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The State of Madhya Pradesh Vs. Bootasingh Gopal Singh - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMadhya Pradesh High Court
Decided On
Case NumberFirst Appeal No. 109 of 1967
Judge
Reported inAIR1972MP116; 1972MPLJ392
ActsMadhya Pradesh Forest Contract Rules - Rules 7, 8, 21, 21(1), 29 and 29(2); Forest Act, 1927 - Sections 82 and 83;
AppellantThe State of Madhya Pradesh
RespondentBootasingh Gopal Singh
Appellant AdvocateA.N. Mukherji, Adv.
Respondent AdvocateR.S. Dabir, Adv.
DispositionAppeal allowed
Cases Referred(Madh Pra) and State of M.P. v. Sardar Mohan Singh. In
Excerpt:
.....the coupe in terms of the conditions nos. 35,625/- for having failed to re-sell the contract must be set..........whereby the learned judge has granted to the plaintiff a decree for:-- (i) a declaration that the state government was in breach of the forest contract granted to him by ordering a stoppage of working and, therefore, not entitled to recover rs. 35,625/- towards the balance of the auction price; (ii) a permanent injunction restraining the state government from recovering that amount as arrears of land revenue or otherwise, and (iii) refund of rs. 4,750/- representing the security deposit. 2. facts leading to the appeal may be shortly stated. on 17-8-1962, the plaintiff purchased the right to fell and extract bamboos from coupe no. 'a' walhar o/b. f.s. kanker division, at a public auction held by the divisional forest officer, kanker, for rs. 47,500/-. the purchase price was payable in.....
Judgment:

A.P. Sen, J.

1. This appeal preferred by the State Government is directed against the Judgment and decree of the Additional District Judge, Kanker, dated 16-6-1967 whereby the learned Judge has granted to the plaintiff a decree for:--

(i) a declaration that the State Government was in breach of the forest contract granted to him by ordering a stoppage of working and, therefore, not entitled to recover Rs. 35,625/- towards the balance of the auction price;

(ii) a permanent injunction restraining the State Government from recovering that amount as arrears of land revenue or otherwise, and

(iii) refund of Rs. 4,750/- representing the security deposit.

2. Facts leading to the appeal may be shortly stated. On 17-8-1962, the plaintiff purchased the right to fell and extract bamboos from Coupe No. 'A' Walhar O/B. F.S. Kanker Division, at a public auction held by the Divisional Forest Officer, Kanker, for Rs. 47,500/-. The purchase price was payable in 4 instalments. Rs. 11,875/-were payable at once and were so paid. The other instalments-2nd of Rs. 11,875/-, 3rd and 4th of Rs. 11,875/- each were due on 1-11-1962, 1-2-1963 and 1-4-1963. Admittedly, beyond paying the 1st instalment, the plaintiff paid no other instalments, despite repeated notices.

3. Having paid the first instalment, furnished the requisite coupe boundary certificate and having executed the contract deed, the plaintiff obtained possession of the contract area. The usual contract in writing. Ex. D-3, embodying the terms was executed between the parties. The contract provided, by Clause (1), for sale of the forest produce described Sn the First Schedule, i. e. bamboos, on the conditions set forth therein. By Clause 2, the period of contract was to expire on 30-6-1963. Clause 4 provided for payment of the consideration in four instalments on the specified dates. By Clause 6, the contract was made subject to the Forest Contract Rules which were to be deemed to be part of the contract.

4. On 25-11-1962, the plaintiff having defaulted in payment of the 2nd instalment which was due on 1-11-1962, was served with the Divisional Forest Officer's notice dated 17-12-1962 (Ex. P-1) requiring him to pay the amount of Rs. 11,875/- which had by then fallen due, and drawing his attention to Rule 29 of the Forest Contract Rules. It further stated that in the event payment was not made by 31-12-1962. further extraction would be stopped and steps would be taken to terminate the contract. The plaintiff did not comply with the notice of demand on one pretext or another, and stopped the working from the 1st Section on 9-1-1963. He represented to the Divisional Forest Officer that due to lack of sufficient time between the issue of the work order and the date for payment of the 2nd instalment, he could not extract sufficient material from the 1st Section and was, therefore, not in possession of sufficient funds to pay the 2nd instalment. He contended that he was entitled to pay the 2nd instalment from out of the proceeds of the forest produce extracted from the 1st Section. In the meanwhile, the 3rd instalment fell due on 1-2-1963. So, on 17-2-1963, the Conservator issued another notice (Ex. P-2) on terms similar to the earlier, requiring payment of 2nd, 3rd instalments of Rs. 11,875/-, i.e., Rs. 23,750/- in all, by 25-2-1963, failing which the contract was to be terminated. The plaintiff again did not comply with this notice. Eventually, by the Conservator of Forest's Order No. 39, dt. 27-24963 (Ex. P-3) the Contract was terminated under Rule 29 of the Forest Contract Rules, with the following directions-

