Judgment :- 1. In the auction of forest coupes conducted by the 2nd defendant DFO. on 29-11-1973, in pursuance of an auction/ sale notice, plaintiff bid sub-coup No. 2 of Ayyapppankovil Range for Rs. 50,000/-. After depositing Rs. 10,000/- in terms of the sale notice, however, the plaintiff faded out of the picture, without executing a written agreement and depositing the balance, despite confirmation of sale and issue of notices demanding payment. One of the clauses in the sale notice was to the following effect: "Failure to remit all dues and execute the agreement will entail cancellation of the sale, forfeiture of all moneys deposited and resale of the coupe at the risk and loss of the purchaser." Relying on the above clause, the 2nd defendant cancelled the sale in favour of the plaintiff and resold the sub-coupe for Rs. 18,600/-. The amount deposited by the plaintiff was forfeited, and in addition, he was called upon to pay Rs. 31609.33 towards the loss sustained in reauction. O.S. No. 86 of 1975 was thereupon instituted by the plaintiff for a declaration that he was not liable to pay the said amount, and for recovery of the amount forfeited. The trial court granted the declaration, but declined to grant the other relief. 2. In A.S. No. 311 of 1978 the defendants contend that the declaration should not have been given; and in the Cross-objection, the plaintiff reagitates his claim for recovery of the amount of Rs. 10,000/-. 3. The court below had granted the declaration on the footing that there was no concluded and enforceable contract between the parties, within the meaning of Art.299(1) of the Constitution, so long as they had not entered into an agreement in writing expressed to be made by the Governor. And for the same reason, and for some other reasons also, the plaintiff's claim for recovery of the amount deposited was also negatived. 4. On behalf of the appellants the learned Government Pleader contends that the view taken by the court below is opposed to the decisions of this Court in Bhaskaran Nair v. State of Kerala (1980 KLT. 462) and Kunhukrishnan v. State (AIR. 1983 Ker. 73) That appears to be so. 4. On behalf of the appellants the learned Government Pleader contends that the view taken by the court below is opposed to the decisions of this Court in Bhaskaran Nair v. State of Kerala (1980 KLT. 462) and Kunhukrishnan v. State (AIR. 1983 Ker. 73) That appears to be so. This Court had held, in the said two cases, that the liability sought to be enforced by the State was a statutory liability under S.79 of the Kerala Forest Act, 1961 standing outside the fold of contracts made in exercise of the executive power of the State, and governed by Art.299(1) Counsel for the plaintiff however contends that the said two decisions require reconsideration, that S.79 of the Forest Act only provides for a mode of recovery as distinct from creating a liability, and that unlike abkari contracts considered in Damodaran v. State of Kerala (AIR 1976 SC. 1533) and State of Haryana v. Lal Chand (1984) 3 SCC. 634, forest contracts have to be construed in the manner done by the Supreme Court in K. P. Chowdhry v. State of M. P (AIR.1967 SC.203). 5. Chowdhry's case had arisen from a writ petition filed by a forest contractor before the High Court of Madhya Pradesh, challenging Revenue Recovery proceedings initiated against him for recovery of loss sustained in reauction. R.28 and 29 of the Madhya Pradesh Forest Contract Rules were to the effect that after the bid, a formal agreement had to be drawn up and the Chief Conservator of Forests had to sign it. It was contended before the High Court that as no agreement as contemplated under the Rules had been executed, there was no concluded and valid contract within the meaning of Art.299(1) of the Constitution. The High Court took the view that Art.299(1) applied only to contracts required to be reduced to writing, that an implied contract arising from the conditions of auction was outside the scope of the Article, and that consequently, the deficiency could be recovered under S.155 (b) of the Madhya Pradesh Land Revenue Code. But the Supreme Court held that in view of Art.299 (I) there could be no implied contract, at all, and that in the absence of a contract, S.155 (b) of the M. P. Land Revenue Code could not be invoked. But the Supreme Court held that in view of Art.299 (I) there could be no implied contract, at all, and that in the absence of a contract, S.155 (b) of the M. P. Land Revenue Code could not be invoked. After having said so, however, their lordships remitted the matter to the High Court to examine whether the Revenue Recovery proceedings could be sustained under S.82 and 85 of the Indian Forest Act. The decision is no authority for the proposition, as counsel would suggest, that all forest contracts should satisfy the requirements of Art.299(1). On the other hand, the remittal itself was for examining the question whether Revenue Recovery proceedings could be justified on the basis of statutory provisions other than S.155 (b) of the M. P. Land Revenue Cods, despite the absence of a valid and concluded contract under Art.299 (1), indicating thereby that what was unenforceable as a contractual liability could probably be enforced as a statutory liability. 