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2011 DIGILAW 1585 (RAJ)

Priya Verma v. State of Rajasthan

2011-08-03

ARUM MISHRA, BELA M.TRIVEDI

body2011
Hon'ble MISHR, CJ.—In the special appeals, the question raised is about enforceability of condition of forfeiture of bond of Rs.5 Lacs entered into by the appellants which provides that if they leave the course of MD/MS/Diploma of Medical Education, the bank guarantee of Rs.5 Lacs will be forfeited. The writ petitions having been dismissed, the intra-court appeals have been preferred. 2. The appellants were admitted in the post-graduation courses. Dr. Vishnu Sharma was admitted in MS (Surgery) course in 2010. He joined the course, Thereafter in 2011, after appearing in the Pre-PG examination again, he was admitted in MD, Radio Diagnosis. Dr. Niranjan Singh was admitted in MD, General Medicine in Medical College, Udaipur in 2010. He again appeared in the Pre-PG examination held in 2011 and was admitted in MD, General Medicine course in SMS Medical College, Jaipur. Dr. Beena Thada was admitted in MD, Anesthesia in 2010. In 2011, after Pre-PG examination, she was admitted in another course. Similarly, Dr. Dinesh Chand Gupta was admitted in 2009 in PG course and in 2010 he was admitted in another different PG course. Dr. Vivek Gupta was admitted in 2009 and in 2010, he was admitted in another course. Likewise, Dr. Priya Verma was admitted in 2010 and she changed it in 2011. Dr. Veena Sharma was admitted in 2009 and she changed the course in 2010. Dr. Rajesh Rawat took admission in PG course in 2010 and admitted in another course in 20.11. 3. The condition stipulated in the prospectus is in Para-7(e) to the effect that the successful candidates after first counseling will have to submit bank guarantee of Rs.5 Lacs at the time of joining/reporting at allotted college so that he/she cannot forego or leave the course or seat. It was also stipulated that if he/she does, the bank guarantee will be forfeited. The condition in the prospectus was in pursuance to the decision taken in the meeting dated 22.10.2007 at the government level by a committee consisting of three members, viz. Chancellor of the Rajasthan University of Health Sciences, its Registrar and Professor of Anatomy, Medical College, Jaipur. Various decisions were taken including taking bond of Rs. 5 Lacs which has been stipulated in the prospectus. The appellants-have joined the new courses and left the seats which were occupied by them earlier. They have availed the seat for one year. Chancellor of the Rajasthan University of Health Sciences, its Registrar and Professor of Anatomy, Medical College, Jaipur. Various decisions were taken including taking bond of Rs. 5 Lacs which has been stipulated in the prospectus. The appellants-have joined the new courses and left the seats which were occupied by them earlier. They have availed the seat for one year. The seats in question which were occupied by the appellants are not available for fresh allotment to the next candidate and they have gone waste. As the appellants left the previous seats and joined the new seats, the said condition of bond was invoked. Hence, the writ petitions have been preferred. 4. The respondents have justified their action on the ground that in view of clear stipulation in the bond and the prospectus, forfeiture of Rs.5 Lacs cannot be questioned. The seats will have to be kept vacant in entire duration of the course depriving the patients from services of efficient Doctors and at the same time, other eligible candidates had been deprived of undertaking the course on the seats in question. Since there is violation as the condition agreed to, the amount has to be forfeited as stipulated in the bond. 5. Shri Sanjeev Prakash Sharma, learned senior counsel appearing on behalf of the appellants alongwith Mr. Ankit Sethi has submitted that as only fee of Rs.1000/- has been realized from the appellants that could have been the basis of realization of the damages for the unexpired term of the seat. Stipulation to forfeit amount of bond is by way of penalty. Thus, is not enforceable in absence of damages being caused to the State due to leaving the seats. He has relied upon Section 74 of the Indian Contract Act, 1872 and decision of the Apex Court in Fateh Chand vs. Balkishan Dass ( AIR 1963 SC 1405 ). Learned senior counsel has also submitted that action tantamount to unjust enrichment at the cost of poor appellants. Thus, reasonable amount be ordered to be recovered instead of the amount of Rs. 5 Lacs. He has also submitted with respect to the appellant Niranjan Singh that he is handicapped person and joined at Medical College, Udaipur. He joined in SMS Medical College, Jaipur considering the fact that he is handicapped person and special treatment is required. It was not possible for him to perform arduous duty at Udaipur. 