(1) The 1st instalment of Rupees 11,8757- and 10 per cent S. D. Rs. 4,750/-already paid by the contractor shall be retained with the Forest Department for adjustment towards consideration or part consideration of the contract.

(2) To recover as arrears of land revenue the 2nd and 3rd instalments of Rs. 23,750.00 S. D. = 19,000/- (Nineteen thousand) which have already fallen due but not paid on this date of termination of the contract.

(3) To resell by public auction the balance produce of the coupe A Waller B. F.S. (felled and standing) and retain by the Forest Department all the sale price that would be obtained by such resale and to recover as arrears of land revenue the amount by which price secured on such resale falls short of that part of the consideration which would have so fallen due. Steps were then taken by Divisional Forest Officer to reauction the contract under Rule 29 of the Forest Contract Rules. By notice dated 29-3-1963 (Exhibit D-5), the reauction was fixed between 22/24-4-1963, on the terms and conditions set forth therein. Condition No. 8 provided that the contract shall expire on 30-6-1963. At the commencement of the reauction. the Divisional Forest Officer fixed the upset price at Rs. 35,625/-. The bid list dated 22-4-1963 (Ex. D-6) shows that there was no bid offered.

5. On 23-2-1966, the plaintiff commenced the present action alleging that there were 2,50,000 bamboos in the 1st Section, that he had extracted 35.000 bamboos and had left 90,000 cut bamboos and the remaining were left uncut in the 2nd when there was stoppage of working ordered by the Divisional Forest Officer on 9-1-1963, that under the terms of Rule 8 of the Forest Contract, the value of 35,000 bamboos extracted by him did not exceed Rs. 11,875/- which he had paid towards the 1st instalment and, therefore, the Divisional Forest Officer had no authority under Rule 8 to direct a stoppage of working, and that he was under the contract entitled to remove 2,50,000 bamboos from the 1st Section as he had paid the price thereof, and to pay the 2nd instalment from out of the proceeds of the forest produce extracted from the 1st Section. He claimed that the State Government was in breach of the contract by reason of the illegal stoppage of working and, therefore, liable to pay Rs. 25,975/- as damages and was not entitled to recover Rupees 35,625/- due towards the balance of the auction price.

6. The State Government contested the plaintiff's claim and pleaded that the plaintiff was in breach and therefore, not entitled to any damages. Further, they pleaded that under the terms of Rule 29 of the Forest Contract Rules, which forms a Part of the contract between the parties, the State Government was entitled to recover the 2nd, 3rd and 4th instalments as arrears of land revenue. As regards re-auction, they pleaded that no bidders were forthcoming and, therefore, nothing could be realised towards the price of the auction money.

7. The learned trial Judge has found that the contract was binding on the plaintiff and that he was responsible for the breach of it, he having committed a default in payment of the 2nd and 3rd instalments and, therefore, the State Government was within their right in terminating the contract under Rule 29 of the Forest Contract Rules. The rinding that the plaintiff was in breach has not been assailed before us. On that finding, the learned trial Judge dismissed the plaintiff's claim to the extent of Rupees 2l,225/-. The cross-objection is directed against the dismissal of this part of the claim. The plaintiff wilfully committed a breach of the contract by not paying the 2nd and 3rd instalments. The payment of the price was an essential term of the contract. No attempt was made before us to suggest that the plaintiff was not bound under the terms of the contract to withhold payment. The finding of the learned trial Judge that the plaintiff was in breach must, therefore, be confirmed. The cross-objection, therefore, fails.

