Governor of Orissa State v. Shivaprasad Sahu — 1963 DIGILAW 18 (ORI)

JUDGMENT : Defendant is the appellant. Plaintiff claims refund of Rs. 1100/- paid as security deposit. He is a forest contractor and gave a bid for Sikerput Selection Coupe No. 4. His was the 2nd highest bid and ultimately his bid was accepted. An agreement (Ex. 5) was executed on 3-11-1954 and the security deposit was made on that day. His work was suspended for sometime by unnecessary interference by the defendant. By the auction sale, 1193 sound and 1874 defective standing trees were sold. Plaintiff felled 500 normal trees and converted those into logs. Out of 1200 logs, only 175 were sound and the rest were found to be hollow and worthless. In consequence of the facts found by the plaintiff that cut of 1200 logs, only 175 logs were sound, he came to the conclusion that the trees in the coupe were not upto their specification or marking as per the Forest Contract Agreement and that the working of the coupe was certain to land him in utter and ruinous loss, and, therefore, he stopped the working of the coupe. In an application dated 8-7-1955 to the Director of forests, Orissa, after stating all the facts, the plaintiff rescinded the contract and requested for refund of his security deposit besides claiming a compensation of Rs. 500/- as expenses incurred in felling and logging the said 500 trees. To the said letter, the plaintiff got an order that the Government of Orissa determined the agreement (Ex. 5) under cl. (1) of R. 34 of the Orissa Forest Contract Rules, as the contractor defaulted in the payments of first and second instalments on the due dates in spite of repeated warnings, and that the security deposit was forfeited. Plaintiff made an assertion that he did not remove all the trees or logs or timbers whatsoever from the Coupe, in question, and had not made any profits or gained any advantage. The suit has been filed for refund of security deposit. 2. Most of the allegations in the plaint are not denied. The stipulated dates of payment of instalments were 1-8-1954, 15-12-1954 and 15-2-1955, and the total consideration was Rs. 11,000/- On account of the representation made by the highest bidder the work was stopped for about 15 days and the plaintiff was thereafter allowed to fully work out the Coupe in accordance with the contract. The stipulated dates of payment of instalments were 1-8-1954, 15-12-1954 and 15-2-1955, and the total consideration was Rs. 11,000/- On account of the representation made by the highest bidder the work was stopped for about 15 days and the plaintiff was thereafter allowed to fully work out the Coupe in accordance with the contract. The allegation that the work of the Coupe was stopped was denied. With regard to the plaintiffs assertion that he felled 500 trees, defendant denied knowledge but accepted that a representation was filed by the plaintiff on 8-7-1955 to the Director of Forests, Orissa, wherein it was stated that about 500 normal trees were felled and converted into 1200 logs out of which only 175 logs were found sound and the balance were unsound. The department got the matter inquired by the concerned Range Officer. The Forester could not verify all the felled trees as the numbers given on the trees were not clearly visible for identification whether the trees felled by the plaintiff were marked sound or unsound. The Forester could verify only 28 felled trees which were numbered and marked sound of which 6 were sound and the rest 22 mostly sal were defective. Defendants assert that the agreement represented the correct state of affairs and further resort to the defence that under clause (6) of the sale notice, the intending bidders were strictly warned to inspect the areas and the growth beforehand and no complaint as regards the area and growth was entertained after the conclusion of the sale. Plaintiff was an old forest contractor working in the neighbouring Coupe and must have inspected the Coupe in question and satisfied himself before bidding in the auction sale. The defence case is that it is not possible to say accurately which free would turn to be sound and which would be defective from external appearance. Often unsound trees turn out to be sound and the sound trees to be unsound. The sale notice was published giving full and accurate descriptions of the trees intended to be sold, and if the trees marked and numbered as sound ultimately proved unsound, the defendants were not to be blamed for it. Plaintiff defaulted in making payments of instalments and failed to pay arrear outstanding dues within one month after receipt of the order, and according to the Govt. decision the security deposit was forfeited. Plaintiff defaulted in making payments of instalments and failed to pay arrear outstanding dues within one month after receipt of the order, and according to the Govt. decision the security deposit was forfeited. Plaintiff was never prevented from removing the trees felled on payment of instalment and that the suit is liable to be dismissed. 