purposes. This was brought to the notice of the Conservator of Forests and he was requested to permit the petitioners to take green Fir trees instead of dry Fir trees. In case the suggestion was not accepted, the Conservator was requested to refund the earnest money deposited by the petitioners.

3. On 30-3-1952, the Conservator notified to the petitioners that their offer of Rs. 50,100/- made at the auction had been accepted by the Chief Conservator of Forests. They were, accordingly, called upon to deposit a sum of Rs. 2,505/- as security and to execute an agreement within 15 days. The request made by the petitioners was not accepted. Petitioners were informed by the Conservator on 14-6-1952 that the auction in their favour had been cancelled, the security deposited by them compeared and the trees would be resold and the loss, if any, incurred on account of the resale would be recovered from them as arrears of land revenue.

4. On further representations being made, the Secretary, Forest Department, Himachal Pradesh Government conveyed an offer to the petitioners on 26-11-1952, whereby the Government agreed to deduct a sum of Rs. 6,692/2/3 (representing the price of dry Fir trees) from the auction price of Rs. 50,100/-.

5. Accordingly, the petitioners were directed to execute an agreement within 15 days, subject to the understanding that the earnest money deposited by the petitioners would be adjusted towards their dues. This offer was not accepted by the petitioners, who claimed that the price of the dry Fir trees should have been, at least, Rs. 21,758/-.

6. The trees covered by the auction were eventually resold by the Conservator for a sum of Rs. 18,000/- and in respect of the balance of Rs. 27,090/- a recovery certificate was sent by the Collector of Mahasu on behalf of the Himachal Pradesh Government to the Collector of Ambala for recovery proceedings under the Punjab Land Revenue Act and the Revenue Recovery Act.

7. The petitioners contended that the recovery proceedings launched against them are illegal and unjustified on various grounds. These grounds will be referred to by me in detail subsequently. Hence, this writ petition, wherein I am requested to quash the recovery proceedings pending against the petitioners under the Land Revenue Act.

8. On notice of this petition being issued to the respondents, a joint written-statement was filed on their behalf. The writ petition has been opposed both on preliminary objections as well as on its merits.

9. Arguments of the learned counsel for the parties were heard at length on the 30th and 31st ultimo. I now proceed to deliver judgment.

10. Mr. D.K Mahajan for the petitioners argued, in the first place, that the sum in question could not be recovered from his clients as arrears of land revenue. He argued that under Section 82 of the Forest Act, only money payable to Government under that Act or under any rule made under that Act, or on account of the price of any forest produce etc. could be recovered, as if it were an arrear of land revenue. He further contended that the trees in question having been resold to third parties, there is no question of “any price of the trees” being recoverable from the petitioners.

11. In this connection, he invited my attention to the provisions of Section 54(4) of the Sale of Goods Act, which runs as follows:

“Where the seller expressly reserves a right of resale in case the buyer should make default, and, on the buyer making default, resells the goods, the original contract of sale is thereby rescinded, but without prejudice to any claim, which the seller may have for damages.”

12. Consequently, Mr. Mahajan urged that the only remedy open to the Government was to sue the petitioners for damages on account of breach of contract and it was not open to them to recover the amount as arrears of land revenue. Mr. Mahajan also invited my attention to the provisions of Section 98 of the Punjab Land Revenue Act, which enumerates the sums that may be recovered as arrears of land revenue. Emphasis was laid on the expression “any other enactment for the time being in force” to be found in the opening sentence of S. 98.

13. Since, according to learned counsel, the recovery of the sum in question as arrears of land revenue is not covered by Section 82 of the Forest Act, it was, vehemently, argued that, the recovery proceedings are ultra vires. Mr. Mahifjan's attention was drawn to condition No. 8 of the conditions of the auction in question (Annexure ‘A’) to the petition, whereby, in the event of the failure on the part of the successful bidder to execute the agreement and to deposit the security money within the prescribed period, the earnest money would stand forfeited to Government, the sale in his favour would be treated as cancelled, the trees would be resold and any loss thus accruing, would be recovered from the original bidder as arrears of land revenue.

