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Babulal Vs. the State Rajasthan and anr. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtRajasthan High Court
Decided On
Case NumberS.B. Civil Writ Petition Nos. 916, 917, 918, 919, 921, 922, 923 and 1037 of 1979
Judge
Reported in1980WLN(UC)562
AppellantBabulal
RespondentThe State Rajasthan and anr.
DispositionPetition allowed
Cases ReferredBabulal v. State of Rajasthan and Ors.
Excerpt:
.....officer forfeiting security deposit and gum of petitioner without notice--dispute not referred to chief conservator bf forests for arbitration--held, it is a police action and cannot be protected in garb of contractual action & a citizen is entitled to protection by invoking jurisdiction under article 226.;where the impugned actions of the state or its officer can hot even prima facie be brought within the operation of the contractual field and these actions in fact amount to a police action, then surely a remedy by way of a writ is available to the aggrieved party. a citizen has to be protected from the unauthorised use of police powers of the state. he can not be deprived of his just relief merely because the state wants to shield its actions under the false garb bf a contractual..........or indirectly connected with the agreement, then all such questions have to be submitted to the chief conservator of forest and his decision is final. the non-petitioners did net adopt this course and did not refer any question in dispute between the parties to the chief conservator of forest. in absence, thereof non-petitioner no. 2 was not entitled to pass police orders in the nature of the impugned orders exs. 1 and 2 my attention was drawn in this respect to chief conservator of forests and ors. v. ratan singh hans : air1967sc166 .on behalf the respondent it was urged before the high court, as also before this court, that where a dispute arose between the divisional forest officer and the contractor, whether the contractor his servants or agents had caused damage in a reserved.....
Judgment:

S.N. Deedwania, J.

1. These eight writ petitions under Article 226 at the Constitution raise common questions of law and, therefore, it will be convenient to dispose them by this order.

2. The relevant facts as stated in S.B. Civil Writ Petition No. 916 of 1979 are these. Petitioner Babulal took Kyari Forests on contract for extracting gum during the working seasons 1975-76 and 1976-77. For some alleged breach of contract, the security deposit and gum of the petitioner have been forfeited, the non-petitioners are about to auction the gum. The impugned order is contained in Ex. 1 dated May 24, 1979. Before passing this order, no notice whatsoever was issued to the petitioner to give him an opportunity to explain the dispute. Non-Petitioner No. 2 Divisional Forest Officer, Udaipur passed further order on 8-6-79 (Ex. 2) imposing a heavy penalty and directed forteiture of the security and auction of the gum toward relization of the penalty. These actions of non-petitioner No. 2 are illegal, unauthorised and without any jurisdiction Three years after the contract, had been performed, the security amount and the gum of the petitioner could not have been forfeited. Both the orders Exs. 1 and 2 are bad being in violation and breach the principles of natural justice. Under the provisions of the Rajasthan Forests Act, the non-petitioner No. 2 was not empowered to pass such orders. The petitioner was given a contract for collecting gum and all sorts of resins were included in the same and there is no distinction so far as salar gum and other gum is concerned. Therefore, the petitioner did not commit breach of any terms of the contract. The alleged irregularity was also not committed by him. Non-petitioner No. 2 had arrived at his finding regarding the breach of contract without any evidence and also he had no jurisdiction under the terms of contract to arrive at such a finding. The non-petitioners in their reply averred that non-petitioner No. 2 has not passed impugned orders under any law but under the terms of the contract. Blazing of salar trees was against the agreement signed by the contractor petitioner. He could not blaze the salar trees under clause 25(b) of the agreement. There is no question of any arbitrary decision as non-petitioner No. 2. has acted according to the terms of the agreement. Anx R/1 the agreement between the parties is very explicit. In short the defence appeared to be that non-petitioner No. 2 was taking action under the terms of the agreement, Anx. R/1 and, therefore, the writ petition filed by the petitioner is not maintainable. The facts in other writ petitions are more or less similar except that they relate to different periods of contract and different areas of the forest and also punitive action taken is different, inasmuch as, the weight of gum seized, the amount of security deposit forfeited and the penalty imposed are varying. One additional factor may be noticed in the writ petition of Mahavir Prasad v. State of Rajasthan and Anr. S.B. Civil Writ Petition No. 1037 of 1979 that a show cause notice was given to the petitioner and he justified his action of extracting the gum even from the salar trees. The impugned orders in this writ petition are Ex. 2 and 3, which relate only to imposition of the penalties. In writ petition No. 923 of 1979 the petitioner was required to pay a sum of Rs. 23061/- towards the penalty.