5 Lacs. He has also submitted with respect to the appellant Niranjan Singh that he is handicapped person and joined at Medical College, Udaipur. He joined in SMS Medical College, Jaipur considering the fact that he is handicapped person and special treatment is required. It was not possible for him to perform arduous duty at Udaipur. He has further submitted that no legal injury has been caused to the State Government. The State could not prove that any damages have been caused due to switch-over of the seats by the appellants. He has also submitted that some of the appellants are in-service candidates. They are not to be paid amount of stipend which was payable to them had they continued on the seats which had been vacated by them. As the State Government would not require to make the payment of stipend to them on account of switching-over to another seat. Thus, State Government has saved amount payable to appellant. 6. Shri N.A. Naqvi, learned Additional Advocate General appearing on behalf of the State has submitted that the amount stipulated in the prospectus and the bond is reasonable one. Considering the fact that huge expenditure is incurred by the State Government in imparting medical education that too at post-graduate level of which judicial notice can be taken. The stipulation cannot be said to be term in terrorum or in the form of penalty. It is not necessary to prove the damages when reasonable amount has been stated in Para-7(e) of the prospectus. He has relied upon the decision of the Apex Court in Oil and Natural Gas Corporation Ltd. vs. SAW Pipes Ltd. ( AIR 2003 SC 2629 ) and has submitted that wastage of one seat is colossal loss which is virtually loss to national wealth as one student who could have been admitted in previous year had been deprived of the course by the appellant. The seats were vacated after one year, they could not have been allotted to anyone. Huge expenditure is also incurred by the State Government in imparting education for one year to the appellants. Thus, the decision of the Single Bench is appropriate as per contract entered between parties. No case for interference is made out in the intra-court appeal. 7. The seats were vacated after one year, they could not have been allotted to anyone. Huge expenditure is also incurred by the State Government in imparting education for one year to the appellants. Thus, the decision of the Single Bench is appropriate as per contract entered between parties. No case for interference is made out in the intra-court appeal. 7. After hearing learned counsel for the parties, we are of the opinion that considering the fact that the seat is of post-graduation medical course, it is obvious that huge expenditure is incurred by the State Government for imparting such education, for providing infrastructure and hospital in the medical colleges. The seats in question which were occupied have gone waste. For one year education was imparted to the appellants of the post-graduation course in which huge expenditure had been incurred by the State Government which has also gone waste. The seats are national wealth which cannot be allotted now to anyone else. Apart from that, the post-graduate students looks after the patients in the hospital attached to college. The State Government has been deprived of one such competent hand as the seats now vacated cannot be occupied by other incumbent and have gone waste. Thus, in our opinion, reasonable amount of Rs.5 Lacs has been stipulated in the condition in Para-7(e) of the prospectus. Para-7(e) is quoted below:- "7(e). The the successful candidates after first counselling will have to submit bank guarantee of Rs.5 Lacs at the time of joining/reporting at allotted college so that he/she cannot forego or leave the course or seat. If he/she does, the bank guarantee will be forfeited. The successful candidates will also be required to execute a bond to the effect that he will not resort to strike or mass C.L." 8. In our opinion, the aforesaid condition cannot be said to be in the form of penalty. Reasonable amount has been stated to be forfeited. In the facts and circumstances of the case, the seat in post-graduation course had been wasted. There are scarcity of such seats. The stipulation of forfeiture of bank guarantee of Rs.5 Lacs is found to be appropriate particularly when the seat had been utilized for duration of one year. 9. Reasonable amount has been stated to be forfeited. In the facts and circumstances of the case, the seat in post-graduation course had been wasted. There are scarcity of such seats. The stipulation of forfeiture of bank guarantee of Rs.5 Lacs is found to be appropriate particularly when the seat had been utilized for duration of one year. 9. The submission raised by the learned counsel appearing on behalf of the appellants that as the amount of fee of Rs.1000/- per month is realized from the students that could have been recovered for the unexpired duration, cannot be accepted as huge expenditure has been incurred while setting up infrastructure in making payment of salary to the teachers and other supporting staff. Moreover, the seats now cannot be allotted depriving other students from getting admission. 