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Malik Abdul Ahad Shah Jalil Ahmed Akhtar Vs. State of Jammu and Kashmir and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtJammu and Kashmir High Court
Decided On
Case NumberCivil First Appeal No. 70 of 1977
Judge
ActsJammu and Kashmir Forest Act, 1987 - Section 52B and 52C; ;Jammu and Kashmir Constitution - Section 122; ;Constitution of India - Article 299; ;Contract Act, 1872 - Sections 65 and 70; ;Code of Civil Procedure (CPC) , 1908 - Section 34
AppellantMalik Abdul Ahad Shah Jalil Ahmed Akhtar
RespondentState of Jammu and Kashmir and anr.
Appellant Advocate M.L. Bhat, Adv.
Respondent Advocate A.K. Malik, Adv. General for Respondent No. 1
DispositionAppeal allowed
Cases ReferredPilloo Dhunji Shaw Sidhwa v. Municipal Corporation of
Excerpt:
- .....state of jammu and kashmir on account of compensation for the advantages received by him under the void lease agreement dated 11th april, 1964.....'6-a. section 122 of the state constitution, which corresponds to article 299 of the constitution of india, it is well settled, is mandatory in character. the three requirements of section 122 which a contract has to satisfy are:--(i) it must be in writing;(ii) it must be expressed to be made by the governor; and(iii) it must be executed on behalf of the governor by such person and in such a manner as he may direct or authorise.7. a contract, which does not satisfy all the aforesaid three requirements is clearly unenforceable, and therefore, void, for, clause (h) of section 2 of the contract act defines contract as an agreement enforceable by.....
Judgment:

Kotwal, J.

1. This appeal is directed against an ex parte order of the authority constituted under Section 52-C of the Jammu and Kashmir Forest Act, 1987, hereinafter to be referred to as the Act, certifying a sum of Rs. 20,50,513.00to be recoverable as arrears of land revenue by the State of Jammu and Kashmir, respondent No. 1 herein, from Malik Abdul Ahad Shah, one of the partners in the appellant-firm M/s. Malik Abdul Ahad Shah Jalil Ahmed Rather.

2. The respondent State of Jammu and Kashmir filed a petition under Section 52-B of the Act for a certificate to recover as arrears of land revenue a sum of Rs. 10,81,487.00 on account of principal sum, and a further sum of Rupees 6,52,429.00 by way of interest on account of belated payments of royalty dues against the appellant-firm, which was shown to be represented by its partner Malik Abdul Ahad Shah, the second respondent to the petition. A third respondent, namely, Khawaja Moh'd Ahsan Wani was also added to the petition, who was later on deleted from the array of respondents by the Authority, hereinafter to be referred to as the Forest Authority, by its order dated 14-7-1977, on accepting his plea that he was not a party to the contract of lease, but had merely acted as an attorney of the appellant, adding, that this power of attorney was also later on revoked.

3. The claim in the petition was based upon a lease granted in favour of the appellant in respect of Compartment No. 21 Shopian Range, Pir Panchal Forest Division, for a period of two years viz. 1963 and 1964 on acceptance of the highest bid of Rs. 17,61,991.11 offered by it. Govt. Order No. FST/174/63 of 19615 sanctioning the lease in favour of the appellant was issued 4-12-1963, pursuant to which a deed of contract also came to be executed on 13-5-1964 between the Governor of Jammu and Kashmir and the appellant which was signed on the former's behalf by the Conservator of Forests, Kashmir South Circle, Srinagar. Soon thereafter, work order in favour of the appellant for taking possession of the Compartment and for exploitation of timber from it was also issued by the Conservator of Forests, Kashmir South Circle on 11-4-1964, and the possession of the coupe handed over to the appellant. The volume of timber which could have been extracted out of the coupe, was estimated at 6,70,974 cft. i.e. 6,521 cft. of Kail and 6,64,453 cft. of Fir. In addition to it, the appellant, pursuant to a supplementary marking, was also allowed to exploit timber out of the damaged trees, the cost whereof was estimated at Rupees 2,18,136.88. The appellant not havingbeen able to execute the work within the time initially stipulated, extensions were granted in its favour from time to time up to 15-9-1971, whereafter possession of the coupe was taken back from it. The total timber extracted by the appellant during this period was 7,595 cft. of Kail and 1,83,939 cft. of Fir. In the premises the first respondent worked out his claim in the following manner:

