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2002 DIGILAW 482 (KER)

K. C. Thomas v. State Of Kerala

2002-07-18

M.R.HARIHARAN NAIR

body2002
Judgment :- M.R.Hariharan, J. The petitioner is a forest contractor. Pursuant to a tender he took up the work of clear felling of trees in 1926 and 1927 Mallana Teak Plantations in Kalady Range, Malayattoor Forest Division. The work was for clear felling and it was completed in May, 1997. Thereafter the areas concerned were re-planted. However, a sum of Rs. 23,849/- was realised from the petitioner on the ground that the auction price received by the department in respect of certain quantity of wood of inferior quality was less than the kolevila charges. The security deposit of the petitioner which comes to about Rs.7 lakhs, is also withheld. Apparently this was done in enforcement of the condition that “for all logs and billets selling in the depot at rates less than the kolevila, the kolevila payable to the contractor will be limited to the sale price.” 2. The tender notice based on which the petitioner submitted the tender did not contain any such condition and hence the department is not justified in introducing any such new provision. Under the decisions of the Supreme Court the weaker parties to such contractors have to be relieved from unconscionable contractual obligations. 3. Eventhough this Court directed in Ext.P3 judgment dated. 16-12-1999 that Ext.P2 representation filed by the petitioner invoking the said grounds should be disposed of, the petitioner has not been given any relief through Ext.P4 order. The prayer, therefore, is to quash Ext. P4 and to declare that the forest department is not entitled to retain any amount payable to the petitioner on the ground that the sale price of timber collected on clear felling is below the kolevila rates. There is also a prayer that the department should be directed to return the amount of Rs.23,849/- and the security amount withheld with interest. There is also a prayer for invalidating clause 19 of the agreement. 4. There is also a prayer that the department should be directed to return the amount of Rs.23,849/- and the security amount withheld with interest. There is also a prayer for invalidating clause 19 of the agreement. 4. In its counter affidavit the department took the stand that tender notice is only a preliminary step for the conclusion of a contract; that all the terms and conditions need not be specified in the tender notice; that the attention of the contractor had been drawn to the fact that before submission of tender he should go through the draft of the agreement that he was to execute in due course and under clause 19 of the conditions forming part of the agreement there was reference to the liability for the value of timber sold in auction below working charge. The petitioner is an experienced A Class contractor of the department and is aware of the applicability of such provisions and it was with eyes wide open that he entered into the contract. The dismissal of the petition is hence prayed for. 5. In this Original Petition filed invoking Article 226 of the Constitution of India consideration of matters cannot be akin to what is done in a civil suit. Under the writ jurisdiction the court would be justified in going into the legality and fairness of the decision making process and not the decision as such. Even if clause 19 is declared invalid, that also cannot have retrospective effect so as to benefit the petitioner with regard to the liability impugned in the Original Petition. 6. During hearing the learned counsel for the petitioner placed reliance on the decision of the Apex Court in Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly ((1986) 3 SCC 156) where it is held that contracts which are unconscionable, unfair, unreasonable and opposed to public policy are void. The test of reasonableness or fairness of a clause in a contract where there is inequality of bargaining power is another theory recognized in the sphere of law of contracts. It was held that the Courts will not enforce such provisions and will, when called upon to do so, strike down an unfair and unreasonable contract, or even a clause in the contract entered into between parties who are not equal in bargaining power. It was held that the Courts will not enforce such provisions and will, when called upon to do so, strike down an unfair and unreasonable contract, or even a clause in the contract entered into between parties who are not equal in bargaining power. If the contracts contain terms which are so unfair and unreasonable that they shock the conscience of the court and work out injustice to the weaker party who might have executed the agreement under pressure or circumstances, it might be invalidated. 