1. This First Appeal has been filed by the State of Orissa against the judgment and decree dated 4th March, 1953 of Sri K. C. Mohapatra, First Additional Subordinate Judge of Cuttack, arising out of a suit brought by the original plaintiff Khan Sabeb Md. Khan for recovery of damages of Rs. 2,09,500/-on the following allegations:
On 25th August, 1946 two Forest contracts were transacted between the parties, that is, the plaintiff and the Government of Orissa -- one executed by the Secretary to the Government for a consideration of Rs. 40,588/- and the other signed by the Divisional Forest Officer, Angul Forest Division, and the Deputy Commissioner of Angul on behalf of the Governor of Orissa for a consideration of Rs. 40,587/-, on the basis of which the Government of Orissa granted to the plaintiff exclusive monopoly rights to pluck, remove and appropriate for sale for profits in due course of trade the entire Kendu leaf crop of all the Government reserved forests, demarcated protected forests and undemarcated protected forests under the control of the Forest Department and all undemarcated protected forests under the control of the Civil Department. Exhibit C is the contract In respect of the undemarcated protected forests under the control ofCvil Department executed by the Deputy Commissioner of Angul and Ex. C/l is the other con-tract in respect of the demarcated protected forests and undemarcated protected forest under the control of the Forest Department, It is to be noted, the contract in respect of the undemarcated protected forests under the control of the Civil Department included also, as asserted by the plaintiff, vil-lage lands along with the lands leased out and in possession of the tenants of Angul. These two leases were to enure from 1st August, 1945 to 31st July, 1948.
2. The plaintiff asserts, under the aforesaidcontracts the Government of Orissa were bound to secure to the plaintiff the full, unrestricted andcomplete exercise and enjoyment of all rights, title, interest and facilities for the utilisation and exploitation of the aforesaid monopoly rights granted under the agreements; the Government of Orissa were also bound to afford full protection from all infringement and unlawful interference by any other person derogatory to the rights of the plaintiff; that the Government committed breach of contract by not affording such protections and the plaintiff could not exercise the monopoly rights to pluck and remove kendu leaves within the limits of the contract areas on account of unlawful collections of the leaves by other persons; that the tenants of the village lands refused to sell Kendu leaves grown on the tenanted lands and the Government also failed to fix reasonable prices in accordance with the terms of the agreements; that unauthorised collections in a very large scale were made by third parties not only from the tenanted lands but also from the forest areas; that the Government also had cancelled the contract of the Forest Department on 8th July, 1947 on account of which also there was interference with the rights of the plaintiff in collecting the Kendu leaves by third parties.
The plaintiff, therefore, suffered considerable damage which he estimated at 7300 bags, the value of which being Rs. 1,09,500/- in respect of agreement relating to the Forest Department and 12000 bags the value of which being Rs. 1,80,000/- in respect of the agreement relating to the Civil Department -- the total claim being Rs. 2,09,500/-after relinquishing the amount of Rs. 80,000/- as detailed in paragraph 6 of the plaint, the valuation being based on the estimated profit of Rs. 15/-per bag.
3. The defence, on the contrary, is to the effect that the village lands in possession of the tenants on the basis of the Kabuliyats were never the subject-matter of the leases granted and the tenants were not bound in law to sell the leaves to the plaintiff and Government could not compel the tenants to do so; that the Government under the terms of the contracts could only intervene for fixation of reasonable prices if the tenants were willing to sell to the plaintiff; that the plaintiff was fully aware of the position and was served with a copy of the Forest Rules which, according to the terms of the agreement, formed a part of the two contracts; that under the terms of the two contracts the Government had never given an undertaking to prevent unlawful interference by third parties; that the defendant had given all facilities for workingout the monopoly leases in favour of the plaintiff; that the Government had never allowed any third party to interfere with the exercise of the plaintiff's rights and as such the plaintiff has no cause of action for the present suit for damages.
The Government further asserted that there was no breach of any terms of the contracts on their part, that on the contrary the plaintiff after making payments in respect of two instalments only stopped payments and as such under the aforesaid Rules the Government took steps for cancellation of the two leases; that the lease in respect of the Forest Department was cancelled on 8th July, 1947 and the other a few days before the expiry of the term, that is, on 20th July, 1948; that the quantum of damages also was high and excessive. It is to be noted, the balance of the consideration was realised by issuing certificates against the plaintiff after remission to the extent of Rs. 9,010/-.