3. Seven issues were framed. A large many points were argued before the trial Court. But the only substantial point, urged before him, was whether the consent of the plaintiff to the agreement was taken by misrepresentation. The learned Munsif found that the plea of misrepresentation was not acceptable and that the plaintiff worked out the Coupe till 25-5-1955 without paying any instalment though by that date two instalments were due. He found forfeiture of security deposit legal and dismissed the suit with costs. 4. Before the learned District Judge the only point urged was that the agreement was void under Sec. 20 of the Indian Contract Act. The learned District Judge puts it as follows. "The main point of contention that is raised in this appeal on behalf of the plaintiff-appellant is that the contract is void within the meaning of S. 20 of the Indian Contract Act and therefore, is not binding on the plaintiff-appellant." He recorded the following findings : "(i) But ultimately 75 per cent of those trees shown as sound by the department were found out to be unsound as is evident from the examination made by the Range Officer. Therefore, the contract is vitiated as the agreement was arrived at under a mistaken fact essential to the contract". (ii) But the representation made by the Officer of the Forest Department as to the soundness and unsoundness of the trees, cannot be called misrepresentation within the meaning of Sec. 19 of the Indian Contract Act. For a representation to become actionable, it must be wilful. The circumstances discussed above tend to show that Forest Department made the representation on a bona fide mistake. It was not wilfully done to misguide the intending bidders, and (iii) "So when the agreement is discovered to be void, the defendant-respondent is bound to refund it to the plaintiff-appellant within the meaning of the provision of Sec. 65 of the Indian Contract Act." He accordingly decreed the suit with costs throughout. 5. Mr. It was not wilfully done to misguide the intending bidders, and (iii) "So when the agreement is discovered to be void, the defendant-respondent is bound to refund it to the plaintiff-appellant within the meaning of the provision of Sec. 65 of the Indian Contract Act." He accordingly decreed the suit with costs throughout. 5. Mr. Rath, the learned Standing Counsel, raised the following contentions : (i) Plaintiff did not plead a case that both the parties to the agreement were under a mistake as to a matter of fact essential to the agreement; no issue was framed on the point and the point was never canvassed before the trial court; the plaintiff should not be permitted to take up a question of fact for the first time before the appellate Court; (ii) Under the agreement, 1193 sound trees and 1874 defective standing trees were sold for a consideration of Rs. 11,000/-; there is no material on record for a finding that 75 per cent of 1193 normal trees were defective; even if the whole of the plaintiffs case that out of the timbers from 500 felled trees 75 per cent were unsound is accepted, a case is not made out that 75 per cent of the normal trees were defective; and S. 20 of the Contract Act would not cover such cases; (iii) Even if the plaintiffs case is true, on the finding of the learned District Judge that misrepresentation by the defendant was not fraudulent, the contract is not voidable as the plaintiff had the means for discovering the truth with ordinary diligence; (iv) Plaintiff has failed to prove that the alleged misrepresentation by the defendant caused the consent of the plaintiff to be a party to the contract, and that as such the contract is voidable; and (v) Even assuming the plaintiffs case to be true, plaintiff is not entitled to the refund of the security deposit unless mutual benefits are ascertained; he having worked out the Coupe up to 25-5-55 and felled 500 trees, and there being no case that he was prevented from removing those trees on payment of instalments, no restitution can be granted. 6. Mutual mistake of fact under Section 20 of the Contract Act was not pleaded in the plaint. No issue was framed and the point was not canvassed before the trial Court. 6. Mutual mistake of fact under Section 20 of the Contract Act was not pleaded in the plaint. No issue was framed and the point was not canvassed before the trial Court. The learned District Judge therefore exercised his jurisdiction with material irregularity in allowing such a point involving question of fact to be taken for the first time in appeal. As was observed in Ramchandra Ayyar v. Ramlingam Chettiar, 1962 SCD 982 : ( AIR 1963 SC 302 ), if the lower appellate Court allows a new point of fact to be raised for the first time before it, it would amount to a substantial defect in the procedure provided by the Code, and the judgment is vulnerable under Section 100 (c), C. P. C. In Jyoti Prasad Singh v. Sammuel Henry Seddon, AIR 1940 Pat 516, it was observed that a mutual mistake such as would render a contract void within the meaning of S. 20 depends upon facts which must be pleaded and proved and where the plea is not made out either in the plaint or at the hearing before the Trial Court, it cannot be raised for the first time in appeal. 