8. That brings us to the appeal filed by the State Government. In our view, the learned trial Judge is wrong in holding that the State Government was in breach in ordering stoppage of working for non-payment of the 2nd and 3rd instalments and, therefore, was not entitled to take recourse to their powers under Rule 29 of the Forest Contract Rules. Learned counsel for the plaintiff has tried to support the judgment on three grounds. In the first place, he contends that under Rule 8, the Divisional Forest Officer had no authority to direct a stoppage. According to him, the working of the forest was section-wise. Admittedly, the plaintiff had only extracted 35,000 bamboos from the 1st Section. He contends that the value of the bamboos extracted did not exceed Rupees 11,875/-, and under the terms of the contract, the plaintiff was entitled to cut and remove 2,50,000 bamboos from, that Section and from out of the sale proceeds pay the 2nd instalment. Secondly, he contends that the Government failed to resell the coupe in terms of conditions Nos. 13 (2), 14 and 15 of the auction conditions at the risk of the plaintiff.

The re-auction fetched a bid of Rs. 30,000/- from Harbansh Singh (P. W. 3). The Divisional Forest Officer was wrong in not accepting that bid. It was the duty of the Government to mitigate the loss, by accepting that bid even though it was below the upset price. Thirdly, he contends that the power under Rule 29 (3) (e) of the Forest Contract Rules should have been exercised within a reasonable time. There was no reason for the Divisional Forest Officer not to have terminated the contract after service of the notice (Ex. P-l) on default of the 2nd instalment. The belated holding of the re-auction on 22/24-4-1963, with the condition that the contract would expire on 20-6-1963, was the reason why no bidders were forthcoming, as it was impossible to work the contract within that time. There is no substance in any of these contentions.

9. There was a fundamental breach of an essential condition by the plaintiff. In a commercial contract of this nature, for the performance of which a definite time has been fixed, and the contract specifies the mode of payment, i. e., specifies the dates on which the instalments of the purchase price are to be paid, time is of the essence of the contract. Rule 7 of the Forest Contract Rules specifically makes time of the essence. It, therefore, follows that payment of the instalments on the due dates, was a condition prerequisite to the performance of the contract, and that the failure of the plaintiff to make such payments relieved the State Government of their obligations. Now, in a case where there are mutual obligations, on the parties, it is on the plaintiff to show that, on the dates fixed for performance of the contract, he was ready and willing to perform his part of the bargain. It was, therefore, incumbent on him to satisfy the Court that he was ready and willing with the money, that he had the capacity to pay, or, at any rate, he had made proper and reasonable arrangements for purchase money and that having thus complied with the requirements of law he had demanded the goods on the due dates from the defendant. Of this, there is no evidence.

10. There is no substance in the contention that the State Government was in breach in ordering a stoppage of working. The plaintiff committed a breach of the contract on 1-11-1962 by not paying the 2nd instalment. The Divisional Forest Officer, therefore, by his notice dated 17-12-1962 (Ex. P-l) drew his attention to Rule 29 (1) of the Forest Contract Rules, and afforded him an opportunity to pay the amount by 25-12-1962, failing which he stated that steps would be taken for termination of the contract. That notice was served on the plaintiff on 25-12-1962. The contention that the notice (Ex. P-l) must be treated as a notice of termination under Rule 29 (1) cannot be accepted. That notice merely asked the plaintiff to show cause why the contract should not be terminated and further recited that in the event of his failing to pay the instalment, steps would be taken to terminate the contract. On a plain reading of the document, it is obvious that it was not a notice to terminate the contract. It merely stated that steps would be taken towards that end, and the first step, namely, an issue of a notice of termination had yet to be taken.