6. In our opinion State of Haryana v. Lal Chand (1984) 3 SCC 634, relied on by counsel, supports the above view That was a case of a contract made under the Punjab Excise Act and the Punjab Liquor Licence Rules. The auction for the right to vend country liquor was held by the Dy. Commissioner, after announcing the conditions of auction, as required by the Rules. The bid in favour of the successful bidder was accepted by the Commissioner, but the bidder failed to deposit the security amount. A reauction was accordingly conducted after notice, and the party was called upon to make up the deficiency. The contention before the Supreme Court, as in Chowdhry's case, was that there was no concluded contract under Art.299(1); and that was firmly rejected in the following terms: "It is well settled that Art.299(1) applies to a contract made in exercise of the executive power of the Union or the State, but not to a contract made in exercise of statutory power. Art.299(1) has no application to a case where a particular statutory authority as distinguished from the Union of the States enters into a contract which is statutory in nature. Art.299(1) has no application to a case where a particular statutory authority as distinguished from the Union of the States enters into a contract which is statutory in nature. Such a contract, even though it is for securing the interests of the Union or the States, is not a contract which has been entered into by or on behalf of the Union or the State in exercise of its executive powers. In respect of forest contracts which were dealt with by this Court in K.P. Chowdhry, AIR. 1967 SC. 203. Mulamchand, AIR. 1968 SC. 1218, Rattan Lal 1967 M. F L. J.104 and Firm Gobardhan Dass AIR. 1973 SC. 1164 cases, there are provisions in the Indian Forest Act, 1927 and the Forest Contract Rules framed thereunder for entering into a formal deed between the forest contractor and the State Government to be executed and expressed in the name of the Governor in conformity With the requirements of Art.299(1), whereas under the Punjab Excise Act, 1914, like some other State Excise Acts, once the bid offered by a person at an auction sale is accepted by the authority competent, a completed contract comes into existence and all that is required is the grant of a licence to the person whose bid has been accepted. It is settled law that contracts made in exercise of statutory powers are not covered by Art.299(1)" The above observations make it clear that Art.299(1) has no application to a case where an authority named in a statute enters into a statutory contract with another, even though the former may be doing so on behalf of the Government; the rights and liabilities of parties in such a case will be statutory, and outside those arising from a contract made in exercise of the executive power of the State. The decision also indicates that Chowdhry's case turned on the requirements of the Madhya Pradesh Rules regarding the execution of a formal deed expressed to be in the name of the Governor. 7. Admittedly there were no Rules under the Kerala Forest Act, corresponding to R.28 and 29 of 'be M. P. Forest Contract Rules, at the time the forest coupe was auctioned in this case, in 1973. It may be that Rules similar to those considered in Lal, Chandi case were also absent. 7. Admittedly there were no Rules under the Kerala Forest Act, corresponding to R.28 and 29 of 'be M. P. Forest Contract Rules, at the time the forest coupe was auctioned in this case, in 1973. It may be that Rules similar to those considered in Lal, Chandi case were also absent. But that does not preclude consideration of the question whether S.79 of the Kerala Forest Act could be pressed into service by the State not only for spelling out a statutory liability, but also for recovering amounts found payable, by resort to R.R. proceedings. The Section reads: "All money, other than fines, payable to the Government under this Act or any rule made thereunder, or on account of timber or forest produce or of expenses incurred in the execution of this Act in respect of timber or forest produce, or under any contract relating to timber or forest produce including any sum recoverable thereunder