Research › Search › Judgment

Karnataka High Court · body

2009 DIGILAW 711 (KAR)

STATE OF KARNATAKA v. M. REVANNA

2009-09-02

K.L.MANJUNATH, P.D.DINAKARAN

body2009
JUDGMENT Legality and correctness of the order passed in W.P. No. 15158 of 2007, dated 6-3-2008 by the learned Single Judge of this Court, is called in question in this appeal by the State and the Forest Department. 2. The facts leading to this case are as hereunder: Forest Department conducted an auction of timber lots by notification dated 24-4-2007. Respondent participated in the tender and he became successful bidder in respect of 16 lots stated in para 1 of the writ petition. Subsequently, by an order dated 20-3-2007, the bid was confirmed in favour of the respondent-writ petitioner. Writ petitioner also participated in an auction conducted pursuant to another notification and purchased 5 lots, as stated in para 2 of the writ petition and the auction made by the respondent in respect of those 5 lots was also confirmed vide order dated 18-4-2007. As per the terms and conditions of the contract, respondent-writ petitioner was granted two months time to pay the sale price and required to lift the wooden logs purchased by him in the auction within 90 days from the date of auction. Respondent in terms of the contract could not pay the amount within the time stipulated and did not lift the material purchased by him, which resulted in passing an order forfeiting one-fourth of the bid amount and for re-auction by orders dated 6-7-2007, 24-7-2007/18-8-2007. The said orders forfeiting one-fourth of the bid amount and to re-auction the wood, was questioned by the respondent-writ petitioner by filing a writ petition. 3. The main contention of the respondent-writ petitioner before the learned Single Judge was that he could not deposit the amount on time on account of his illness since he was suffering from acute lumbo-saceal strain. According to him, he was advised by the doctor to take complete rest. Therefore he contends that he could not pay the amount within the stipulated period. He also gave a representation stating that in other cases Department has reconsidered the matter by collecting interest. On the ground that his request has not been considered, writ petition was filed to quash the orders of forfeiture and re-auction dated 6-7-2007, 24-7-2007/18-8-2007 and to issue a direction to accept the balance sale consideration along with interest at 18% p.a., thereby permitting the writ petitioner to lift the wooden logs. 4. Government filed a detailed counter. On the ground that his request has not been considered, writ petition was filed to quash the orders of forfeiture and re-auction dated 6-7-2007, 24-7-2007/18-8-2007 and to issue a direction to accept the balance sale consideration along with interest at 18% p.a., thereby permitting the writ petitioner to lift the wooden logs. 4. Government filed a detailed counter. According to the Government, writ petition was not maintainable, as sale of the wooden logs was subject to the conditions enumerated in the notification. According to the appellants, it was well-within the knowledge of the respondent-writ petitioner that he had to deposit the money in terms of the notification and was required to adhere to the terms and conditions of the notification. Since there is a failure on his part in not depositing the money in accordance with the contractual terms, the amount has been forfeited and the wooden logs have been ordered for reauction. It is further contended that respondent-writ petitioner cannot invoke the provisions of Article 226 of the Constitution of India as the relief is arising out of a contractual obligation. In the circumstances, Government requests the Court to dismiss the writ petition. 5. The learned Single Judge after hearing the parties, mainly on the ground of humanitarian consideration of equity, has allowed the writ petition directing the Forest Department to accept the balance amount along with interest at 18% p.a. and to release the timber. This order is called in question in this appeal. 6. The matter was heard by this Court, and judgment was also dictated dismissing the appeal. Thereafter, before signing the order, since it was realised that the judgment was rendered without noticing the rulings of the Hon'ble Supreme Court, the matter was posted before the Bench again for being spoken to' on 20-4-2009. On 20-4-2009, after hearing the learned Counsel for both the parties, the earlier order dated 13-3-2009 was recalled and fresh arguments were heard. 