10. Similarly, the submission made by the learned counsel is equally not acceptable that payment of stipend will not be required to be made once seat has been vacated. The pertinent question is that the patients are deprived of one hand. The State has not been benefited at all by vacating of seat as the stipend will have to be paid to the appellants when they joined new seats and new course. On the other hand, the State is being deprived of services of the Doctor as the seat cannot be allotted now to any other Doctor. As huge actual expenditure had been incurred and huge loss is caused by deprivation of hands to serve hospitals, we find that the condition of Para-7(e) of prospectus is most reasonable one and is to curb tendency of switching over the seats. In case the appellants were desirous of opting for better seats or subject was not of their liking, they should not have joined the seats in question which they have left. It was open for them to take a firm decision at that very time when seats were allotted to them. They knew of consequence as well of leaving the seat. Thus, nothing can be gained by the appellants by invocation of Article 51A(j) which provides fundamental duty of individual to strive towards excellence in every sphere of life. It was open for them to take a firm decision at that very time when seats were allotted to them. They knew of consequence as well of leaving the seat. Thus, nothing can be gained by the appellants by invocation of Article 51A(j) which provides fundamental duty of individual to strive towards excellence in every sphere of life. It is open to the appellants to have strive towards excellence but, question in the instant case is of going waste of seats which is precious from the point of view of public interest and are national wealth, patients are deprived of competent hands due to vacation of seats. 11. Coming to submission that damage has not been caused to State is not acceptable on facts. The Apex Court in State of M.P. & Ors. vs. Gopal D. Tirthani & Ors. ( 2003(7) SCC 83 ) has laid down that when such condition is reasonable, it is not necessary to prove the damages. In Oil and Natural Gas Corporation Ltd. vs. SAW Pipes Ltd. (supra), the Apex Court has laid down that if the compensation named in the contract for breach is genuine, pre-estimate of loss which the parties knew when they made the contract to be likely to result from the breach of it, there is no question of proving such loss nor such party is required to lead evidence for proving that no loss is likely to occur by such breach. Para-65 of the judgment of Apex Court in Oil & Natural Gas Corporation Ltd. (supra) is quoted below:- "65. It is apparent from the aforesaid reasoning recorded by the arbitral tribunal that it failed to consider Sections 73 and 74 of the Indian Contract Act and the ratio laid down in Fateh Chand's case (supra) wherein it is specifically held that jurisdiction of the court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; and compensation has to be reasonable. Under Section 73, when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss caused to him which the parties knew when they made the contract to be likely to result from the breach of it. Under Section 73, when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss caused to him which the parties knew when they made the contract to be likely to result from the breach of it. This Section is to be read with Section 74, which deals with penalty stipulated in the contract, inter alia relevant for the present case provides that when a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach the party complaining of breach is entitled, whether or not actual loss is proved to have been caused thereby to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named. Section 74 emphasizes that in case of breach of contract, the party complaining of the breach is entitled to receive reasonable compensation. If the compensation named in the contract is by way of penalty, consideration would be different and the party is only entitled to reasonable compensation for the loss suffered. But if the compensation named in the contract for such breach is genuine pre-estimate of loss which the parties knew when they made the contract to be likely to result from the breach of it, there is no question of proving such loss or such party is not required to lead evidence for proving that no loss is likely to occur by such breach. Take for illustration; if the parties have agreed to purchase cotton bales and the same were only to be kept as a stock-in-trade. Such bales are not delivered on the due date and thereafter the bales are delivered beyond the stipulated time, hence there is breach of the contract. Question which would arise for consideration is -whether by such breach party has suffered any loss. If the price of cotton bales fluctuated during that time, loss or gain could easily be proved. But if cotton bales are to be purchased for manufacturing yarn, consideration would be different." 12. In view of aforesaid dictum of the Apex Court, it was for the appellants to prove the condition to be unreasonable. In the facts and circumstances of the case, it was for the appellants to prove that no loss is likely to occur by such breach. 13. In view of aforesaid dictum of the Apex Court, it was for the appellants to prove the condition to be unreasonable. In the facts and circumstances of the case, it was for the appellants to prove that no loss is likely to occur by such breach. 