(i)

Original royalty amount -

Rs. 17,61,991.11

(ii)

Amount due on account of supplementary marking -

Rs. 2,16,136.89

(iii)

Interest on account of delayed payment -

Rs. 6,52,429.00

TOTAL:Rs. 26,30,557.00

Less payments actually made -

Rs. 8,96,641'.00

Balance including interest: -

Rs. 17,32,916.00

4. Conceding that the contract of lease between the parties, in view of the law laid down by this court in State of Jammu and Kashmir v. Goodwill Forest Lessees, AIR 1974 J & K 1 (FB) was void ab initio, the 1st respondent laid this claim petition before the Forest Authority.

5. The appellant resisted the aforesaid claim inter alia on the grounds; that the estimate of total 6,70,974 eft. of timber which the appellant was expected to have extracted was found to be incorrect, as all the trees out of which this timber had to be extracted did not turn out to be sound; that the appellant did not actually extract 7,595 cft. of Kail and 1,83939 cft. of Fir, but extracted a volume less than this; that it had to suffer a loss of five lacs of rupees on account of the cancellation of the lease by the first respondent and its re-auction on 1-7-1971, i. e. nearly two months earlier to the date of the expiry of the extended period of lease, which on its own showing was to expire on 15-9-1971; and that the total stocks of timber, converted and unconverted, which were lying in the forest when the possession of the coupe was taken back from the appellant approximately valued rupees twenty four lacs, for extracting which the appellant had to spend an amount of rupees three lacs, The claim was resisted on a few other grounds also, but in view of the limited controversy involved in this appeal, it is not necessary to state herein all those grounds.

6. After the appellant had filed the written statement, it failed to appear before the Forest Authority as a consequence whereof ex parte proceedings were taken against it on 12-7-1977. Ex parte evidence was thereafter, led by the 1st respondent, on consideration whereof, the Forest Authority passed the impugned order, the operative part whereof reads as under:--

'..... The respondent was thus liableto pay the compensation for the entire volume of timber marked for his extraction and the State was to be compensated for the entire volume of timber marked including supplementary marking. The respondent was free to make extractions and remove all the volume of timber stipulated in the marking list as also the volume contained in the supplementary bills. The respondent, therefore, had to compensate the State in respect of the amount fixed' as the consideration of the leased out coupe as also in respect of the supplementary marking. Besides, the interest on the belated payments calculated up to July, 1972 amounting to Rupees 6,25,429.00 and from July 1972 up to August, 1977 amounting to Rs. 3,43,597.00 which makes a total of Rs. 9,69,026.00 is also recoverable from the respondent. In these circumstances an amount of Rupees 20,50,513.00 is payable by the respondent to the State of Jammu and Kashmir on account of compensation for the advantages received by him under the void lease agreement dated 11th April, 1964.....'

6-A. Section 122 of the State Constitution, which corresponds to Article 299 of the Constitution of India, it is well settled, is mandatory in character. The three requirements of Section 122 which a contract has to satisfy are:--

(i) it must be in writing;

(ii) it must be expressed to be made by the Governor; and

(iii) it must be executed on behalf of the Governor by such person and in such a manner as he may direct or authorise.

7. A contract, which does not satisfy all the aforesaid three requirements is clearly unenforceable, and therefore, void, for, Clause (h) of Section 2 of the Contract Act defines contract as an agreement enforceable by law and Clause (g) of the same section provides that an agreement not enforceable by law shall be void. It necessarily follows that no right flows from a contract which is violative of Section 122, nor is such a contract capable of creating any liability, Consequently, neither anaction for specific performance of such a contract, nor one for damages arising out of its breach can lie at the instance of the parties to the contract. Nevertheless, law does not permit a party to such nor is such a contract capable of creating a contract to unjustly enrich itself at the cost of the other party by retaining any advantage or benefit that has accrued to it under. The prohibition is contained in Sections 65 and 70 of the Contract Act. These sections read as under:

'65. 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.

XX XX X70. Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.'