7. The main contention of the Government Advocate before us is that the writ petition was not maintainable to enforce contractual obligation. He contends that the respondent-writ petitioner, having realised the terms and conditions of the notification, had participated in the auction and having participated and becoming a successful bidder had failed to deposit the money, which resulted in a great loss to the department. He contends that the respondent-writ petitioner, having realised the terms and conditions of the notification, had participated in the auction and having participated and becoming a successful bidder had failed to deposit the money, which resulted in a great loss to the department. He further contends that even if the respondent was suffering from some ailment, he was not prevented to deposit the money through any other person. Therefore, the reasoning assigned by the respondent in the writ petition could not have been considered by the learned Single Judge. He further contends that the terms and conditions of a contract or auction notification cannot be varied at the instance of the respondent-writ petitioner by any Court while exercising powers under Article 226 of the Constitution of India. Learned Government Advocate relying upon the judgment of the Division Bench of this Court in Mysore Minerals Limited, Bangalore v S. Pradeep Exports, Hospet, Bellary District and Others1, contends that the terms and conditions of the contract cannot be varied at the instance of the party as the same is not available for judicial review. In the circumstances, he requests the Court to allow the writ appeal. 1 2009(5) Kar. L.J 443 (DB) 8. Per contra, Counsel for the respondent-writ petitioner contends that the learned Single Judge was justified in granting relief to the respondent taking into consideration the financial loss caused to the respondent on account of his illness. According to him, the cause shown by the respondent was bona fide and the order of the learned Single Judge does not call for any interference. 9. Having heard the Counsel for the parties, we have to examine whether the learned Single Judge has committed any error in granting relief to the respondent. 10. Facts of this case, as narrated above, are not in dispute. Pursuant to the auction notice, along with others, the respondent-writ petitioner has also participated in a public auction conducted by the Forest Department. It is also not in dispute that the respondent became a successful bidder in respect of two lots of timber as detailed in paragraphs 1 and 2 of the writ petition. It is also not in dispute that the auction was confirmed in favour of the respondent. But unfortunately respondent has failed to adhere to the terms and conditions of the notification. It is also not in dispute that the auction was confirmed in favour of the respondent. But unfortunately respondent has failed to adhere to the terms and conditions of the notification. The short question that has to be considered by us is that if there is a breach of contract, whether this Court can grant any relief to the respondent-writ petitioner under Article 226 of the Constitution of India. The Division Bench of this Court, while considering similar matter in W.A. No. 342 of 2008 disposed of on 24-4-2009, referring to the various judgments of the Hon'ble Supreme Court, has held as follows.- "10. ... It may not be proper for this Court to affix its seal in the matter of contractual obligations between the parties which are to be decided only as per the terms of the contract entered into between the parties. 11. ... It may not be proper for this Court to affix its seal in the matter of contractual obligations between the parties which are to be decided only as per the terms of the contract entered into between the parties. 11. The law on the point is well-settled by the Apex Court in the case of ABL International Limited v Export Credit Guarantee Corporation of India Limited, (2004)3 SCC 553 , wherein the following earlier decisions of the Apex Court are referred to: (i) K.N. Guruswamy v State of Mysore and Others, AIR 1954 SC 592 ; (ii) Basheshar Nath v Commissioner of Income-tax, Delhi and Rajasthan and Another, AIR 1959 SC 149 ; (iii) State of Madhya Pradesh and Another v Thakur Bharat Singh, AIR 1967 SC 1170 ; (iv) D.F.O. South Kheri and Others v Ram Sanehi Singh, AIR 1973 SC 205 ; (v) Erusian Equipment and Chemicals Limited v State of West Bengal and Another, AIR 1975 SC 266 ; (vi) M/s. Radhakrishna Agarwal and Others v State of Bihar and Others, AIR 1977 SC 1496 ; (vii) M/s. Kasturi Lal Lakshmi Reddy v State of Jammu and Kashmir and Another, AIR 1980 SC 1992 : (viii) Gujarat State Financial Corporation v Lotus Hotels Private Limited, AIR 1983 SC 848 ; (ix) Life Insurance Corporation of India v Escorts Limited and Others, AIR 1986 SC 1370 ; (x) M/s. Dwarakadas Marfatia and Sons v Board of Trustees of the Port of Bombay, AIR 1989 SC 1642 ; (xi) Bareilly Development Authority and Another v Ajay Pal Singh and Others, AIR 1989 SC 1076 ; (xii) Kumari Shrilekha Vidyarthi and Others v State of Uttar Pradesh and Others, AIR 1991 SC 537 ; (xiii) L.I.C. of India and Another v Consumer Education and Research Centre and Others, AIR 1995 SC 1811 ; (xiv) Style (Dress Land) v Union Territory, Chandigarh and Another, AIR 1999 SC 3678 ; (xv) Air India Limited v Cochin International Airport Limited and Others, AIR 2000 SC 801 ; (xvi) Kerala State Electricity Board and Another v Kurien E. Kalathil and Others, AIR 2000 SC 2573 . 12. 