3. I have heard the learned Counsel for the parties and perused the record of the case carefully.

4. Before considering the preliminary objection taken by the learned Counsel for the non-petitioners, I would like to focus the controversy between the parties, which crystalised during the course of the arguments. Learned Counsel for the petitioner argued that no doubt, under term 31 of the contract, the Divisional Forest Officer has the right to forfeit some part of the earnest money and may also determine the' damages for injury caused to the forest and till the contractor deposits such damages, he is not entitled to take away the forest produce, It is also specific under term 4 of the agreement that the contractor is not entitled to remove any forest produce except that for which he has been granted a contract. The dispute between the parties is whether the petitioner could collect gun from all trees or only from Kadaya (Sterenlia) trees. However all these powers are subject to term 35 of the agreement, wherein, if there is a dispute between the parties about the interpretation of any of the terms of the agreement or on any question which is directly or indirectly connected with the agreement, then all such questions have to be submitted to the Chief Conservator of Forest and his decision is final. The non-petitioners did net adopt this course and did not refer any question in dispute between the parties to the Chief Conservator of Forest. In absence, thereof non-petitioner No. 2 was not entitled to pass police orders in the nature of the impugned orders Exs. 1 and 2 My attention was drawn in this respect to Chief Conservator of Forests and Ors. v. Ratan Singh Hans : AIR1967SC166 .

On behalf the respondent it was urged before the High Court, as also before this Court, that where a dispute arose between the Divisional Forest Officer and the contractor, whether the contractor his servants or agents had caused damage in a reserved forest, the question could be decided in the manner appointed in CI. 9 of the contract alone i. e. by arbitration of the officer denominated, and not by the Divisional Forest Officer. In dealing with the validity of the order imposing penalty upon the contractor, the High Court upheld that argument. Rule 15 in the first instance declares that the forest contractor shall be responsible for any damage done either by himself, or his servants or agents it then proceeds to state that compensation shall be assessed by the Divisional Forest Officer whose decision shall be deemed to be that of an arbitrator, subject to an appeal to the Conservator of Forests. The rule does hot confer upon the Divisional Forest Officer authority to, determine, when a dispute is raised, whether damages has been caused in a reserved forest by the contractor, his agents or his servants. The rule only declares that for damage that may be done, by the contractor, his servants or agents, in the forest, the contractor shall be liable; the rule also invests the Divisional Forest Officer with, authority to determine the amount of compensation payable by the contractor, but not to determine whether the contractor, his servants or his agents have committed breach; of the contract. Clause 9 of the contract confers authority upon the Chief Conservator of Forests to adjudicate upon disputes, inter alia, as to the performance or breach of the contract. By CI. 1 read with the Schedule to the contract 'the contractor had to fell or uproot trees marked with a geru band or to fell these oh coupes and Section lines which bear a marking banner impression on the stup buttonds and all Karra over 9 at P.R. whether marked or not. It was the case of the Divisional Forest Officer that the contractor had, contrary, to the terms of the contract, cut trees not market with the geru band. Plainly, the Divisional Forest Officer that the contractor had committed a breach of the terms of the contract, and when the contractor denied the breach, a dispute arose between the parties as to the performance or breach of, the terms of the contract and it had to be referred to the Chief Conservator of Forests. It is corceded, and in our judgment Counsel is right in so conceding, that the expression 'shall be referred to' means 'shall be referred to the Officer, demominated as an arbitrator to decide the dispute.'

It was urged however, that by virtue of CI. 6 of the contract, the Forest Contract Rules were made part of the contract, and the Divisional Forest Officer was invested with authority not only to determine the amount of compensation which may be payable by the contractor for damage done in a reserved forest, but also to determine whether the Contractor .or his agents or servants had been responsible for causing the damage. This, for reasons already stated, we are unable to accept.

It was then urged that in any event a decision was in fact given by the Chief Conservator of Forest in this case, and that decision complied with the requirements of CI. 9 of the contract. But as already stated, the Divisional Forest Officer passed on order holding the respondent liable to pay compensation for damage done in a reserved forest and assessing the compensation at Rs 8500/- and penalty at Rs. 500/-. That order was confirmed in appeal by the Conservator of Forests, and in exercise of his revisional jurisdiction' the Chief Conservator of Forests upheld the order of conservator of Forests'. The Chief Conservator of Forests did not purport to act as an arbitrator, he recorded no evidence, and expressly held that the Divisional Forest Officer was not obliged to refer the case for arbitration under CI. 9 of the Contract. The trial was not of a proceeding in arbitration, but of a proceeding in exercise of supervisory or revisional jurisdiction. If in truth the dispute had to be referred for adjudication to the Chief Conservator of Forests, his decision that he found no reason to interfere with the 'finding of the Divisional Forest Officer' who was one of the parties to the dispute, Cannot conceivably be regarded as an award between two contesting parties. It must therefore be held that the order passed by the Divisional Forest Officer imposing liability for compensation for damage done by illegal fellings cannot be sustained.