4. On the aforesaid pleadings the following issues were framed :
1. Is the suit maintainable?
2. Has the plaintiff any cause of action to bring this suit?
3. Is the suit barred by limitation?
4. Is the plaintiff entitled to any compensation from the defendant?
5. Is there any breach of the contract on the part of the defendant?
6. What relief, if any, is the plaintiff entitled to?
Of which issues 4 and 5 are the main relevantissues.
5. The learned trial Court found that tenanted lands were included in the contract entered into by the Deputy Commissioner of Angul representing the Government of Orissa. Quite a number of godowns had been established in the area also. The villagers plucked Kendu leaves from the trees standing on their tenanted lands and refused to sell the leaves to the plaintiff and sold the same to others. The plaintiff had brought this to the notice of the Government and also the plaintiff had brought to the notice of the Government that smuggling was going on in the area; but no effective measures were taken for checking smuggling.
It has also been found by the trial Court thatthe authorities, even of the lowest rank, were of the opinion that the tenants were not bound to sell the leaves plucked and collected from the Kendu trees standing on their tenanted lands to the plaintiff. He has not accepted the estimated value as claimed in the plaint; but nevertheless he having. found that the monopoly contracts were impossible of performance the plaintiff was entitled to the benefit of Section 56 of the Indian Contract Act (hereinafter called the Act) and further as the agreements were discovered to be void the plaintiff was also entitled to the benefit of Section 65 of the Act
The trial Court having found that there has been a failure of warranty of title on the part of the Government, the suit was decreed for a sum of Rs. 18,006/-. So the State of Orissa has filed the appeal against the decree. The plaintiff-respondent has filed a cross-appeal for an amount of Rs. 86,994/- having substantially reduced his claim.
6. It would be more convenient to place the points on the basis of which the plaintiff claims to be entitled to damages as advanced by Mr. G. K. Misra, appearing on behalf of the plaintiff-respondent, in order to appreciate the points of controversy between the parties and whether the plaintiff-respondent is at all entitled to any damages. Mr. Misra strongly argues that the Kabuliyat granted to the tenants in the village formed a part of the contract on the basis of which the plaintiff was allowed monopoly rights for plucking, collecting and removing the Kendu leaves from out of the contract area. He asserts, this inclusion was on the basis of mutual mistake of fact; but at the same time he asserts that the position is notorious that the Government had no right to grant any lease in respect of the tenanted lands in the occupation of the tenants and the tenants could by no laws be compelled to sell the Kendu leaves to the plaintiff and the plaintiff alone.
It is argued by Mr. Misra that both the agreements formed one single and individual transaction or contract and on account of this mutual mistake of fact both the contracts, forming as one, are vitiated and rendered void under Section 20 of the Act. The inclusion of tenanted lands in the contract was an integral and essential part of it. It is on account of this inclusion that the entire contract of monopoly leases was made impossible of performance. Taking advantage of this position that the tenants are not compelled to sell the Kendu leaves to the plaintiff alone, various merchants established their godowns and collected Kendu leaves which facilitated the process of smuggling from out of the non-tenanted lands also. Mr. Misra has placed great reliance on the provisions of Sections 56 and 65 of the Act in order to make his claim for refund of the considerations paid.
7. The first and foremost point of controversy is whether the Taila lands, the Kabuliyat lands, that is to say, the lands in the occupation of the tenants from out of which they could pluck, gather and sell away the leaves from the Kendu trees standing in the contract area, were the subject matter of the contract. It is to be mentioned, these lands are included within the village lands and they are within the demarcated and undemarcated forest areas under the administration of the Civil Department and not under the administration of the Forest Department. We will now refer to the terms of Ex. C. the contract in respect of areas under the administration of the Civil Department. It may be mentioned, the terms of Ex. C/I also are almost identical. The first paragraph of the lease runs as follows :
'The forest produce sold and purchased under this agreement, hereinafter referred to as the said forest produce, is specified in Schedule I below, and is situated in the area indicated in Schedule V, herein-after referred to.'
Schedule I runs thus:
'The forest produce sold and purchased under this agreement consists of monopoly lease of Kendu leaves from the Government undemarcated protected forests under the control of the Civil Department as well as all village lands in the Angul Sub-Division.'