The plaintiff failed to comply with the notice. Apparently, he could not arrange for money to make payment of the 2nd instalment. There is no reason to disbelieve Shri Maheshwar (D. W. 1) that the plaintiff stopped the working on his own on 9-1-1963. In the meanwhile, the 3rd instalment fell due on 1-2-1963. The plaintiff was again in default and the Conservator of Forests was constrained to serve the plaintiff with a notice dated 12-2-1963 under Rule 29 (1) of the Forest Contract Rules (Ex. P-2), terminating the contract w. e. f. 25-2-1963, while affording the plaintiff another opportunity to clear off the 2nd and the 3rd instalments by 25-2-1963. The plaintiff never complied with this notice also and, therefore, he was in the breach. Even if it be assumed that the stoppage of working was in consequence with the Divisional Forest Officer's notice dated 17-12-1962 (Ex. P-l), and that he had no authority to direct a stoppage in terms of Rule 8 and, therefore, the State Government was in breach, that notice was not served on the plaintiff until 25-12-1962. By then, the plaintiff had already committed a breach of the contract on 1-11-1962 when he committed a default in payment of the 2nd instalment. The plaintiff's breach was, therefore, prior in point of time,

11. There is no warrant for the submission that de hors Rule 8, the Divisional Forest Officer had no power to order a stoppage of working. The Divisional Forest Officer's coercive powers are given in Section 83 of the Forest Act. This contemplates two stages (a) the seizure of the forest produce and (b) the sale thereof. When there is power of seizure to secure payment of a defaulted instalment, it logically follows that there is the power to order a stoppage of working. Under Clause 2 of the contract deed (Ex. D-3), the plaintiff's right to fell and remove the forest produce was subject to his observance of the terms and conditions. The failure to pay an instalment is an important breach of the conditions of a forest contract. While it is true that the power given in Rule 8 of the Forest Contract Rules to stop operations is exercisable if the rate of work exceeds. substantially the rate of payment of instalments, but that does not mean that there is no power apart from it. When there was a default in payment of the instalments, the Conservator of Forests was entitled to terminate the contract under Rule 29. Under Rule 29 (2), upon such termination, the plaintiff's ' right under the contract ceased, and all the forest produce remaining within the contract area became the absolute property of the Government.

12. We are not impressed with the submission that the plaintiff having paid the first instalment, he was entitled to fell and remove all the bamboos standing on the 1st Section, irrespective of the fact that in the meanwhile he was in default with the 2nd instalment. Under Rule 21 (1), there is a section-wise working, and the removal of bamboos from any section has to be completed before the removal of bamboos is begun in another section. The Section-wise working of a contract has a two-fold purpose. First, it secures a fair measure of control and thereby prevents illegal felling of the forest and secondly, it paces out the payments. Where a contractor works in a businesslike manner, and does not commit any default in payment of the instalments when they fell due the system works to his benefit. Such a system, however, does not clothe the contractor with any kind of right to work only one section, leaving the other sections untouched. That would defeat the very object of the contract area being divided into sections. Otherwise, the contractor when he finds that he has made a bad bargain would try to reduce his loss by not working the other sections and by withholding the payment of the subsequent instalments.

13. The contention that it was obligatory for the State Government to. have resold the contract at the risk of the plaintiff and their only remedy was to recover the deficiency, if any, on such resale as arrears of land revenue cannot be accepted. In the State of M.P. v. Komalchand, First Appeal No. 16 of 1966, D/- 23-7-1970 (Madh iPra) we stated as follows:--

'The learned Judge is of the view that the Government failed to re-sell the coupe in terms of the Conditions Nos. 13(2), 14 and 15 of the auction conditions at the risk of the plaintiff. These conditions were not embodied in the formal deed of indenture, Ex. D-1, executed between the parties setting out the terms of the contract. Conditions 13 (2), 14 and 15, therefore, do not form part of the contract. In State of Madhya Pradesh v. Kaluram, AIR 1967 SC 1105, their Lordships of the. Supreme Court have stated that auction conditions which are not in the form of a contract within the meaning of Article 229(1) of the Constitution are not enforceable against either party After adverting to Rule 29 (1), we stated '

'In terms of Rule 29 (1), the State Government had an 'option in the matter. In the event of a default in the payment of any instalments or breach of the other conditions of the contract, the State Government was not bound to re-sell the contract as envisaged by conditions 13 (2) and 14 of the auction conditions. When the parties have chosen to enter into a contract which is made subject to the Forest Contract Rules, their rights and mutual obligations have to be worked out with advertence to the rules ... ..'