The second part of the order imposing penalty under Rule 30(1) also suffers from the same infirmity. It is true that under the rule the Divisional Forest Officer had power to impose penalty in a sum not exceeding Rs. 500. But exercise of that power is conditioned by the existence of a breach by the forest contractor of any of the terms of the contract. Where a dispute arises whether there has been a breach of any of the terms of the contract, it is for reasons already stated, to be determined by the Chief Conservator of Forests. That has admittedly not been done. The order imposing penalty under Rule 30(1) must also be set aside.

It may be observed that the terms of the agreement between the parties in the aforesaid case were akin to the terms entered into by the parties in these petitions. I have purposely quoted in extenso from the aforesaid authority to show that the controversy before the Supreme Court and before me is similar.

5. This Court held as follows in S.B. Civil Writ Petition No. 319 of 1968 Abdeh Ali v. Rajasthan State and Ors., decided on 21st September, 1970.

This provision of the law gives a right to a party who feels aggrieved by the breach of the contract to receive from the party who has broken the contract reasonable compensation, but that compensation shall not exceed the amount so named, or, as to the case may be, the penalty stipulated therefore. The reasonable compensation that can be claimed by the aggrieved party cannot be determined by himself. He shall have to go to the court of law to get that reasonable compensation determined even though no actual damage or loss is proved to have been caused by such a breach of contract. The only benefit that can be drawn by the stipulation in the terms of contract for getting penalty in case of any breach of the terms of contract is that the party who complains about the breach of contract can get reasonable compensation from the person who is guilty of the breach of such contract even though the aggrieved party has not actually suffered any such damages or sustained any such loss by such a breach and that reasonable compensation into case can exceed the amount specified in the contract or the penalty stipulated therefore. If the Government felt aggrieved by the breach of the terms of the contract by the petitioner for manufacturing 28 Handis of Katha in excess of the quantity of the Katha fixed, under the contract, then the remedy that was open to it was to get first of all the quantum of penalty fixed by the Chief Conservator of Forests under clause 12 of the agreement and then to sue the petitioner for reasonable compensation in the court of law for breach of there contract in the light of the penalty fixed by the Chief Conservator of Forests. It is not open to the Government to act like a court.We cannot forget that the rights of the parties in this case had arisen purely out of contract and not under any statute empowering the Government to impose penalty and realise the same by resorting to its police power and therefore, the only course open to the Government was to take recourse to the remedy available to it under the provisions of the law, i.e., the Contract Act. 1

This decision was upheld by the Division Bench of this Court in D B. Special Appeal No. 308 of 1970 The State of Rajasthan and Ors. v. Abdeh Ali and it was observed:

The Divisional Forest Officer pas-ported to act under clause 41 of the agreement. The agreement no doubt empowers him to determine the amount of compensation for any damage caused by any contractor. This, he could do only if there was no controversy on the question of the breach of the Contract and the causing Of any damage. As in the present case the contractor denied the breach of contract as also causing any damage to the State property, the Divisional Forest Officer was not competent to determine the amount of compensation on the principle laid down by the Supreme Court in Chief Conservator of Forest, Rewa and Ors. v. Ratansingh Hans (1).

So far as the Government order is concerned it is wholly Unsupportable by the terms of the contract. Even Mr. Rajnarain made no attempt to support the judgment of the Government.

Mr. Raj Narain, however, vehemently contended that the Chief Conservator of Forest is competent to act as an arbitrator under clause 46 of the agreement and that the present order of the Chief Conservator of Forest should be maintained with help of clause 46. In this connection, Mr. Raj Narain also invited Our attention to some observations male by the learned Single Judge which according to him, meant that the State could only get compensation 'determined by a court and cannot have recourse to the remedy available under clause 46 of the agreement. We are unable to maintain the order of the Chief Conservator of Forest oh the basis of the powers that should be exercised by the Chief Conservator of Forest as an arbitrator under clause 46. He never was called upon to arbitrate nor did, he act as an arbitrator. In this connection we considered the observations of the learned Single Judge and are of the opinion that the learned Single Judge did not have the occasion to consider the effect of clause 46 and his judgment cannot be construed to lay down that the State Departments only remedy is to have recoup to the court of law. In our opinion, there is nothing to stand in the way of the State Government having recourse to the remedy available to them under clause 46 of the agreement.