The contract area is dealt with in Schedule V which provides that the contract area is all Government undemarcated forests under the control of the Civil Department as well as all village lands in the Angul Sub-Division. Area is about 386 sq, miles. Indeed by reference to Schedule I and Schedule V we get, the village lands are included within the contract area. The term 'village lands' standing by itself, does not include the tenanted Kabuliyat lands in tike occupation of the tenants. There may be waste lands and other kinds of land situate within the village area but not in occupation of the tenants on the basis of the leases or kabuliyats etc.
Both parties had argued at length by reference to Clause (e) of Schedule IV of Ex. C which runs thus :
'The purchaser shall buy at reasonable prices all Kendu leaves collected by the local tenants and residents of Angul Government Estates from their leased or kabuliyat lands, and to avoid disputes may have a rate fixed in consultation and with approval of the forest officer and Sub-divisional Officer of Angul.'
The pertinent question to be determined is whether the parties intended to include the village lands in the monopoly lease. This has got to be adjudged from one significant and important background which is admitted by the learned Advocate appearing for both parties. It is too notorious the position known to all concerned in the locality that the tenants are entitled, as a matter of law, to pluck, gather and sell the leaves of the Kendu trees standing on their tenanted lands whomsoever they please. There is no law by which the Government or the lessee can compel the tenants to sell the leaves of such trees standing on their tenanted lands to the lessee alone.
It is also clear from the evidence of the plaintiff himself (P.W. 12) that he was the sole lessee for plucking, gathering and removing the Kendu leaves from out of the area in Angul Sub-Division. Those leases are Exs. 36 and 37. They were executed in 1942 and were to enure till the end of August 1945. Indeed they do not cover the tenanted lands. This is significant to indicate that the lessee was not unacquainted with the affairs of the locality. There are innumerable documents on record which indicate that even the Government officers of the lower rank were aware of the position that there is no law by which the Govt. can compel the tenants to sell Kendu leaves from out of their tenanted lands to the lessee. The lessee entered into transactions of this nature in the year 1945 agreeing to pay heavy amounts as consideration.
It is impossible, therefore, to accept that the parties wanted to include within the area covered by the lease the tenanted lands in respect of which the tenants are not bound in law to sell the leaves to the lessee and the Government cannot compel them to do so. Clause (e) can mean only this that the Government undertook to exert the influence of the Sub-Divisional Officer of Angul. who was acquainted with the affairs of the locality, in the matter of fixation of reasonable rates of the Kendu leaves. They had no further obligation in the matter and the lessee wag perfectly at liberty, according to the terms of the agreement, to use his own persuasion and influence for purchasing the Kendu leaves of the tenanted lands from the tenants who were indeed free to sell the same to the lessee.
8. Mr. Misra argues, on the assumption that) these lands were included within the contract area, that the inclusion was based upon purely a mistaken fact and as such he relies upon the provisions of Section 20 of the Act where it is provided that such an. agreement is void. This part of the argument of Mr. Misra can be excluded from consideration on the ground that a mistake of fact must be specifically pleaded. Within the four corners of the plaint, it is nowhere stated that the inclusion of such a clause was on account of mistake of fact and that the mistake was a mutual mistake of both parties. But that apart, we are definitely of the view that the case cannot come under mistake of fact which vitiates the contract as being void. Even accepting the argument of Mr. Misra that contract area includes the tenanted lands, it involves only a mistake of law as contemplated under Section 21 of the Act which would not render the contract void.
If at all the parties were under a misconception as to the position whether the tenants can be compelled to sell the Kendu leaves from out of the tenanted lands, it is a mistake of law as to the rights of the tenants in respect of the tenanted lands in the locality, and manifestly it cannot be taken to be a case of any mistake as to any position of fact non-existent or existent. As I have indicated above when the position as to the rights of the tenants in respect of such area is too notorious and is well known even to the subordinate officers, who are not persons of the locality, it cannot be said that either party to the lease was under a misconception as to the rights of the tenants in respect of these lands far less that there was any common or mutual mistake as to such rights -- whether it is a question of law or fact.
9. Mr. Misra next relies upon the provisions of Section 56 of the Act in support of his argument that this monopoly agreement was impossible of performance and as such is void. Section 56 contains two clauses: (1) an agreement to do an act impossible in itself is void, and (ii) a contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. That is to say, it contemplates two varieties of cases --whether the contract was impossible of performance from the very beginning or it becomes impossible on account of subsequent supervening circumstances coming into existence. Indeed the contracts contemplated under Section 56 are not merely contracts which are physically impossible to be performed.