7. According to the learned District Judge 75 per cent of the sound trees were unsound and the soundness of the tree was an essential part of the agreement with regard to which both the parties were under a mistake. In my view the finding is based on confusion of thought and insufficient materials. Admitted, 1193 sound and 1874 defective standing trees constituted the subject-matter of the agreement. There is no case for the plaintiff that 1874 defective standing trees were not available. The only case put forth by the plaintiff is that cut of 1193 sound trees agreed upon, 500 trees were felled and converted into timbers whereafter it was noticed that 75 per cent of those 500 trees were unsound. Even accepting the whole of the finding it cannot be said that the remaining 693 sound trees were unsound. The 500 trees felled were certainly not the representative of the trees not felled down. Moreover, the subject-matter of the agreement is the trees and not the logs. There is no agreement that the soundness of the trees would be tested with reference to logs that would be ultimately produced. The 500 trees felled were certainly not the representative of the trees not felled down. Moreover, the subject-matter of the agreement is the trees and not the logs. There is no agreement that the soundness of the trees would be tested with reference to logs that would be ultimately produced. According to the defendant, trees were marked with reference to their external appearance. There is no case for the plaintiff that the determination of the soundness was to be made after scientific examination and not by external appearance. If that was not the case, there was absolutely no mistake on the part of the Forest Department. They purported to sell sound trees, determined their soundness with reference to their external appearance and never gave out that they characterised those 1193 trees as sound on the basis of scientific examination. On the contrary, their positive case was that they considered them sound only from their external appearance. It is not the plaintiffs case that even judged by the external appearance, these 1193 trees were not sound. From whichever standpoint the matter is examined, there was absolutely no mistake on the part of the defendant in their characterising 1193 trees as sound ones. Merely because the trees did not produce logs according to the expectation of the plaintiff cannot render the trees unsound. As to what are the tests of soundness was not a part of the agreement itself. It may be that the plaintiff entertained misapprehension from the very start that sound trees would mean those trees which would produce sound logs. But that was not certainly an essential part of the agreement so far as the defendant is concerned. If the defence version is accepted only out of 28 marked sound trees, 6 produced good logs. If the plaintiffs version is accepted, out of 500 sound trees, 75 per cent did not produce good logs. Soundness of the trees was absent only with reference to a part of the subject-matter of the agreement. Plaintiff is a forest contractor even from before and was working in the adjoining coupes. Plaintiff did not even advance a case far less proving it that in all former occasions soundness of the trees was established only after scientific investigation. Soundness of the trees was absent only with reference to a part of the subject-matter of the agreement. Plaintiff is a forest contractor even from before and was working in the adjoining coupes. Plaintiff did not even advance a case far less proving it that in all former occasions soundness of the trees was established only after scientific investigation. Neither it was a part of the agreement that though a tree would be perfectly sound from the external appearance, it must be declared unsound if ultimately it does not produce good logs. In the facts therefore there is absolutely no mistake on the part of the defendant and the mistake, if any, is confined to the plaintiff alone. Under Section 22 of the Contract Act, a contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact. The learned District Judge drew large conclusions from insufficient data. It is contrary to law and cannot be upheld. 