In my opinion, the ratio from the aforesaid two authorities that emerges is that the Divisional Forest Officer could only proceed after the dispute has been referred to the Chief Conservator of Forests for arbitration, as there was a dispute between the parties as to the interpretation of the terms of the contract. No doubt, under term 34 of the contract, the Divisional Forest Officer could have taken action in case, there has been no dispute between the parties as to the interpretation of the terms of the contract. Further more, as observed in D.B. Special Appeal No. 308 of 1970 (supra) it was for the Chief Conservator of Forest to determine the compensation for damages, if any caused by the petitioner to the forest area.

6. It is argued by the learned Counsel for the petitioner that in such circumstances, as held by the teamed Single Judge in the case of Abdeh Ali (supra), non-petitioner No. 2 has passed the impugned orders not within the four corners of the agreement. Thereafter, the action of non-petitioners No. 2 in proceeding to realise the penalty by restoring to his police powers is not justified.

7. It could not be argued on behalf of the learned Counsel for the non-petitioners that non-petitioner No. 2 could pass the impugned orders under the terms of the contract or the agreement without making a reference to the Chief Conservator. The point for determination that arises before me is that whether in such circumstaaces, a writ lies to this Court or is not maintainable because the dispute between the parties is purely contractual.

8. Learned Counsel for the respondent vehemently argued that the controversy between the parties is purely contractual and, therefore, no writ lay to this Court and relied upon the observations made in Radhakrishna Agarwal and Ors. v. State of Bihar : [1977]3SCR249 . I have perused this authority carefully. The law has been thus declared in this authority :

The Patna High Court had, very rightly, divided the types of cases in which breaches of alleged obligation by the State or its agents can be set up into three types. These were stated as follows :

(i) Where a petitioner makes a grievance of breach of promise on the part of the State in cases where an assurance or promise made by the State he has acted to his prejudice and predicament, but the agreement is short of a contract within the meaning of Article 229 of the Constitution.

(ii) Where the contract entered into between the person aggrieved and the State is in exercise of a statutory power under certain Act or Rules framed thereunder and the petitioner alleges a breach on the part of the State; and

(iii) Where the contract entered into between the State and the person aggrieved is non-statutory and purely contractual and the rights and liabilities of the parties are governed by the terms of the contract and the petitioner complains about breach of such contract by the State.

It is then, very rightly, held that the cases naw before us should be placed in the third category where questions of pure alleged breaches of contract are involved. It held, upon the strength of Umakant Saran v. State of Bihar, : (1972)IILLJ580SC and Lekhraj Sathram Das v. N.M. Shah, : [1966]1SCR120 and B.K. Sinha v. State of Bihar, : AIR1974Pat230 that no writ or order can issue under Article 226 of the Constitution in such cases 'to compel the authorities to remedy a breach of contract pure and simple.

It is evident that if the case of the petitioner fell in the third category involving the question of alleged breaches of contract, then no order can be issued under Article 226 of the Constitution to compel the authorities to remedy a breach of contract pure and simple. Apparently the dispute between the parties arose out of contractual relation. Before proceeding further, it may be observed that a contract between an ordinary citizen and the State, the State apparently is placed in an advantageous position as it has vast powers at its disposal. It is also well setteld that the State as well as a citizen in matters of contract are equally subjected to the law of contract and the State is also situated like an ordinary litigant and, therefore, normally and ordinarily such dispute between the two contracting parties should be decided by an ordinary Civil Court like in every case between the ordinary litigants, who can not invoke the powers of the High Court under Article 226 of the Constitution. This position is not changed merely because one of the parties happens to be a State. It has to be treated like an ordinary litigant and, therefore, it enjoys no special benefits and privilage or is subjected to special burden and disadvantage.