8. Section 65, as is obvious from its reading, applies to two types of cases, namely, (i) where the agreement is discovered to be void, and (ii) where a contract becomes void. Cases falling under the first category are those where even though the contract is void from the beginning, yet its voidity was not known to the parties, or at least to the party seeking to invoke the section, when it came to be executed. Consequently, if the contract is void ab initio to the knowledge of both the parties, this section shall have no application. To this extent Section 65, in fact, embodies the doctrine of pari delicto that where both the parties to the contract are equally at fault, in that, they having entered into an agreement which was void to their knowledge, law will leave them alone and will not intervene to determine their inter se rights and liabilities relatable to the contract. The cases falling under the second category, however, are those where the contract was valid at its inception but became void on account of a subsequent event.

9. Whereas a case falling under Section 65 is based upon a contract, Section 70 applies to all cases irrespective of any contract, where a person lawfully does something for another, or delivers anything to him which was never meant to be done or delivered gratuitously and the other person has enjoyed the benefit thereof. Thethree requirements of Section 70 are: (i) a per-son has lawfully done something for an-other, or delivered something to him; (ii) he did not intend doing so gratuitously and (iii) the other person has enjoyed the benefit thereof. The word 'lawfully' occurring in the section it has been judicially noticed, is unhappy. There was cleavage in judicial opinion on the interpretation of this word which has been, however, finally set at rest by the Supreme Court in State of West Bengal v. B. K. Mondal and Sons, AIR 1962 SC 779, wherein it has been held (at p. 788):--

'It is, of course, true that between the person claiming compensation and person against whom it is claimed some lawful relationship must subsist, for that is the Implication of the use of the word 'lawfully' in Section 70; but the said lawful relationship arises not because the party claiming compensation has done something for the party against whom the compensation is claimed but because what has been done by the former has been accepted and enjoyed by the latter. It is only when the latter accepts and enjoys what is done by the former that a lawful relationship arises between the two and it is the existence of the said lawful relationship which gives rise to the claim for compensation.....'

10. Application of this section, however, will not be refused merely because the thing done was for the benefit of both the parties (Srirama Raja v. Secretary of State, AIR 1943 Mad 85) (FB). The test would always be whether or not the other preson has willingly accepted the benefit.

11. Again, the thing done or delivered by one person to another will not be sufficient to attract the rule laid down in Section 70, unless it is further shown that it was open to the person to whom the thing was delivered, or for whom the thing was done, had an option to reject it. A person is not entitled to seek restitution under Section 70 where he has forced something upon the other against his wish. This principle was also laid down by their Lordships in the aforesaid case in these words:

'..... Section 70 is not intended toentertain claims for compensation made by persons who officiously interfere with the affairs of another or who impose on others services not desired by them. Section 70 deals with cases where a person does a thing for another not intending to act gratuitously and the other enjoys itIt is thus clear that when a thing is delivered or done by one person it must be open to the other person to reject it. Therefore, the acceptance and enjoyment of the thing delivered or done which is the basis for the claim for compensation under Section 70 must be voluntary.....'

12. There is ample authority for the proposition that Section 70 applies to all those cases where a party to a contract, which is void for being violative of Section 122, seeks restitution under the section. (State of West Bengal v. B. K. Mondal and Sons, AIR 1962 SC 779 and Mulamchand v. State of Madhya Pradesh, AIR 1968 SC 1218).

13. Relief under Section 70, as already noticed, is given on the principle of quantum meruit, that is, as must be deserved. It is not given on the basis of any express or implied contract, but under circumstances which would cast an obligation under law on the party receiving the goods, either to return them, or to pay for the same. The same principle would apply where a person has enjoyed the benefit of any work done for him. The word 'compensation' occurring in Sections 65 and 70 means the money value of the advantage or the benefit received. Compensation has to be measured not according to the fair price of the goods received, but according to their market price. This rule was laid by the Supreme Court in Pilloo Dhunji Shaw Sidhwa v. Municipal Corporation of the City of Poona, AIR 1970 SC 1201 wherein it was held (at p. 1204) :

'In our view the High Court was in error in holding that the plaintiff is entitled not to the invoice value of the goods, but only to 'the fair price' of the goods. Under Section 70 of the Contract Act, a person lawfully delivering goods to another, and not intending to do so gratuitously, is entitled to demand that the goods delivered shall be returned or that compensation for the goods shall be made. Compensation would normally be the market price of the goods. By refusing to return the goods the person, to whom the goods have been delivered cannot improve his position and seek to pay less than the market value of the goods.....'The same principle will apply in determining compensation for the work done,