14. Mr. Mahajan contended that condition No. 8 was null and void, and submitted that, such an agreement is not covered by the provisions of Section 98 of the Land Revenue Act. He elaborated his argument by saying that S. 98 refers only to the sums enumerated thereunder as well as sums recoverable as arrears of land revenue under the Land Revenue Act or any other enactment for the time being in force. He argued, that condition No. 8 would not amount to a statute and S. 98 does not refer to agreements.

15. Under these circumstances, he pleaded that the only remedy open to Government was to sue the petitioners for damages on account of their breach of contract. He further argued that under Section 74 of the Contract Act, the respondents were entitled only to reasonable compensation and not to the penalty stipulated in the contract. In this connection, he pointed out that while the original auction in favour of the petitioners had taken place on 28-2-1952, the resale of the trees took place nearly two years later, i.e on 2-3-1954.

16. Mr. Mahajan contended that if the respondents choose to enforce their right to resale, they should have done so within a reasonable time from the date of the breach, the measure of damages being the difference between the contract price and the price-realized on the resale. If the resale has been unreasonably delayed, the true measure of damages would be the difference between the contract price and the market price on the date of the breach. Reliance was placed, in this connection, on — ‘Nikku Mal-Sardari Mal v. Gur Parshad & Brothers’, 12 Lah 452 : (AIR 1931 Lah 714) (A), where a Division Bench of that High Court held that:

“It is a well-settled rule that on breach by the buyer of a contract for the purchase of goods, if the vendor chooses to enforce his right to re-sell, he must do so within a reasonable time from the date of the breach. If the goods are re-sold within a reasonable time alter the breach of the contract by the purchaser, the measure of damages is the difference between the contract price and the price realised on the re-sale, with the costs and expenses of the resale.

17. But if the re-sale has been unreasonably delayed until the market has fallen, the price realized on re-sale will not afford a true criterion of the damages, and the measure of damages will then be the difference between the contract price and the market price on the date of the breach of the contract.”

18. Harichand and Co. v. Gosho Kabushiki Saisha Ltd., 49 Bom 25 : (AIR 1925 Bom 28) (B), where a Division Bench of that High Court expressed themselves in the following terms:

“A clause in a contract for the sale of goods, which provides that the seller, on the failure of the buyer to take delivery, shall be at liberty at any time to re-sell the goods, and recover the loss re-guiling from such re-sale, gives to the seller a valid right to recover damages on the basis therein mentioned, but, if that right is not exercised within a reasonable time, he is thrown back on his remedy of damages on the ordinary basis of the difference between the contract rate and the market rate at the date of breach.”

19. Under these circumstances, Mr. Mahajan contended, vehemently, that the action of the respondents in attempting to recover the sum of Rs. 27,090/-, as arrears of land revenue, was illegal and amounted to seeking to deprive the petitioners of their property otherwise than by authority of law. I was, therefore, requested to hold that the provisions of Article 31(1) of the Constitution are attracted and, accordingly, a case is made out for invocation or the writ jurisdiction of this Court under Article 226 of the Constitution.

20. Mr. Mahajan further contended that the threat of using coercive machinery against his clients under the provisions of the Land Revenue Act and the Revenue Recovery Act would amount to sufficient infringement of their fundamental rights and, consequently, relief under Article 226 can be granted. Reliance was placed, in this connection, on — ‘Himmatlal Harilal v. State of Madhya Pradesh’, AIR 1954 SC 403 (C), wherein their Lordships of the Supreme Court held that:

“Explanation 2 to S. 2(g), C.P and Berar Sales Pax Act having been declared ‘ultra vires’ any imposition of sales tax on the appellant in Madhya Pradesh is without the authority of law, and that being so, a threat by the State by using the coercive machinery of the impugned Act to realize it from the appellant is a sufficient infringement of his fundamental right under Article 19(1)(g) and it was clearly entitled to relief under Article 226 of the Constitution. The contention that because a remedy under the impugned Act was available to the appellant, it was disentitled to relief under Article 226 stands negatived by the decision of this Court in — ‘State of Bombay v. United Motors (India) Ltd.’, AIR 1953 SC 252 (D).”