7. In Delhi Transport Corporation v. D.T.C.Mazdoor Congress (1991 Supp (1) S.C.C. 600)the question of applying the principle of reading down of provisions in enactments was considered. It was found that it cannot be resorted to where the provision is plain and unambiguous and legislative intent is clear. Where a statute is silent or is not expressive or is inarticulate, the court could read down the statute and transmute the inarticulate. It is argued by the learned counsel for the petitioner that this principle might be applied with regard to the contract involved herein as well and that if so it could very well be held that though the contract is valid, the impugned provision which affects the petitioner adversely can be stifled or declared nugatory. 8. I do not think that the above decisions have any application to the facts of this case. The former decision arose in a case relating to master and servant relationship coming under labour law. The observation made on the facts of such a case cannot be applied to a case of contract arising in a totally different context. Likewise, the principle of reading down which might be applied in an appropriate case in the matter of considering a statute cannot be imported into the realm of interpretation of contract. According to me the said two decisions hence have no application to the facts of the present case. 9. Biman Kerishna Bose v. United India Insurance Co. Ltd. ((2001) 6 SCC 477) is relied on to show that even in an area of contractual relations, the State and its instrumentalities are enjoyed with the obligation to act with fairness and in doing so, it has to take into consideration the relevant materials. They must not take any irrelevant and extraneous considerations into account while arriving at decisions. Arbitrariness should not appear in their actions or decisions. They must not take any irrelevant and extraneous considerations into account while arriving at decisions. Arbitrariness should not appear in their actions or decisions. That was a case where the respondent Insurance Company refused to renew the mediclaim policy of the appellant on the ground of the appellant’s unpalatable past conduct in having dragged the company to litigation for non-payment of his claim on a prior instance. 10. The observations aforementioned have to be understood in the circumstances aforementioned and it cannot be stretched to a case where the contractor has given his tender with eyes wide open and understanding the nature, implication and consequences of the transactions that he was entering into. It has to be noted here that the present petitioner is an experienced forest contractor and not a novice in the field. Of course the State has to act with fairness; but it has also to take into account the public interest. 11. When clauses are included in an agreement with the broader perspective of safeguarding the State’s interests, an individual contractor cannot be heard to contend that it worked out loss to him when actually put into effect. If the contractor was not satisfied with the clause or was afraid of possible loss, he could very well have abstained from submitting his tender. But after having taken up the work and performing it and on finding that it was not fetching the profit that he expected, he cannot wriggle out of the situation by dropping out midway through, exposing the State to loss. It is presumably to check such conduct on the part of the contractors that necessary clauses are included in the contract so that consequent losses to the State arising from any lapse on the part of the contractor could be realised from him. Viewed from this perspective, it cannot be said that inclusion of the relevant clause which is intended to ensure the interests of the State and in that way interests of the Public in general is defective in any manner. 12. I shall now consider the contention of the petitioner that until the time when he submitted his tender, he was not aware of the possibility of a clause like Clause 19 of the relevant agreement which reads as follows: “19. 12. I shall now consider the contention of the petitioner that until the time when he submitted his tender, he was not aware of the possibility of a clause like Clause 19 of the relevant agreement which reads as follows: “19. As remuneration for the contract work, the Contractor shall be entitled to receive the payment at the rate of the Kolevila mentioned in the schedule hereto annexed which are inclusive of all incidental charges such as toll, ferry charges etc. Kolevila shall be payable only on production of Depot receipts of acknowledgement of the produce from the Depot Officer concerned. In making payments rounding of amounts shall be done in accordance with the accounts rules in force. Payment of Kolevila will be made on receipt of Kolevila bill and other connected records from the Depot Officers concerned. For all logs and billets selling in the Depots at rates less than the Kolevila, the Kolevila payable to the contractor will be limited to the sale price.” (emphasis supplied) The contention of the petitioner is that in the tender notice there was no such clause and that if he had known of such a clause, he would not have submitted his tender at all. To the question as to why he executed the agreement containing the clause aforementioned, the answer is that it was too late by then to walk out of the tangle in so far as he stood the risk of losing his Earnest Money Deposit at that stage. 