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  • Section 5, Subsection 2 of the 1983 Income Tax Act
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  • Section 5, Subsection 2 of the 1983 Income Tax Act
Smart Summary

Factual and Procedural Background

The Divisional Forest Officer (DFO), Kamrup Division, Assam, invited tenders for monopoly rights to quarry stone—inter alia from the Narengi Stone Quarry Mahal—for the period 1 July 1963 to 30 June 1964. Respondent Mool Chand Sarougi submitted a tender with an earnest-money deposit of Rs 100 and offered a royalty rate of Rs 5.25 per rupee. His offer was accepted on 13 July 1963 for a minimum quantity of 1,25,000 cubic ft., obligating him to pay Rs 31,250.

One Baputi Ram, a member of a Scheduled Tribe, appealed to the Government of Assam against the acceptance of Sarougi’s tender and secured a stay. Approximately three months later Baputi Ram withdrew, and the appeal was dismissed; by then the respondent refused to accept the settlement.

The DFO invited fresh tenders twice, finally settling the quarry on 10 January 1964 for a reduced minimum quantity of 50,000 cubic ft. at Rs 10,000 for the shortened period 25 January 1964 to 30 June 1964.

Invoking Section 75 of the Assam Forest Regulation, 1891, the DFO sought to recover the original Rs 31,250 as arrears of land revenue. The respondent petitioned the High Court of Assam to quash the recovery proceedings. The High Court allowed the petition, holding that the amount was not recoverable under the Regulation, and issued a mandamus restraining the DFO. The State of Assam obtained a certificate and appealed to the Supreme Court.

Legal Issues Presented

  1. Whether the unpaid amount of Rs 31,250 arising from the respondent’s accepted tender can be recovered as an arrear of land revenue under Section 75 of the Assam Forest Regulation, 1891.
  2. Whether Rule 10, framed under the same Regulation, creates a liability enabling such recovery and whether “stone” constitutes “forest produce” within the meaning of the Regulation.

Arguments of the Parties

Appellant (State of Assam)

  • The State contended that the sum of Rs 31,250 became “money payable to the Crown under this Regulation” by virtue of Rule 10, and therefore fell within Section 75, making it recoverable as arrears of land revenue.

Respondent (Mool Chand Sarougi)

  • He maintained that the claim did not arise under the Regulation or any rule thereunder; consequently Section 75 was inapplicable and civil remedies, not revenue recovery, were the proper course.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Supreme Court, per J. C. Shah C.J., undertook a textual analysis of Section 75 and Rule 10 of the Assam Forest Regulation, 1891:

  • Section 75 authorises summary recovery only for monies payable under the Regulation, its rules, or for the price of forest produce/expenses incurred in relation thereto.
  • The Court found “stone” difficult to classify as “forest produce” under the Act; even if arguendo it were, the disputed sum was not the price of extracted stone but damages for breach of a tender obligation.
  • Rule 10 merely restricts the authority of forest officials to grant leases of specified forest produce; it does not itself impose any monetary liability on a tenderer or lessee.
  • Since the respondent’s liability, if any, stemmed from breach of contract rather than from the Regulation or its rules, the amount lay outside Section 75. Consequently, the State’s use of land-revenue recovery machinery was impermissible.
  • The Supreme Court concurred with the High Court that the proper remedy for the State, if it wished to claim damages, would be an ordinary civil suit, not coercive revenue recovery.

Holding and Implications

Appeal dismissed with costs.

The Supreme Court affirmed the High Court’s mandamus, definitively ruling that contractual damages for a failed quarry tender cannot be recovered as arrears of land revenue under Section 75 of the Assam Forest Regulation, 1891. The immediate effect is that the State of Assam must pursue civil proceedings, if any, against the respondent; the decision does not articulate broader precedent beyond statutory interpretation of Section 75 and Rule 10 in similar contractual contexts.

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    Divisional Forest Officer v. Mool Chand Sarougi Jain .