14. All money payable to the Govt. under a contract of lease is, in terms of Section 52 of the Act, recoverable as arrears of land revenue, provided the contract is enforceable by law. A contract not satisfying the requirements of Section 122 of theConstitution being void, no money due under it can be said to be lawfully recoverable in terms of Section 90 of the Land Revenue Act so as to attract the contract itself containing a provision for recovery of the sum due as arrears of land revenue. Remedy of suit under Sections 65 and 70 of the Contract Act no doubt being still there, the legislature in its anxiety to avoid the lengthy and cumbersome procedure provided for a suit, amended the Act by enacting the Jammu and Kashmir Forest (Amendment) Act, 1974 (Act No. IX of 1974) and added Sections 52-A, 52-B, 52-C, 52-D, 52-E, 52-F, 52-G and 52-H to it, out of which Section 52-B, which alone is relevant for the present discussion, is reproduced as below:

'52-B. Restoration of advantage or benefit or payment of compensation.-

Notwithstanding anything contained in this Act or in the Contract Act, Samvat 1977 or in any other law for the time toeing in force,--

(a) Where any transaction or lease relating to sale of forest produce or extraction of timber from any forest is or is discovered to be void only on the ground that the transaction or lease is not in conformity with the provisions of Section 122 of the Constitution of Jammu and Kashmir or any order or direction issued thereunder, any person who has received any advantage or has enjoyed any benefit by virtue of such transaction or lease shall be bound to restore it or to make compensation for it, to the person or party from whom he received it.

(b) The extent of any advantage or benefit or the amount of compensation payable in lieu thereof, referred to in clause (a), shall be determined in accordance with the provisions hereinafter appearing and the value of the advantage or benefit or the amount of compensation so determined shall be recoverable as arrears of land revenue in accordance with the provisions of the Jammu and Kashmir Land Revenue Act, Samvat 1996.'

15. By enacting Section 52-B, the legislature not only imported into it the principles contained in Sections 65 and 70 of the Contract Act, but at the same time it enlarged its scope to the extent that it made the section applicable to all such contracts as were void for being violative of Section 122, whether or not their voidity was known to the parties at the time the contracts came to be executed. This is amply borne out from the expression'where any transaction or lease relating to sale of forest produce or extraction of timber from any forest is or is discovered to be void' occurring in Clause (a) of the section. In this way the doctrine of pari delicto enshrined in Section 65 was done away with and Section 52-B was made applicable to all such contracts as were not in conformity with the provisions of Section 122. Viewed thus, use of the words 'is discovered to be' in the section, it is obvious, is a mere surplusage, for, the same intention is clearly reflected by the words 'is void' occurring in the section. Instead of saying 'is or is discovered to be void' it could have been enough for the legislature to have merely said 'is void', for, the expression 'is void' is comprehensive enough to include both the cases that is, where the voidity was known to the parties at the time of execution of the contract, or where it became known to them subsequently.

16. At the same time the legislature preserved the right of the Govt. to recover as arrears of land revenue, any amount certified to be due under Section 52-B by the Forest Authority constituted under Section 52-C. By doing so, it never intended to make enforceable a contract which otherwise was unenforceable under law as being violative of Section 122 of the Constitution, but merely intended to apply the principles enshrined in Sections 65 and 70 of the Contract Act to all such contracts, at the same time preserving the right of the Government to recover the sum found due thereby as arrears of land revenue,

17. The Forest Authority, there can be no manner of doubt, has passed the impugned order by interpreting Section 52-B as a manifestation of the legislative intent to make all such contracts of lease enforceable by law as have been declared to be void ab initio by this court in Good-wil Forest Company's case (AIR 1974 J & K 1) (FB) (supra) on account of being violative of Section 122 of the Constitution. This is amply borne out from the operative part of the impugned order reproduced heretofore. It has clearly misunderstood the purpose and scope of this provision. From what has been stated heretofore it clearly follows that had a dispute arisen between the parties before even a single tree had been felled by the appellant, the Forest Authority should have certified that nothing was due to the first respondent from the appellant, leaving the latter to take appropriate proceedings for the recovery of royalty andother sums paid by it to the former, for, in that case the contract of lease being void ab initio, neither of the parties had a right to retain the advantage obtained under it. The appellant's advantage being the possession of the coupe for extracting timber from it, it was bound to restore the possession of the unexploited coupe to the Govt. Likewise, the Govt.'s advantage being the receipt of royalty amount and other deposits, if any, it was equally bound to refund the same to the appellant.