12. In ABL International Limited's case, the Supreme Court has demarcated the power of the judicial review under Article 226 of the Constitution of India in contractual matters as hereunder: "(1) Judicial review is permissible both at the pre-contract stage and post-contract stage though the scope of interference varies depending upon the stage of review. The scope of judicial review in post-contractual matters is very much narrower. '(2) In pre-contract stage the action of the State of its instrumentality has to satisfy the test of reasonableness as enunciated by the Supreme Court in various decisions interpreting Article 14 of the Constitution of India. Action should be fair, just, reasonable and devoid of arbitrariness. (3) The pre-contract stage squarely falls within the realm of public law character and, therefore, the decision must not only be tested by principles of Wednesbury's principles of reasonableness but must be free from arbitrariness not affected by bias or actuated by mala fides. (4) Post-contract stage falls within the realm of private law. But nonetheless the requirement of Article 14 and contractual obligations are not alien concepts. They can co-exist. (5) Every holder of a public office by virtue of which he acts on behalf of a State or public body is ultimately accountable to the people in whom sovereignty vests. Therefore, even in this private law sphere when a public officer exercises power it is in the nature of a public duty and, therefore, as his action is in import of public interest that factor alone is sufficient to import at least the minimum requirements of public law obligations. The requirement of Article 14 being the duty to act fairly, justly and reasonably, such action of a public officer in discharge of public duty should conform to the said requirement of law. (6) The order terminating a contract on the ground of breach of terms of the contract is not vitiated for not disclosing the reasons, the application of mind, by way of consideration of the case of the defaulting party. Such an order when challenged in Court could be justified by producing the relevant records and showing the applications of mind to the said material after following the principles of natural justice which would meet the requirement of law as Courts are only concerned with the process of decision making and not the decision itself. Such an order when challenged in Court could be justified by producing the relevant records and showing the applications of mind to the said material after following the principles of natural justice which would meet the requirement of law as Courts are only concerned with the process of decision making and not the decision itself. (7) When some defect is found in the decision making process, the Court must exercise its discretionary power under Article 226 with great caution and circumspection and should exercise it only in furtherance of public interest and not merely on the making out a legal point. (8) Writ petition against a State and its instrumentality, arising out of contractual obligation is maintainable. Even disputed questions of fact could be gone into, if necessary by recording of evidence. Monetary claims can also be entertained. But the normal rule is not to entertain such claims. But, only in exceptional cases when the circumstances warrant such an interference the Court has the power and could be exercised. In other words, only in rarest of rare cases the exercise of power is justified. It is not want of power or jurisdiction. It is a case of self-restraint. (9) A contract would not become statutory simply because it is for construction of a public utility and it has been awarded by State or a statutory body. (10) The interpretation and implementation of a covenant in a contract ordinarily cannot be the subject-matter of writ petition, and the same has to be determined according to the principles of the Contract Act". 11. In the said judgment, it is further observed as follows.- "14. ...... If the parties are agreeing to the terms of the contract, nothing prevents them to withdraw the writ petition and enter into an agreement independently. x x x x 16. ....... It is therefore obvious that what the parties want is only the seal of this Court for fixing the rate of Rs. 811/- PMT, which in our considered opinion is not permissible in law, as the contractual agreements has to be settled only between the parties and this Court, by invoking the powers of judicial review, cannot be made as a party to such contracts, as held by Supreme Court in ABL International Limited's case, wherein various judgments of Hon'ble Supreme Court have been referred to above". (emphasis supplied) 12. (emphasis supplied) 12. Following the judgment made in Writ Appeal No. 342 of 2008 disposed of on 24-4-2009, we are of the opinion that the learned Single Judge has committed an error in allowing the writ petition on the ground of equity, inasmuch as while enforcing the terms and conditions of the contract the question of equity does not arise at all. Since the learned Single Judge has not considered the scope and maintainability of the writ petition, we are of the view that an error has been committed by him in granting the relief to the respondent-writ petitioner. 13. In the result, we allow this appeal. Order passed by the learned Single Judge in W.P. No. 15158 of 2007, dated 6-3-2008 is hereby reversed and the writ petition filed by the respondent-writ petitioner is dismissed.