21. The learned Government Advocate for the respondents argued that the recovery proceedings pending against the petitioners in Ambala were perfectly legal and, therefore, the provisions of Article 31(1) of the Constitution are not attracted. He urged — and in my opinion with considerable justification — that the only binding conditions between the parties are the conditions of sale published before the auction. In this connection, he cited — ‘Sheo Lall v. Sheikh Mahomed’, 13 Suth WR 4 (PC) (E), where their Lordships of the Privy Council held that:

“The conditions of sale published before the auction are the only binding conditions.”

22. He further pointed out that before the auction was held the conditions of sale were notified to all concerned (Annexure ‘A’) to the petition. Condition 4 thereof lays down that the Forest Department, Himachal Pradesh, did not hold itself responsible for the soundness of any trees and would not give other trees in exchange………. the purchaser would have no claim for the refund of the purchase money paid or to be paid for any trees which turned out to be hollow or useless.

23. Condition 6 further provided that all trees sold would remain at the purchaser's risk from the date of the acceptance of his bid. Condition 8 clearly provided that the successful bidder would be required to sign an agreement and to deposit a security of 10 per cent of the sale money within 15 days of the sale being confirmed. In case the successful bidder failed to sign the agreement and to deposit the security money or fulfil the other conditions of sale within the prescribed period, it was open to the Government to forfeit the earnest money, to treat the sale as cancelled, to re-sell the trees and to recover any loss thus accruing to it, as arrears of land revenue.

24. In the face of such conditions, it was submitted that it was not open to the petitioners, after having committed default, to turn round and say that the recovery proceedings are ultra vires and they are being unlawfully “deprived” of their property. I have already referred to the argument of Mr. D.K Mahajan, for the petitioners, to the effect that on the resale of the trees, the only remedy open to the Government was to sue his clients for damages.

25. Mr. Mahajan's argument was that it might have been possible for the Government to recover the sale price from the petitioners as arrears of land revenue, provided the trees had not been resold. Mr. Mahajan's argument was based on the provisions of Section 54(4) of the Sale of Goods Act, which have been reproduced earlier in this judgment. We have, therefore, to see whether by exercising the option of resale, conferred in condition 8 of Annexure ‘A’ (conditions of sale), the Government is estopped from recovering the balance, due to them, as arrears of land revenue.

26. In my opinion, the Government is not so estopped. I am supported in my view by a Full Bench decision of the Lahore High Court, reported in — ‘Firm Karam Narain Daulat Ram v. Volkarf Bros.’, AIR 1946 Lah 116 (F). There, the point for determination was whether an arbitration clause in a contract is wiped out, because the seller exercised his right, provided in the contract, of re-sale.

27. It was held by the Full Bench that the arbitration clause is not wiped out and reference to arbitration was possible in pursuance of that clause. With reference to the provisions of Section 54 of the Sale of Goods Act — on which reliance has been placed by Mr. Mahajan — their Lordships observed that:

“The term ‘rescission’ as used in S. 54(4) does not mean complete and total annulment of the contract and by such rescission, the parties are not placed in the same position as if they had never entered into contract. As sub-s. (4) reserves to the seller the right to claim damages, in spite of rescission, the contract must be regarded as existing, at least, for the purpose of claiming such damages. Consequently, it must be regarded as existing for providing the means for claiming such damages.”

28. On the same analogy, it can be said here that the exercise of the right of resale by the Government consequent on the default of the petitioners, did not wipe out condition 8 of the conditions of sale (Annexure ‘A’). In other words, it was open to the Government, after exercising their right of resale, to recover the balance due to them as arrears of land revenue. Harries, C.J, who was on the Full Bench, expressed himself in the following terms:

“It is difficult to give the word ‘rescission’ the meaning suggested by Tek Chand, J., when the right is given to the seller to claim damages in respect of the breach. To assess such damages, reference must be made to the contract. But how can such a reference be made, if such rescission in this sub-section means not merely to release the parties from further obligations in respect of the subject of the contract, but to annul the contract and restore the parties to the positions which they would have occupied if no such contract had ever been made?

