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1985 DIGILAW 216 (KER)

STATE OF KERALA v. JOY

1985-07-12

BALAKRISHNA MENON, SUKUMARAN

body1985
Judgment :- 1. The three appeals by the common defendants arise out of three suits by different plaintiffs. The defendants are the State of Kerala and the Deputy Conservator of Forests, Kottayam. The facts of all the cases are similar. The Government had by Ext. Al notification dated 6-2-1973 published in the Gazette notified the auction sale of tree-growth in different sub coupes in the Nagarampara range of the Kottayam forest division. The notification provided that auction sale of the tree-growth will be subject to the general conditions of auction applicable to sale of tree-growth in forest coupes. One of the general conditions admitted by the parties as can be gathered from the plaints in the three different suits is that the bid representing the offer for purchase will be kept firm for a period of three months to enable the Conservator of Forests to confirm the auction sale. Auction relating to the different coupes was held on 22-2-1973. The plaintiffs in the three different suits were the highest bidders in respect of different coupes. Even though the plaintiffs had deposited one-third of the bid amount, they had not executed the agreements after their respective bids had been accepted and confirmed in terms of the general conditions of auction. The respective coupes were re-auctioned on 12-12-1973 for much lesser price than offered by the respective plaintiffs at the previous auction. The 2nd defendant by the notices issued to the plaintiffs forfeited the amounts deposited and also demanded of them to make good the loss sustained by the Government or re-auction of the different coupes. The respective plaintiffs have filed these suits for declaration that there were no concluded contracts in these cases, for refund of the amounts deposited, and also for injunction restraining the defendants from taking proceedings against them for realisation of the loss sustained on re-auction of the respective coupes. 2. It is not necessary to refer to all the contentions the parties have raised in these suits. The defendants rely on the general conditions of auction as per which the highest bidder at the auction is required to keep the offer firm for a period of three months to enable its confirmation by the Conservator of Forests. The bids by the three plaintiffs in respect of the respective coupes had been confirmed within the aforesaid period and the confirmation communicated to the plaintiffs. The bids by the three plaintiffs in respect of the respective coupes had been confirmed within the aforesaid period and the confirmation communicated to the plaintiffs. The plaintiffs are, therefore, not entitled to withdraw from or rescind the offer; and on acceptance of the offer, there is a concluded contract between the parties. Execution of formal agreement is only for the purpose of embodying the terms of the contract already concluded between the parties. The contracts in all these cases having been concluded, it is not open to the plaintiffs to unilaterally rescind the same and claim refund of the amounts deposited in pursuance to the auction sale. The defendants have also raised a contention that except in O.S No.322/1975 there was no communication revoking the offer by way of the highest bid by the respective plaintiffs before its confirmation by the Conservator of Forests. The revocation according to the defendants is also of no avail in view of the general conditions of auction. 3. The court below has found that there is no concluded contract in all these cases as, according to that court, unless there is an agreement in terms of Art.299 of the Constitution, it cannot be held that there is a valid contract between the parties. In view of the finding regarding the requirement of a formal contract in conformity with Art.299 of the constitution, the court below has not entered clear findings on the various other issues arising in these suits. 4. The Supreme Court in K.P. Chowdhary v. State of Madhya Pradesh (AIR 1967 SC 203), Mulamchand v. State of Madhya Pradesh (AIR 1968 SC 1218) and State of Madhya Pradesh v. Firm Gobardhan Dass Kailas Nath (AIR 1973 SC 1164), and this Court in State of Kerala v. Kerala Flour Mills (1980 KLT 966) and Spl. Dy. Tahsildar v. Kunju Moideen (1980 KLT 850) have laid down that if a contract with the Government is not one in compliance with Art.299(1) of the Constitution it would be no contract at all, and cannot be enforced either by the Government or by the other person as a contract. Counsel for the appellants submits that the contracts involved in these cases do not fall under Art.299(1) of the Constitution and relies on the following passage in State of Haryana v. Lal Chand (AIR 1984 SC 1326 at 1330): 11. Counsel for the appellants submits that the contracts involved in these cases do not fall under Art.299(1) of the Constitution and relies on the following passage in State of Haryana v. Lal Chand (AIR 1984 SC 1326 at 1330): 11. 