for the breach thereof or in consequence of its cancellation or under the terms of a notice relating to the sale of timber or forest produce by auction or by invitation of tenders, issued by or under the authority of a Divisional Forest Officer, and all compensation awarded to the Government under this Act may, if not paid when due, be recovered under the law for the time being in force, as if it were an arrear of land revenue." Confining attention to only two of the heads under which money payable to Government is made recoverable under the Section, the first to be noticed is liability arising under a contract relating to timber or forest produce. The second is money payable under the terms of a notice relating to timber or forest produce by auction, when such notice is issued by a Divisional Forest Officer. The term 'contract' under the first head can possibly include only formal contracts executed under Art.299(1), in exercise of the State's executive power. But the second head is obviously designed to cover something different from such contracts, for otherwise, there was no need to separately provide for it. And what is covered by it is a liability arising from a sale notice issued by the D.F.O. The mere issuance of a sale notice may not create liability, but when money becomes "payable under the terms" of such a notice, that becomes recoverable. And what is covered by it is a liability arising from a sale notice issued by the D.F.O. The mere issuance of a sale notice may not create liability, but when money becomes "payable under the terms" of such a notice, that becomes recoverable. That is, when a person participates in the auction and becomes answerable for money payable under the terms of the auction notice, something recoverable under S.79 comes into being. That something may not be a contractual liability when tested in the light of Art.299(1). What is involved may be an imperfect contract. But nothing prevents the legislature from recognising such an imperfect contract and making it enforceable at law. 8. Such an approach cannot be condemned as an indirect attempt to get over the requirements of Art.299 (1), in view of the decision of the Supreme Court in State of W. B. v . Mondal & Sons (AIR. 1962 SC. 779). There, the respondents who had put up some storage godowns at the request of an official of the Government, had instituted a suit for recovery of the costs thereof. The claim was based on contract, and alternatively, as compensation for work done for the benefit of the State Government, within the meaning of S.70 of the Indian Contract Act. The Calcutta High Court held that there was no contract as required by S.175(3) of the Government of India Act, 1935 corresponding to Art.299(1) of the Constitution of India, but decreed the claim on the basis of S.70 of the Contract Act. The Supreme Court upheld the decision, overruling the State's contention that such a course would virtually amount to a circumvention of S.175 (3). Gajendragadkar J. (as he then was) said: "normally a claim for compensation made under S.70 may not mean the same thing as a claim for damage for breach of contract if a contract was subsisting between the parties. Thus considered it would, we think, not be reasonable to suggest that in recognising the claim for compensation under S.70 we are either directly or indirectly nullifying the effect of S.175(3) of the Act or treating as valid a contract which is invalid. The fields covered by the two provisions are separate and distinct; S.175(3) deals with contracts and provides how they should be made. The fields covered by the two provisions are separate and distinct; S.175(3) deals with contracts and provides how they should be made. S.70 deals with cases where there is no valid contract and provides for compensation to be paid in a case where the three requisite conditions prescribed by it are satisfied. We are, therefore, satisfied that there is no conflict between the two provisions." And in a concurring judgment, Sarkar J. said: "Furthermore, we do not see that S.175(3) in any way prevents a contract with the Government being implied or a Government from incurring an obligation under a quasi-contract. A contract implied in law or a quasi-contract is not a real contract or, as it is called, a consensual contract and S.175(3) is concerned only with such contracts. The section says that all contracts made in the exercise of the executive authority of the Federation or of a Province shall be "expressed" in a certain manner and "shall be executed on behalf of the Governor-General or Governor by such person and in such manner as he may direct or authorise". It therefore applies to consensual contracts which the Government makes and not to