    J.C Shah, C.J— The Divisional Forest Officer, Kamrup Division, Assam, invited tenders for the purchase of monopoly rights to quarry stone from certain areas, including Narengi Stone Quarry Mahal, for the period July 1, 1963 to June 30, 1964. Mool Chand Sarougi hereinafter called “the respondent” submitted a tender accompanied by the requisite deposit of Rs 100 as earnest money, and offered the rate of Rs 5.25 per rupee of royalty. The tender submitted by the respondent was accepted and for the minimum quantity of 1,25,000 c. ft. of stone allotted to the respondent out of the quarry he was to pay Rs 31,250. Intimation of acceptance of the tender was given to the respondent on July 13, 1963.

    2. One Baputi Ram, a member of a scheduled tribe, appealed against the order of the Divisional Forest Officer accepting the tender, to the Government of Assam and obtained a stay order. After about three months he declined to prosecute the appeal and his appeal was dismissed. The respondent then declined to accept the settlement of the quarry.

    3. The Divisional Forest Officer invited fresh tenders. The offers made were not however accepted and tenders were invited again. On January 10, 1964, a settlement was made for a minimum quantity of 50,000 c. ft. for the period from January 25, 1964 to June 30, 1964, for Rs 10,000.

    4. The Divisional Forest Officer thereafter, sought to recover the amount of Rs 31,250for which the tender of the respondent was accepted as arrears of land revenue in the manner provided by Section 75 of the Assam Forest Regulation 7 of 1891. The respondent then moved a petition in the High Court of Assam for an order quashing the proceeding for recovery of the amount demanded. The High Court held that the amount claimed was not recoverable under the provisions of the Assam Forest Regulation 7 of 1891 and passed an order quashing the proceeding for recovery and issued a mandamus to the Divisional Forest Officer, Kamrup Division not to proceed with the recovery. The State of Assam has appealed to this Court with certificate granted by the High Court.

    5. Section 75 of the Assam Forest Regulation 7 of 1891, provides:

    “All money, other than fines, payable to Crown under this Regulation, or under any rule made thereunder, or on account of the price of any forest produce, or of expenses incurred in the execution of this Regulation in respect of any forest produce, may, if not paid when due, be recovered under the law for the time being in force as if it were an arrear of land revenue.” The amount claimed to be due from the respondent is not on account of the price of any forest produce, or of expenses incurred in the execution for recovery of any forest produce. The amount is also not due in the execution of the Regulation. So far there is common ground. It was claimed, however, that the amount was due under Rule 10 promulgated in exercise of power under the Regulation and on that account it was recoverable as an arrear of land revenue. Rule 10, provides:
    “No lease for any fixed period giving the right of removing India rubber, cane, Kutcha or cutch, lac, Agar, ivory, or any other forest produce shall be given otherwise than in accordance with the general or special orders of the conservator who is empowered to authorise sales in respect of such leases, by auction, tender or any other method at such rates as he may decide in his discretion.”

    6. The Rule in our judgment does not apply to recovery of the amount alleged to be due for failure to carry out the obligations of the tender by proceedings under the Assam Forest Regulation, 1891. It is again difficult to hold that “stone” is forest produce within the meaning of the Act. In any event the Rule does not give rise to any liability to pay a sum of money. It merely imposes a limitation upon the power of the officers of the Forest Department to grant leases in respect of certain forest produce. The lease may not be granted except in accordance with the general or special orders of the conservator who alone is empowered to authorise a sale in respect of such a lease. It is a rule relating to the exercise of power to grant leases. The High Court was, in our judgment, right in observing that the amount of damages for breach of the terms of the sale notice is not an amount due under, the Regulation or Rule 10, made thereunder.

    7. The appeal accordingly fails and is dismissed with costs.

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    Comments

    Divisional Forest Officer v. Mool Chand Sarougi Jain .
    (Jan 6, 1971)