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 or 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." 5. In the decisions in K.P. Chowdhary's case and Mulamchand's case the Supreme Court has clearly held that Art.299(1) applies to contracts relating to the sale of timber and other forest produce. Such contracts are not executed under any statutory power. These are contracts executed by the State in exercise of its executive power. In the absence of a formal agreement in terms of Art.299(1), there is no valid contract enforceable at law. 6. The court below in the view it took has not considered the question of the plaintiffs' liability under S.79 of the Kerala Forest Act, 1961. These are contracts executed by the State in exercise of its executive power. In the absence of a formal agreement in terms of Art.299(1), there is no valid contract enforceable at law. 6. The court below in the view it took has not considered the question of the plaintiffs' liability under S.79 of the Kerala Forest Act, 1961. S.79 enacts: "Recovery of money due to Government.- 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." A Division Bench of this Court in Bhaskaran Nair v. State of Kerala (1980 KLT 462) stated thus at page 463: "4 S. 79 of the Kerala Forest Act, 1961 specifically provides that all money payable to the Government on account of timber or forest produce inclusive of any sum recoverable under the terms of a notice relating to sale of timber or forest produce by auction 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. What is sought to be recovered from the appellant under Ext. F6 is an amount said to be recoverable from him under the terms of the notice relating to the sale of forest produce by auction and hence it falls directly within the scope of S.79. It cannot therefore be said that the respondents have acted without jurisdiction in initiating proceedings against the appellant under the Revenue Recovery Act for recovery of the said sum. It cannot therefore be said that the respondents have acted without jurisdiction in initiating proceedings against the appellant under the Revenue Recovery Act for recovery of the said sum. This was the view taken by the learned single judge and, with respect, we are in complete agreement with the same." A Division Bench of this Court in State of Kerala v Aly (1985 KLT 249 -1985 KLJ 1) has held that money payable under the terms of a notice for sale of timber or forest produce by action issued by a Divisional Forest Officer is recoverable under S.79 of the Kerala Forest Act. Even though the mere issue of a sale notice may not create any liability, but when money becomes payable under the terms of such a notice, it is held the amount is recoverable under S.79. Such occasions arise when a person participates in the auction and becomes answerable for money payable under the terms of the auction notice. The liability may not be contractual when tested in the light of Art.299 (1) of the Constitution. But the liability is nevertheless fixed and may be enforceable by the statutory provision contained in S.79 of the Kerala Forest Act. Whether the plaintiffs are entitled to any reliefs in these suits will depend upon the question whether they are liable for any amounts to the State enforceable under S.79 of the Forest Act. This question is not considered by the court below. Issues 3 to 6 in the suit also require reconsideration. 7. We therefore set aside the judgment and decree of the court below in all the three cases and remand these cases to that court for fresh disposal in accordance with law and in the light of the observations and directions contained in this judgment. The costs of these appeals will abide and will be provided for in the fresh decrees to be passed by the court below. 8. The respondents in A.S.Nos.18 and 19 of 1979 have filed memorandums of cross-objections against that part of the decree of the court below declining costs to them. Now that we have directed the costs to be provided for in the fresh decrees to be passed by the court below, it is for that court to consider and provide for the costs incurred by the respective parties in these suits. The appeals and the cross-objections are allowed as indicated above. Now that we have directed the costs to be provided for in the fresh decrees to be passed by the court below, it is for that court to consider and provide for the costs incurred by the respective parties in these suits. The appeals and the cross-objections are allowed as indicated above. The parties will appear before the court below on 19-8-1985.