13. I find no merit in the aforesaid submission. The tender in question was submitted pursuant to a tender Notification which the petitioner has not produced before Court. Pursuant to the directions of this Court, the learned Government Pleader has made available for my perusal the file containing the relevant document and it is noticed that Clause 21 of the relevant tender Notification reads as follows: “21. Before submitting the tender the tenderer is expected to study and scrutinize all the conditions in the agreement to be executed, the draft of which can be had for perusal at the Divisional Forest Office on any working day during office hours. Before submitting the tender the tenderer is expected to study and scrutinize all the conditions in the agreement to be executed, the draft of which can be had for perusal at the Divisional Forest Office on any working day during office hours. No plea of ignorance of the agreement conditions or no complaint regarding the said conditions received after putting in the tender shall be entertained.” (emphasis supplied) The above condition with regard to which the petitioner has no case of ignorance or incomprehension specifically states that the tender was expected to be submitted only after the contractor like the petitioner had read through the conditions in the prospective agreement which he was to execute in case the tender was accepted. The said clause casts a liability on the petitioner to go through Clause 19 of the agreement which was already been quoted supra and it has thus, to be presumed that the petitioner has submitted his tender with full knowledge about the prospect of Clause 19 being applicable to him. He cannot turn round now and pretend ignorance of there being such a condition. The present contention is clearly an afterthought. 14. During hearing the learned Government Pleader placed reliance on the decision in state of Orissa v. Narain Prasad (AIR 1997 SCC 1493). That was a case where the respondents entered into a contract with the appellant – government of Orissa undertaking to lift a particular quantity of liquor every month and to remit the monthly excise duty in two equal instalments. The contractors committed default and when the amount of excise duty was sought to be recovered from them, they turned round and contended that the undertaking in the contract was not enforceable on various grounds including exposure to huge loss and unfairness of the condition. The Apex Court held that since the licensees have entered into the agreement voluntarily, and since the agreement contained the conditions casting liability on the part of the contractors to pay up the amounts in question and since the contractors have done the business utilising the license obtained by them pursuant to the contract, they cannot be allowed either to wriggle out of the agreement or to challenge the validity of the Rules which were incorporated in the contract. 15. 15. The aforesaid finding is applicable to the facts of the present case and the petitioner having undertaken the work according to the relevant conditions, cannot turn round at a later stage and challenge the validity of the condition itself. Prayer No. 3 of the Original Petition to declare condition No. 19 in Ext.P1 as ultravires and void has therefore to fail. They are bound by the said condition and viewed form that perspective, the petitioner is not entitled to get any of the reliefs mentioned in prayers 1 to 3 of the Original Petition. 16. What remains to be considered is the refund of the security deposit. Two reasons are mentioned in the counter in this regard: (1) In spite of reminders, the D.F.O., Timber Sales Division, Perumbavoor, has not sent up the liability report due from him. (2) The petitioner has not produced the Tax Clearance Certificates due under Clause 36 of the agreement. 17. As regards reason first mentioned above, the petitioner is not at fault. If delay is caused in sending up the certificate without justifying reasons the D.F.O. has to take up personal responsibility for the interest that might have to be paid to the contractor. 18. In the circumstances, the Original petition is disposed of as follows: (1) The petitioner is called upon to submit the records due from him under Clause 36 of the agreement viz. Clearance Certificate from Income Tax, Sales Tax Agricultural Income Tax authorities. This will be furnished by him within two months from this date. (2) The 3rd respondent is directed to refund the security deposit less recoveries, if any, within two months from the date on which the Clearance Certificates are received from the contractor. In case of failure to effect refund as above, the petitioner will be entitled to get interest at 12% per annum on the dues with effect from the date fixed for payment as above from the 1st respondent which in turn might be recovered by the 1st respondent from the officers responsible for the lapse. The original Petition is disposed of as above.