something which is also called a contract but which the law brings into existence by a fiction irrespective of the parties having agreed to it. Now by its terms S.70 of the Contract Act must be applied where its requisites exist; if it is necessary to imply a contract or to contemplate the existence of a quasi-contract for applying the section that must be done and we do not think that S.175(3) of the Government of India Act prevents that, nor are we aware of any other impediment in this regard." The position seems to be that where a claim is based on a "consensual contract" i e. a contract made in exercise of the executive power of the State, the requirements of Art.299(1) have to be satisfied; but that does not mean that obligations arising from transactions falling short of contracts, or which only resemble contracts, cannot be enforced when a statute makes them enforceable. These are days, we should note, when even rules of promissory estoppel are being applied against public authorities including the State. 9. Of the two heads of claim discussed earlier in the context of S.79, the first is a claim based on consensual contract, but the second is not. These are days, we should note, when even rules of promissory estoppel are being applied against public authorities including the State. 9. Of the two heads of claim discussed earlier in the context of S.79, the first is a claim based on consensual contract, but the second is not. It is different from a contractual obligation, though it may have some resemblance to a contract. But when the legislature has chosen to make it enforceable, effect must be given to it. Nor do we think that the Section only provides for a mode of recovery. It specifically says that all money payable to the Government under the terms of a sale notice issued by the D. F. O., a designated authority, "may be recovered", if not paid when due. Recover ability implies liability on the other party. The circumstance that the mode of recovery is also indicated does not detract from the position that the amount is recoverable. In fact what the Section does is to create a fiction that moneys payable thereunder have to be regarded as arrears of land revenue. An imperfect liability is elevated to the status of an indisputable liability and made recoverable in a manner appropriate to its character. 10. We are therefore of the view that the decisions in Bhaskaran Nair (1980 KLT. 462) and Kunhukrishnan (AIR. 1983 Ker. 73) do not call for reconsideration. 11. We are also not impressed by the argument that even if the amount of loss is recoverable as arrears of land revenue, the same has first to be quantified by a civil court, before it becomes due. If the claim for reimbursement is not strictly a claim for liquidated damages for breach of a contract, but only a statutory liability, the same can be quantified without the intervention of a court when all that is required is the application of simple arithmetic. The position may probably be different where the basic figures are in dispute. On this point also, we are in respectful agreement with the view taken in Kunhukrishnan's case (AIR. 1983 Ker. 73). 12. In this view of the matter the declaration given by the court below in favour of the plaintiff cannot be sustained, and A. S. No. 311 of 1978 has to be allowed to that extent. 13. The plaintiff's claim for return of the Rs. 1983 Ker. 73). 12. In this view of the matter the declaration given by the court below in favour of the plaintiff cannot be sustained, and A. S. No. 311 of 1978 has to be allowed to that extent. 13. The plaintiff's claim for return of the Rs. 10,000/- deposited by him was negatived by the court below, also on the ground that there was no enforceable contract. So long as S.79 provides only for recovery of amounts 'payable' "if not paid when due", it is difficult to bring the above amount within the sweep of its provisions. Even otherwise, it will be inequitable to allow the State, on the facts and circumstances of the present case, to recover more than what it had lost. The estimated value of the coupe was only Rs. 9,000/- and the bid itself had commenced from Rs. 10,000/-. Taking these and other relevant aspects into consideration, we think that the plaintiff should be allowed to adjust the amount deposited towards the loss of the State. 14. In the result, while allowing A. S. No. 311 of 1978 to the extent of setting aside the declaration granted by the court below in respect of the amount of Rs. 31309.33, we also allow the plaintiff's cross-objection to the extent of holding that the amount of Rs. 10,000/- deposited by him shall not stand forfeited, but will be available for adjustment against the State's claim for the loss sustained by it. No costs.