9. However, the question still remains to be considered in this case is that whether the impugned orders of non-petitioner No. 2 can be traced to any of the powers, which he possesses or derives by virtue of the terms of the agreement, I feel that the answer is in the negative. Non-petitioner No. 2 could have passed orders contained in Ex. 1 Ex. & 2, after the matter has been referred to the Chief Conservator of Forest for arbitration as there was a dispute as to the terms of contract and further the quantum of damages has to be determined by him. Unless such questions and quantum of damages are decided by the Chief Conservator of Forest under term 35 of the agreement, non-petitioner No. 2 could not initiate any action for making the recovery. I am therefore of the view that his action does not derive power or the authority from the agreement. I am aware that when the State or the Officer purports to operate within the contractual field the appropriate remedy is not by way of petition under Article 226 of the Constitution. However, I am of the view that it cannot be said that non-petitioner No. 2 was acting or purporting to act within the contractual field i.e. within the terms contained in agreement Ex. R/1. It appears that this question has not yet been decided by the Supreme Court where the State or its Officer claims or purports to claim to operate within the contractual field but in fact does not do so, whether a remedy by way of writ is available to the aggrieved party. It is a question that has yet to decided. I am also conscious that in the case of Chief Conservator of Forest (supra) and S.B. Civil Writ Petition No. 319 of 1968 (supra) no objection was taken by the respondent that a writ was not maintainable because the dispute between the parties was within the contractual field. I, however, feel that where the impugned actions of the State or its Officer cannot even prima facie be brought within the operation of the contractual field and these actions in fact amount to a police action, then surely a remedy by way of a writ is available to the aggrieved party. A citizen has to be protected from the unauthorised use of police powers of the State. He cannot be deprived of his just relief merely because the State wants to shield its actions under the false garb of a contractual action.

10. Learned Counsel for the non-petitioners also referred to me some more authorities, which however, did not go beyond the dictum of M/s. Raghkrishna's case (supra) and therefore, no useful purpose would be served by referring to them. Learned Counsel for the petitioner also addressed me on various other points, which are not necessary to be considered because of the view, which I propose to take, I will only refer two authorities relied upon by the learned Counsel for the petitioner, which are distinguishable. In Excise Commissioner of U.P. v. Ramkumar : AIR1976SC2237 , the controversy was with regard to the contractual field but it was held that no tax can be imposed by any terms of the contract which the State Government could not impose under any statute. For this reason, the condition incorporated in the licence that if contractor failed to lift the fixed minimum quantity of liquor, he would be liable to pay compensation equal to the amount of the excise duty leviable on the unlifted quantity was held to be illegal and unenforceable. In the case of Joseph Vilangandam v. The Executive Engineer (PWD) : [1978]3SCR514 , the controversy was about the black-listing of the petitioner and this action was held to be illegal on the ground that it has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purpose of gains and, therefore, it could only be done so after the objective satisfaction. Thus, it is evident that none of the aforesaid two authorities directly covert the controversy like the one before me. The nearest case touching the controversy before me appears to be the judgment of our own High Court in D.B. Civil Special Appeal No. 308 of 1970 (supra). I am therefore of the view that non-petitioner No. 1 was not acting or purporting to act within the four corners of any contractual authority, which he derived from the terms of the agreement because he could only intiate the actions like the impugned one after the Chief Conservator of Forest had arbitrated the controversy between the parties under term 35 of the agreement Ex. R/1. The action of non petitioner No. 2 is, therefore, nothing but a police action unwarranted by the terms of the agreement and a citizen has to be protected.

11. I, therefore, accept the writ petitions and quash the impugned orders as follows:

Case No. Exhibits DatedS.B. B.W. No. 916/79 Ex. 1 24-5-79Ex. 2 8-6-79S.B. C.W. No. 917/79 Ex. 1 24-5-79Ex. 2 8-6-79S.B. C.W. No. 918/79 Ex. 1 24-5-79Ex. 2 8-6-79S.B. C.W. No. 919/79 Ex. 1 24-5-79S.B. C.W. No. 921/79 Ex. 1 8-6-79S.B. C.W. No. 922/79 Ex. 1 7-6-79S.B. C.W. No. 923/79 Ex. 1 7-6-79Ex. 2 28-6-79S.B. C.W. No. 1037/79 Ex. 3 13-6-79

12. In S.B. Civil Writ Petition No. 923 of 1979 Babulal v. State of Rajasthan and Ors. some goods of the petitioner were seized and they were released only after he had been coerced to deposit Rs. 23, 061/- with non-petitioner No. 2 towards the penalty. Consequently, relief for the return of Rs. 23, 061/- to the petitioner is also granted to him. The said sum of Rs. 23, 061/- shall be refunded by the non-petitioner No. 2 to the petitioner. No order as to costs is passed in the circumstances of the case.


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