If the contract must be deemed never to have existed, then no claim for damages could ever be preferred. The sub-section, however, reserves to the seller his right to claim damages in spite of rescission and the effect of that must mean that the term ‘rescission’, as used in this sub-section, does not mean complete and total annulment of the contract and by such rescission, the parties are not placed in the same position, as if they had never entered into a contract.

It appears to me that the rescission contemplated in S. 54(4) is something less than a complete annulment or destruction of the contract. As a claim for damages by the seller is saved, the contract must be regarded as existing at least for that purpose; otherwise such claim could never be enforced. If the contract must be regarded as still existing for the purpose of claiming damages, why should it not be regarded as existing for providing the means for claiming such damages?”

29. His Lordship also referred to a decision of the House of Lords, reported in — Heyman v. Darwins Ltd.’, 1942-1 All ER 337 (G). There, the House of Lords, unanimously, held that:

“The dispute between the parties was a dispute within the arbitration clause and the appellants' action ought to be stayed. Where there has been a total breach of a contract by one party, so as to relieve the other of his obligations under it, an arbitration clause, if its terms are wide enough, still remains effective. This is so even where the injured party has accepted the repudiation, and, in such circumstances, either party may rely on the clause.”

30. His Lordship went on to observe:

“It appears to me therefore that the House of Lords case in (1942) 1 All ER 337 (G) is as applicable to cases under Section 54, sub-section (4) of the Sale of Goods Act, as it is to cases of anticipatory breach i.e, the cases falling within Section 60 of the Sale of Goods Act.”

31. On the same analogy, it can be said here that although the sale in favour of the petitioners was rescinded by the Government due to their default, condition 8 of the conditions of sale, whereby the balance due to the Government could be recovered from the petitioners as arrears of land revenue was not wiped out, and still remains effective.

32. That brings me to the other question: whether the recovery of this balance would be covered by Section 82 of the Forest Act? In my opinion, the expression” or on account of the price of any forest produce” to be found in S. 82 is wide enough to cover a case of this kind. I am unable to accept Mr. Mahajan's argument that the balance now sought to be recovered from the petitioners cannot be considered to be “on account of the price of the forest produce.”

33. Section 2(4), Forest Act makes it clear that the expression ‘forest produce’ would include timber. I do not see why the expression “or on account of the price of any forest produce” to be found in S. 82: should be interpreted in the very narrow manner suggested by Mr. Mahajan. The plain facts of the case are that the petitioners had purchased the trees in question from the Government for a sum of Rs. 50,100/-. So far they have paid only Rs. 5,010/- (deposited at the fall of the hammer).

34. A further sum of Rs. 18,000/- was realized by the resale of the trees in accordance with condition 8 of the conditions of sale. There remains thus a sum of Rs. 27,090/- due from the petitioners on account of the price of trees. In my view, therefore, for reasons already stated, the respondents were well-within their rights in attempting to recover the balance of Rs. 27,090/- from the petitioners as arrears, of land revenue.

35. I may, at this stage, also point out that the provisions of Article 31(1) of the Constitution are attracted only when a person is “deprived” of his property otherwise than by authority of law. Where is the deprivation here? The petitioners bid at the auction with their eyes open. They knew that in the event of their default, sums due from them would be recovered as arrears of land revenue.

36. I fail to see how, under the circumstances, they can now be heard to say that they are being unlawfully “deprived” of their property. In Dwarkadas Shrinivas v. The Sholapur Spinning and Weaving Co. Ltd., AIR 1954 SC 119 (H), Bose, J., observed that:

“By substantial deprivation I mean the sort of deprivation that substantially robs a man of those attributes of enjoyment, which normally accompany rights to, or an interest in, property.”