13. Shri S.P. Sharma, learned senior counsel, has relied upon the decision of the Apex Court in Fateh Chand vs. Balkishan Dass (supra) in which the Apex Court has laid down that the measure of damages in the case of breach of a stipulation by way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for. In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to all the circumstances of the case. Jurisdiction of the court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated. However, compensation has to be reasonable and that imposes upon the court duty to award compensation according to settled principles and it does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted because compensation for breach of contract can be awarded to make good loss or damage. The Apex Court has laid down in Fateh Chand (supra) as under:- "(10). Section 74 of the Indian Contract deals with the measure of damages in two classes of cases (i) where the contract names a sum to be paid in case of breach and (ii) where the contract contains any other stipulation by way of penalty. We are in the present case not concerned to decide whether a contract containing a covenant of forfeiture of deposit for due performance of a contract falls within the first class. The measure of damages in the case of breach of a stipulation by way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for. In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to ail the circumstances of the case. The measure of damages in the case of breach of a stipulation by way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for. In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to ail the circumstances of the case. Jurisdiction of the court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; but compensation has to be reasonable, and that imposes upon the court duty to award compensation according to settled principles. The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of actual loss or damage; it does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach." 14. There is no dispute with the aforesaid proposition. But, in the instant case seats have gone waste. The State has incurred huge expenditure in imparting education for one year. The patients in attached Hospitals to medical colleges have been derived from getting services of efficient Doctors as the seats cannot be allotted now. Injury has been caused to the cause of education such seats are national wealth and cause of service in the field of health services. Thus, the ratio of aforesaid decision in facts of the case is not attracted. It is not penalty which is mentioned in the bond. In our opinion, it is reasonable amount stipulated to be paid in wake of breach of condition of bond. It cannot be said to be a term in terrorum. 15. Thus, the ratio of aforesaid decision in facts of the case is not attracted. It is not penalty which is mentioned in the bond. In our opinion, it is reasonable amount stipulated to be paid in wake of breach of condition of bond. It cannot be said to be a term in terrorum. 15. Exception to Section 74 of the Indian Contract Act, 1872 provides that recognisance or other instrument of the same nature or under the provisions of any law, or under the orders of the Central Government or of any State Government, gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable upon breach of the condition of any such instrument to pay the whole sum mentioned therein. In view of exception in our view, there is no substance in the submission of the appellants that only actual damages caused can be recovered. Exception to Section 74 is clearly attracted the nature of duties to be performed to the patients is an act in which public are interested. Thus, the bond clearly falls within the exception to Section 74 of the Act of 1872. Exception to Section 74 is to the following effect:- "Exception: When any person enters into any bail bond, recognisance or other instrument of the same nature or under the provisions of any law, or under the orders of the Central Govt. or of any State Govt., gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable upon breach of the condi-tion of any such instrument to pay the whole sum mentioned therein." 16. Learned counsel appearing on behalf of the appellant has also submitted that such a stipulation is outcome of superior bargaining power of the State Government thus, is not enforceable. He has relied upon the decision of the Supreme Court in Central Inland Water Transport Corporation Limited & Anr. vs. Brojo Nath Ganguly and Anr. and Central Inland Water Transport Corporation Limited & Anr. vs. Tarun Kanti Sengupta & Anr. (1986) 3 SCC 156 . He has relied upon the decision of the Supreme Court in Central Inland Water Transport Corporation Limited & Anr. vs. Brojo Nath Ganguly and Anr. and Central Inland Water Transport Corporation Limited & Anr. vs. Tarun Kanti Sengupta & Anr. (1986) 3 SCC 156 . In Brojo Nath Gaguly's case, provision for consideration was under the one under which permanent employee could have been removed by notice of three months such a condition had been held to be outcome of superior bargaining of the employer which is not the case here. The condition in instant case is found to be reasonable and with an objective to take care that the seats do not go waste which causes colossal financial loss deprivation of services and is not in public and national interest. The ratio of the aforesaid decisions is not attracted in the present matter. Condition in the bond in facts and circumstances of case cannot be said to be unreasonable or unconscionable or outcome of superior bargaining power or opposed to public policy or violative of Section 23 of the Contract Act which hits at contract which are opposed to public policy, forbidden by law, defeat provision of any law which involves injury to the person or property of another. Hence, the same is enforceable. 