But it is to be made clear also that contracts which are merely difficult of performance are not contemplated under Section 56 but only those contracts the performance of which may not be literally impossible but is impracticable from the point of view of the object and purpose which the parties had in view; and if an untoward event or change of circumstances totally upsets the very foundation upon which the parties rested their bargain, it isin such a case that the promisor finds it impossible to do the act which he promised to do. The best authority on the point is the decision of their Lordships of the Supreme Court reported in the case of Satyabrata v. Mugneeram, AIR 1954 SG 44. His Lordships B. K. Mukherjea, J. of the Supreme Court, having made a thorough discussion of the English principles underlying frustration of contract and the provisions of the Indian statute on the subject, laid down:
'The relief is given by the Court on tile ground of subsequent impossibility when if finds that the whole purpose or basis of a contract was frustrated by the intrusion or concurrence of an unexpected event or change of circumstances which was beyond what was contemplated by the parties at the time when they entered into the agreement.
XXX X'When such an event or change of circumstance occurs which is so fundamental as to be regarded by law as striking at the root of the contract as a whole, it is the court which can pronounce the contract to be frustrated and at an end. The Court undoubtedly has to examine the contract and the circumstances under which it was made. The belief, knowledge and intention of the parties are evidence, but evidence only on which the court has to form its own conclusion whether the changed circumstances destroyed altogether the basis of the adventure and its underlying object'
In our view, a monopoly contract of this nature cannot be taken to be an agreement to do an act which is impossible in itself from the very beginning; nor can it be said that original lease of monopoly was rendered impossible of performance on account of circumstances as contemplated under Clause (ii). In fact, it is clear there were no supervening circumstances pleaded by the plaintiff on account of which the performance was made impossible subsequently. The position as to the tenanted lands was known to both parties from the very beginning and it cannot be said that it was really impossible of performance from its inception. In fact, it is the plaintiffs version that the leases were worked out for the year 1946 and a part of 1947. He has not put forth any claim so far as this period in concerned. Nothing is clear either from the pleading or from the evidence by or under what circumstances it became impossible of performance subsequently. The lessee complains of acts of smuggling on account of the position that the tenants could sell Kendu leaves from their lands to third parties. But this is not a feature to make the lease impossible of performance but that only is difficult of performance. Moreover this argument of Mr. Misra is hit by third paragraph of Section 58 which runs as follows:
'When one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.'
As we have indicated, the position is too notorious not only in the locality but it must have been verywell known to the present plaintiff who had experience of the locality during the continuance of his leases in the previous years.
10. The provisions of Section 65 of the Act are next relied upon by Mr. Misra. They are as follows:
'When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it'
Section 65 also contemplates two varieties of cases (0 where, the agreement is void from the inception and is discovered as such subsequently before it matured into a contract; and (ii) when the contract which Is not void ab initio becomes void On account of supervening circumstances. In the present case, there is nothing to indicate that the agreement was discovered to be void subsequently before it matures into a contract or that the contract becomes void on account of the happening of the subsequent events.
11. Mr. Misra also relies upon section 72 of the Act which provides:
'A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it.'
On the basis of this section Mr. Misra argues that the plaintiff is entitled to a refund of the money which has been paid on account of misconception of law. This section appears in Chapter V, the heading of which runs to the effect 'Of certain relations resembling those created by contract'. It contemplates all those cases where money not due is paid by one of the parties who wants return or refund of the same. Indeed, in Section 72 mistake includes mistake of fact or of law. But where there is a contract on the basis of which money is paid, the case will be covered by the provisions of Section 21 of the Act and not by the provisions of Section 72. Under Section 21 if a mistake of law has led to the formation of a contract, the contract is not for that reason voidable and if money is paid under that contract, it cannot be pleaded that that money was paid under mistake of law but it was paid because of a contract valid in law. This is well known if the money had not been paid under that contract, the payment could have been enforced as is the case before us. Their Lordships of the Privy Council in the case of Shib Prasad Singh v. Srish Chandra, AIR 1949 PC 297 have laid down that
'Payment by mistake' in Section 72 must refer to a payment which was not legally due and which could not have been enforced; the 'mistake' is in thinking that the money paid was due when in fact it was not due. There is nothing inconsistent in enacting on the one hand that if parties enter into a contract under mistake of law that contract must stand and is enforceable, but on the other hand if one party acting under mistake of law pays to another money which is not due by contract or otherwise, that money must be repaid.'