37. I fail to see how, under the circumstances, the petitioners can complain that they are being “deprived” of their property. I have already given my reasons for holding that the recovery of the balance in question is covered by the provisions of Section 82 of the Forest Act. This is an “enactment for the time being in force” within the meaning of Section 98 of the Land Revenue Act. Action could be taken accordingly against the petitioners in Ambala district on a certificate issued by the Collector of Mahasu under Section 3 of the Revenue Recovery Act.

38. Before I conclude this judgment, I may refer to three other points argued by Mr. Mahajan. One of his arguments was that there is no valid contract between the parties because the contract does not conform to the provisions of Article 299 of the Constitution.

39. The learned Government Advocate rightly pointed out that this provision has been inserted in the Constitution to safeguard the interests of the Government. He further pointed out that the petition makes no reference to Article 299 of the Constitution. He further contended that even if the contract is not in the prescribed form, it was always open to the Government to ratify it. Reliance was placed, in this connection, on Chaturbhuj Vithaldas v. Moreshwar Parashram, AIR 1954 SC 236 (I), where their Lordships of the Supreme Court observed as follows:

“The provisions of Article 299(1) were not inserted for the sake of mere form. They are there to safeguard Government against unauthorised contracts. If in fact a contract is unauthorised or in excess of authority it is right that Government should be safeguarded. On the other hand, an officer entering into a contract on behalf of Government can always safeguard himself by having recourse to the proper form.

40. In between is a large class of contracts, probably by far the greatest in numbers, which, though authorised, are for one reason or other, not in proper form. It is only right that an innocent contracting party should not suffer because of this and if there is no other defect or objection, Government will always accept the responsibility. It would be disastrous to hold that the hundreds of Government officers, who have daily to enter into a variety of contracts, often of a petty nature, and sometimes in an emergency, cannot contract orally or through correspondence and that every petty contract must be effected by a ponderous legal document couched in a particular form.

41. It may be that Government will not be bound by the contract in that case, but that is a very different thing from saying that the contracts as such are void and of no effect. It only means that the principal cannot be sued; but there would be nothing to prevent ratification, especially if that was for the benefit of Government. When a Government Officer acts in excess of authority, Government is bound, if it ratifies the excess. The contracts in question were not void simply because the Union Government could not have been sued on thern by reason of Article 299(1).”

42. Consequently, this objection also fails.

43. Further, Mr. Mahajan suggested that cl. 8 of the conditions of sale runs counter to the provisions of Section 23 of the Contract Act. He based his argument on his earlier contention that the sum in question could not be recovered as arrears of land revenue, having regard to the provisions of Section 82 of the Forest Act.

44. I have already given my reasons for holding otherwise, i.e I have held that the balance of Rs. 27,090/- could be recovered as an ears of land revenue having regard to the expression “or on account of the price of any forest produce” to be found in Section 82 of the Forest Act. This plea, therefore, cannot, stand.

45. Lastly, it was contended that the respondents were not entitled to realize the entire sale price, since they have themselves had admitted that some rebate, amounting to Rs. 6,692/2/3, was due to the petitioners on account of dry Fir trees, vide Annexure ‘I’.

46. I find considerable force in the reply of the learned Government Advocate that this matter cannot be gone into in these summary proceedings and that the proper course for the petitioners would be to pay the amount, sought to be recovered, under protest in writing, and then institute a suit in a civil Court for the recovery of the amount, or any part thereof, as provided in Section 78 of the Punjab Land Revenue Act, read with Section 4 of the Revenue Recovery Act, 1890.

47. In view of all that has been said above, this writ petition must fail.

48. There remains only the question of costs. The writ petition, in my opinion, was misconceived and, ordinarily, I would have saddled the petitioners with the costs of the respondents. But I find that the respondents, themselves, at one time were prepared to make a deduction of a sum of Rs. 6,692/2/3 from the sale price on account of the unremediable defects found in the dry Fir trees, vide Annexure I. I would, therefore, leave parties to bear their respective costs of this petition. The writ petition is, accordingly, rejected. Costs on parties.

H.G.P

49. Writ petition rejected.