17. Shri Sharma has also submitted that action of the respondents amounts to unjust enrichment. In support of his submission, he has placed reliance in Union of India & Ors. vs. Dhanwanti Devi & Ors. (1996) 6 SCC 44 and Urban Improvement Trust, Bikaner vs. Mohan Lal (2010) 1 SCC 512. In Union of India & Ors. vs. Dhanwanti Devi & Ors. the Apex Court has observed in Para-19 as under:- "19. The contention that the denial of solatium and interest in respect of the property acquired under the Act would be an unjust enrichment of the State, is devoid of substance. The public money is credited to the Consolidated Fund which is expended in accordance with the Appropriation Bill passed by Parliament or the State Legislature in accordance with the provisions of the Constitution. The amount collected would be expended for the purposes of appropriation and for implementation of the Directive Principles of State policy and the law made by the appropriate legislature or the executive policy in furtherance thereof. The amount collected would be expended for the purposes of appropriation and for implementation of the Directive Principles of State policy and the law made by the appropriate legislature or the executive policy in furtherance thereof. Therefore, the non-payment of solatium and interest does not independently get into the coffers of the public exchequer nor does the State enrich itself. The public money is expended only for public purpose. The concept of unjust enrichment by the State is alien to and in derogation of the constitutional scheme and public policy. The general principle is that one should not be permitted to unjustly enrich himself at the expense of others. Unjust enrichment of a person occurs when he has and retains money or benefits which in justice and equity belongs to another. Three elements must be established in order to sustain a claim based on unjust enrichment, the benefit conferred upon the defendant by the plaintiff; appreciation of knowledge by the defendant of the benefit; and the acceptance or retention by the defendant of the benefit under such circumstances as to make it inequitable for the defendant to retain the benefit without payment of its value. These principles specifically absent in the case of omission by a statute, are made by the competent legislature to award interest or solatium, in addition to compensation. So, it cannot be characterised as unjust enrichment where such action does not involve violation of law or is not opposed to public policy either directly or indirectly when the statute prescribes the principle for payment of compensation and omits as its policy to provide for the payment of interest and solatium as components of compensation. It is the legislative public policy to provide for acquisition of the private property for a public purpose. The State pays compensation for the acquired land in accordance with the principle laid down in the statute. It would, therefore, be illogical to contend that by legislative omission to pay solatium and interest the State enriches itself unjustly at the expense of the private person. The contention, therefore, is unsustainable in law." 18. In the instant case, the State is not going to receive any unjust enrichment. None of three ingredients are available i.e. retention of money belonging to other, neither any benefit: has been conferred by the appellants on respondents nor question of inequitable consideration of holding such benefit arises against State. The contention, therefore, is unsustainable in law." 18. In the instant case, the State is not going to receive any unjust enrichment. None of three ingredients are available i.e. retention of money belonging to other, neither any benefit: has been conferred by the appellants on respondents nor question of inequitable consideration of holding such benefit arises against State. Thus, claim based on unjust enrichment has no legs to stand. As a matter of fact for one year, the State has actually spent amount or the education and expenditure incurred in such education is huge. 19. With respect to appellant Niranjan Singh, he has availed seat of M.D. Medicine in Medical College, Udaipur he has abandoned it and now has shifted to SMS Medical College, Jaipur on seat in same subject. There was no reason for him not to continue at Udaipur. The disability claimed remains same at Udaipur and in Jaipur. Thus, there was no reason to waste the seat occupied in Udaipur college and shift in SMS College, Jaipur in the same subject. Thus, his case cannot be treated differently. 20. In view of aforesaid discussion, we find that the action of forfeiture of amount stipulated in bond and order passed by the Single Bench calls for no interference. The appeals being devoid of merits are hereby dismissed. Stay applications are also rejected.