These observations make it clear that cases of this nature, as is before us, can in no way be covered by the provisions of Section 72 of the Act. If at all the clauseregarding the Taila lands and Kabuliyat lands was included within the contract area and if it was on, account of mistake of both parties, it was manifestly a mistake of the position of law regarding the rights of the tenants, and as such the contract would be covered by Section 21 of the Act under which the contract is binding and not voidable.
12. The Taila lands or the village lands are included only in the contract by the Civil Department (Ex. C) and not by the Forest Department (Ex. C/1). The arguments referred to in the previous paragraph would only, therefore, refer to Ex. C. To avoid this difficulty Mr. Misra argued that even though there were two separate deeds, they constitute one agreement, one contract and one transaction, they having been executed on the same day, that is, 23rd August 1945 and the consideration for each being almost the same, that is, Rs. 40,588/-in one and Rs. 40,587 in the other. No further argument that this is an integral and essential part of one individual contract and on account of the introduction of this clause the prior contract is void as being rendered impossible of performance.
As such his client is entitled to a refund of the money paid. Mr. Misra argues that there was only one negotiation, the notice for tender was one and the plaintiff also offered one single tender. Apart from negativing his contentions as in the previous paragraphs of our judgment we may also observe that even this plea that both the agreements constitute an individual contract and one transaction is not available to him as this is primarily a question of fact and it was never pleaded. It appears, the two agreements (Exs. C and C/I) cover two distinct and separate areas one being under the administration of Civil Department and the other under the administration of the Forest Department. We need not discuss any further in the matter as in the very first sentence of the plaint the plaintiff opens his case as follows:
'That on 23-8-45 two separate agreements in writing were entered into by the plaintiff of the one part and the Government of Orissa of the other whereby licenses coupled with monopoly grants, as detailed below, were granted by the Government of Orissa to and in favour of the plaintiff for a period' of three years from 1-8-1945 to 31-7-1948, both days inclusive.'
Thereafter the plaintiff describes in full what were the terms in each of the contracts separately etc. The proceedings for cancellation were also taken separately, and as it was admitted, one was cancelled on 1st August 1947 while the plaintiff was working out the other which was also cancelled much later only a few days before the expiry of the term, that is, on 20th July, 1948.
13. Several petitions at different times were also placed before us by Mr. Misra to show that on number of occasions the plaintiff had brought to the notice of the Government that there was smuggling by third parties. This practically is the main cause of action mentioned in the plaint for bringing the present suit and on account of which the plaintiff suffered heavy damages as asserted by him. As is manifest, this is purely on account of the intervention of the third parties and they can be dealt with by the Government in accordance with law inconcrete instances where evidence would be sufficient. There were in fact a few cases of this nature where proceedings were started in accordance with Jaw. But as would appear from Rule 34 of the Forest Rules which served as a part of the contract between the parties, the Government under the terms of the contract, are not liable for any damages whatsoever if suffered by the plaintiff on account of any unlawful interference by third parties.
If the plaintiff suffered damages on account of such illegal interference by third parties, it was only open to him to proceed against the third parties and to bring them to book within the four corners of law. But under the terms of the contract, the Government cannot be held liable for damages of this nature as claimed by the plaintiff. Neither the plaintiff is entitled to the refund of the money paid on the basis of the contract, which is otherwise valid as we have discussed in serveral paragraphs of this judgment. If the Government could have granted any other leases to third parties on the basis of which there was interference, then it could not be taken to be interference by third parties but by the Government themselves. But this is not the case. In these circumstances, we are, therefore, definitely of the view that the plaintiff has simply failed) to establish his case of any liability of Government for damages, nor is the plaintiff entitled to a refund of the consideration paid by him -- a part oi them having been paid voluntarily and the balance realised by proceedings under the Certificate Act.
14. In conclusion, therefore, the plaintiff's suit must fail and is dismissed; the judgment and decree passed by the trial court are set aside; the defendant's appeal is allowed and manifestly therefore the plaintiff's cross-appeal is dismissed. On a careful consideration of all the materials on record and the circumstances transpiring in the case, we are of the opinion that even though the plaintiff has mot been able to make out a case of fixing any liability on the State of Orissa, the plaintiff should not be saddled with costs. It is accordingly ordered that the parties are to bear their own costs throughout.
15. I agree.