18. The facts of the case, however, indicate that the appellant has exploited the forest, converted timber out of it, had taken away and sold some timber leaving behind the rest in the forest itself, which was subsequently taken possession of and sold by the Govt. In these circumstances, the Forest Authority ought to have worked out the net profit, if any, that might have accrued to the appellant by sale of the timber removed out of the forest by it, after deducting from its sale price the expenses incurred by it in extracting the same. In doing this, the Forest Authority ought to have kept in view not only the market rate of the timber, but also the rates of labour as well as the market rates of different commodities used during the process of extraction, which were prevailing at the relevant time. It should have then worked out the net profit accruing out of the sale of the timber extracted by the appellant and left behind in the forest which had been later on sold by the Forest Department, by applying the same method, and added the sum thus found to the other sums paid to the Government by the appellant by way of royalty and other deposits. The total sum thus found should have then been deducted from the net profit accrued to the appellant from the sale of timber conducted by it itself, and if any balance would be still left with the appellant, certified that alone as the amount due to the 1st respondent from it, for, only that amount would represent the compensation tor the benefit received by the appellant within the meaning of Section 52-B. In case no such balance would be left with the appellant, or even if the Govt. were to be found to have received excess amount from the appellant, still the Forest Authority should have merely certified that nothing was due to the 1st respondent from the appellant Keeping in view its limited functions under Section 52-B, it could not have certified, much less ordered the 1st respondent to pay the excess amountto the appellant, even if it were to hold that to that extent the 1st respondent had been benefited at the cost of the appellant. In such a case remedy of the appellant to recover the excess amount from the 1st respondent would lie in a civil court alone.

19. I find no force in the contention of Mr. Malik that the appellant is not entitled to get credit for the expenses it had to incur for extracting the timber, because that would be indirectly permitting it to claim damages on account of breach of a void contract. The Government had granted the lease in favour of the appellant for doing something for it, i. e. for extracting timber from the forest, which it otherwise had to do itself, but which it did not think worthwhile to do itself. In granting the lease its only object was to earn money which it achieved by charging royalty from the appellant, treating the same as equivalent of the price of the timber which it was expected to get by its conversion and sale. By converting into timber the trees standing in the forest, the appellant undoubtedly did something for the 1st respondent, with the latter's accord, and not gratuitously, but for consideration. The Govt, it cannot be gainsaid, willingly accepted the benefit to that extent, for which it was bound to compensate the appellant in terms of Section 70. In other words the expenses incurred by the appellant for extraction of timber represent the benefit derived to that extent by the 1st respondent, for, if the latter itself were to extract the timber, it could not have done so without incurring expenses to that extent.

20. Nor was there any question of awarding interest in favour of the 1st respondent. Interest can be claimed either under an agreement, or under a statute, or by way of damages. No interest could have been claimed by the 1st respondent under the lease agreement as the same was void ab initio. For the same reason it could not have been claimed by way of damages either. The parties being pari delicto, one could not claim damages from the other. There is also no statutory provision under which interest could have been claimed for delayed payments of royalty dues. The judicial officer constituting the Forest Authority not being a court, but merely a persona designata, he could not have awarded interest even Under Section 34 of the Civil P. C. It is thus impossible to uphold the impugned order or even a part thereof.

21. Mr. Malik then contended that the Forest Authority's order has to be sustained because the contract of lease is not void but is a valid contract. This argument, besides being self defeating is manifestly an argument in despair. Firstly, because the 1st respondent's own case as set up in its pleading is that the contract of lease is void, and secondly, because if the contract is held to be valid then the Forest Authority ceases to have jurisdiction to try the case and to issue the requisite certificate under Section 52-B.

22. For all these reasons, the appeal is allowed and the order impugned in it is set aside. The case is sent back to the Forest Authority for its fresh disposal in accordance with the observations made theretofore. The Forest Authority shall allow the parties opportunity afresh to lead evidence and would be better advised if it also frames issues. In the peculiar circumstances of the case, the parties are left to bear their own costs.

Mir, J.

I agree.


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