14. The next and the last contention is as regards the re-auction. It is urged that the re-auction fetched a bid of Rs. 30,000/- from Harbansh Singh (P. W. 3) and the Divisional Forest Officer was not right in not accepting that bid. It was the duty of the State Government to mitigate the loss, by accepting that bid even though it was below the up-set price. Alternatively, it is urged, placing reliance on Harichand and Co. v. Gosho Kabushiki Kaisha, ILR 49 Bom 25 = (AIR 1925 Bom 28) that the power under Rule 29 (3) fe) of the Forest Contract Rules should have been exercised within a reasonable time. There was no reason. for the Divisional Forest Officer not to have terminated the contract after service of the notice (Ex. P-1) on default of the 2nd instalment. The belated holding of the re-auction on 22/24-4-1963 with the condition that the contract would expire on 30-6-1963 was the reason why no bidders were forthcoming. The contention is a contradiction in terms. The plaintiff has falsely alleged that Harbansh Singh (P. W. 3) offered a bid for Rs. 30,000/- at the re-auction.

He has tried to substantiate that plea by examining himself, Bootasingh (P. W. 1), Harbansh Singh (P. W. 3) and Champalal (P. W. 4), Their story is that the Divisional Forest Officer refused to accept the bid stating that the up-set price was Rs. 35,625/-. There is nothing to substantiate their allegation that any such bid was offered. Shri Maheshwar, Divisional Forest Officer, (D. W. 1) has categorically denied that any such bid was offered, and the truth of his version is borne out by the bid list (Ex. D-6) which shows that no bidder was forthcoming. Bootasingh (P. W. 1) or Champalal (P.W. 4) did not offer any bid themselves. They say that the bid of Rs. 30,000/- was of offered by Harbansh Singh (P. W. 3). They have, however, admitted that the Intending bidders have to make a deposit in terms of the auction conditions. Harbansh Singh (P. W. 3) has stated that he had deposited Rupees 3/4,000/-, and had to admit that he was given a receipt in respect thereof. No such receipt has been filed to lend assurance to his version. We have, therefore, no hesitation in holding that the re-auction did not fetch any bid.

The decision in ILR 49 Bom 25 = (AIR 1925 Bom 281 (supra) is distinguishable. There, the Court was concerned with a contract for sale of goods, whereas the contract here is for sale of standing bamboos. Besides, there was no unreasonable delay in holding the re-auction. The default in the payment of 3rd instalment was committed on 1-2-1963. The Divisional Forest Officer issued notice of re-auction on 29-3-1963. The plaintiff was given a last chance to clear off the instalments which had then become due. The Divisional Forest Officer was not bound to terminate the contract straightway on default of the 2nd instalment. Even otherwise, the delay in holding the re-auction, if any, would be of no avail to the plaintiff. The power of re-sell under Rule 29 (3) (e) could be exercised only in respect of the 4th instalment which had fallen due after the termination of the contract. The recovery proceedings so far as the 2nd and 3rd instalments were not affected thereby (sic). When the plaintiff was in breach, the defendant had an option either to treat the contract as terminated and to proceed under Rule 29 (2) or to treat the contract as still subsisting with a view to realise the balance of the price under Section 82 of the Forest Act. See : First Appeal No. 16 of 1966, D/- 23-7-1970 (Madh Pra) and State of M.P. v. Sardar Mohan Singh. In that view, the finding of the learned trial Judge that the State Government was not entitled to recover Rs. 35,625/- for having failed to re-sell the contract must be set aside. His view that the fixation of up-set price at Rs. 35,625/- implied that the Government is deemed to have auctioned the remaining forest for that price and, therefore, the plaintiff is deemed to have paid the arrears of the 2nd, 3rd and the 4th instalments amounting to Rs. 35,625/- by re-sell, is wholly unfounded. That is not the meaning of 'up-set price' in an auction; The fixation of the up-set price only indicates the minimum value and nothing more. Shri Maheshwar, Divisional Forest Officer, (D. W; 1) has stated that the up-set price was fixed at Rs. 35,625/- which was the amount due under the 2nd, 3rd and 4th instalments. The re-auction, having fetched no bid, there was no question of the plaintiff being entitled to an adjustment of that amount.

15. We accordingly allow the appeal of the State Government and, dismiss the plaintiff's suit. The cross-objection accordingly fails and is dismissed. In the circumstances of the case, we direct that the parties will bear their own costs throughout as incurred.


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