8. The learned District Judges view of misrepresentation is also not correct. Misrepresentation has been defined in S. 18 of the Contract Act. Section 18 (1) lays down "Misrepresentation means and includes (1) the positive assertion in manner not warranted by the information of the person making it, or that which is not true, though he believes it to be true." It is well settled that misrepresentation may be innocent. But such innocent misrepresentation does not cause avoiding a contract unless the representation is made without reasonable ground. The learned District Judge held that there was no misrepresentation on the part of the defendant on the wrong view of law that misrepresentation must be wilful. Even if it is not wilful, yet there will be a cause of action if the misrepresentation is not based on reasonable ground. In this case, the question of misrepresentation does not at all arise. Defendant marked certain trees as sound from the external appearance and therefore it cannot be characterised as misrepresentation at all. Even assuming that it is misrepresentation. Exception to S. 19 of the Contract Act applies to such a case. The section runs as follows : "When consent to an agreement is caused by coercion, fraud, or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. Even assuming that it is misrepresentation. Exception to S. 19 of the Contract Act applies to such a case. The section runs as follows : "When consent to an agreement is caused by coercion, fraud, or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. xx xx xx xx Exception - If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of Section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence." It is now well settled by authorities that the word fraudulent does not qualify misrepresentation. In Niaz Ahmed v. Parosattom Chandra, AIR 1931 All 154, their Lordships observed : "If the expression fraudulent within the meaning of Section 17 qualifies misrepresentation, the result would be that due diligence would be required in the case where misrepresentation became fraudulent, but would not be required where the misrepresentation fell within S. 13 and was just short of fraud, for the exception would be confined to the former kind only. This would be startling result." Their Lordships therefore held that in the case of an active misrepresentation knowing that fact to be false, as distinct from mere silence or concealment, it is not incumbent upon the party defrauded to establish that he had no means of discovering the truth with ordinary diligence. The same view has been taken in J. M. Apcar v. N. C. Malchuse, AIR 1939 Cal 473 and Venkataratnam v. Sivaramudu, AIR 1940 Mad 560 . I have already held that in this case there was no misrepresentation at all. Even assuming that there was misrepresentation, it was an innocent misrepresentation and exception to S. 19 will directly apply to such misrepresentation which is not fraudulent, and the plaintiff had the means of discovering the truth with ordinary diligence. If the plaintiff had addressed a letter to the Department enquiring as to whether they had marked those trees as sound after scientific investigation, he could have easily known that the soundness was determined only with reference to the external appearance. Without doing anything of the sort, plaintiff worked under a hallucination and finding that he would be put to a loss as good logs were not turned out wanted to avoid the contract under various pretexts unsupportable in law. Without doing anything of the sort, plaintiff worked under a hallucination and finding that he would be put to a loss as good logs were not turned out wanted to avoid the contract under various pretexts unsupportable in law. Moreover in the sale notice the bidders were given warning that they should inspect the growth and area of the coupe before bidding and no objection was entertainable after the confirmation of sale. Plaintiffs case appears to be wholly frivolous. 9. Admittedly the plaintiff felled 500 trees and worked out the coupe till 25-5-1955. It is not the plaintiffs case that the defendant appropriated the felled 500 trees with the logs turned out of them. As a result of felling of those trees, the defendant had been put to a loss of the value of those trees. Plaintiff was not prevented from removing those felled trees or logs on payment of instalment dues. This is therefore a case in which the defendant has also sustained loss on account of the plaintiffs action. Before the plaintiff is entitled to the refund of the security deposit, he must make out a case that he is not responsible for the loss sustained by the defendant; equities must be adjusted between the parties. Section 65 of the Contract Act cannot apply to the advantage of one party without taking into account the detriment undergone by the other party. Plaintiff has not made out a case of this type and the learned District Judge has not at all devoted his thought to this aspect of the matter. 10. Judged from any point of view, the plaintiff has no case and his suit must fail. In the result, the appeal is allowed with costs throughout. Appeal allowed.