REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6274 OF 2008
[Arising out of SLP (Civil) No. 24242 of 2005]
M/s. Karnataka State Forest Industries Corporation ...Appellant
Versus
M/s. Indian Rocks ...Respondent
WITH
CIVIL APPEAL NO. 6275 OF 2008
[Arising out of SLP (Civil) No. 23148 of 2005]
M/s. Karnataka State Forest Industries Corporation ...
Appellant
Versus
State of Karnataka and others ... Respondents
JUDGMENT
S.B. SINHA, J :
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1. Leave granted.
2. These two appeals involving similar questions of law and fact were
taken up for hearing together and are being disposed of by this common
judgment. We may, however notice the fact of the matters involving in both
the appeals separately.
Civil Appeal arising out of SLP ) No. 24242 of 2005
3. Appellant is a Government of Karnataka Undertaking engaged in sale
of granite of seized and confiscated granite blocks to persons who intend to
purchase in the Tender-cum-Allotment sale on “as is where is basis”. The
relevant terms of the said tender were:
“6. The tender/bidder should make arrangements to
obtain transit permit at his own cost from Forest
Department/KSFIC.
9. The successful Tenderer/Bidder should pay 1/10th
amount of the sale value plus taxes as follows:-
(a) Un-polished Granite Blocks 10% S.T.
(b) Sur-charge on S.T. 15%
(c) Forest Development Tax 5%
(d) Income Tax 15%
(e) Surcharge on I.Tax 5%
On the same day, the balance amount will be
payable as follows:
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(a) 50% within 15 days of the intimation of
confirmation of tender.
(b) the remaining amount shall be paid by the
end of the June, 1995 or before the stones
are lifted whichever is earlier. The period
of the contract shall be upto April, 30th
1995.
11. In case of breach of any of the conditions
mentioned above, the Managing Director, KSFIC
Ltd., is at liberty to cancel the Tender/Bid amount
and make materials at the risk and cost of the
original Tenderer/Bidder and the EMD/Security
Deposit furnished by the Tenderer/Bidder be
forfeited. If the K.S.F.I.C. incurs any extra
expenditure in this regard the same will be
recoverable from the original Tenderer/Bidder.
18. The successful Tenderer/Bidder shall make their
own arrangements for inspection of seized and
confiscated Granite blocks at their own cost
located at different places in the Ranges as the
offer for sale is on. AS IS WHERE IS BASIS.
Rejection due to colour, cracks etc. will not be
entertained once the offer is submitted.
19. Sale of granite blocks is agreed upon in good faith
and K.S.F.I.C. Ltd. shall not be liable for any
damages or otherwise for failure to carryout the
obligation which may be occasioned by Act of
God, War, Civil Disturbance disorders, strike etc.,
or regulation of Government authorities or
agencies or similar circumstances beyond its
control.
20. Breach of any of the conditions specified supra, by
the purchaser will entail forfeiture to K.S.F.I.C. of
all deposits paid by him. Further, the Granite
Blocks already paid for and lying in the field will
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also be liable to be attached towards the balance
due. The Granite Blocks purchased, whether paid
or not will also be resold at the risk and cost of the
original Tenderer/Bidder who will be liable to
make good to Government any loss arising out of
such resale but shall not be entitled to profits.
34. No material shall be removed from the contract
area unless it is covered by transit pass in
accordance with the rules under Section 50 of the
Karnataka Forest Act, 1963. If any problems arise
while lifting the blocks from site, necessary
assistance will be provided if need be under
special circumstances.”
4. Respondent participated in the tender process. It was successful in
purchase of:
(i) one lot containing 25 blocks (Mulegundi Area),
(ii) one lot containing 37 blocks (Mulegundi Area) and
(iii) one lot containing 43 blocks (Nehrudoddi Area).
5. The total sale value of the granite sold to the respondent herein was
Rs. 21,24,574.85. Out of the aforementioned sum, admittedly, the
respondent on or about 11.07.1995 had deposited a sum of Rs.
11,84,447.90. The balance amount due to the appellant from the respondent
was Rs. 9,40,126.55. In terms of the said tender, the respondent was
required to pay not only 10% of the value of the goods but also taxes and
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other statutory dues paid by the appellant herein. Appellant has paid an
amount of Rs.6,85,642/- being the royalty amount, Forest Development Tax,
Karnataka Sales Tax and Surcharge on Karnataka Sales Tax etc.
6. Respondent allegedly refused to pay the amount to which it was said
to be otherwise liable in terms of Clause 8 of the terms and conditions of the
tender.
7. There appears to be a dispute as regards the amount payable by the
respondent on the aforementioned account insofar as whereas according to
the appellant the amount of granite including tax and other statutory
liabilities in respect of 10 blocks of granite which had been received by the
respondent and transported by it is Rs. 3,25,193.90; according to the
respondent, the total amount of goods received was Rs. 2,39,969.35.
Appellant contended that the contract was not concluded within the
stipulated period of time as the entire payment was not made by June, 1995
or before lifting of the stones whichever is earlier, as envisaged under
Clause 9(b) of the terms and conditions of the tender.
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8. Concededly the Government of Karnataka was approached. A
question was also raised in the Legislative Assembly. The Principal
Secretary, Forest, Ecology and Environment Department, Government of
Karanataka issued a letter on or about 16.01.1996, which reads as under:
“Sub: Permission to Karnataka State Forest
Industries Corporation Ltd., for the sale of
Confiscated Granite Block through Tender.
With reference to the above subject, a copy
of the Letter dated 14.12.1995 received from the
Chairman & Managing Director, KSFIC Ltd., is
here with enclosed. The KSFIC Ltd., has sold the
Granite Blocks which were seized by the Forest
Department, through public auction during the
month of March 1995. Since the Granite scandal
is under enquiry of Legislative Committee, it was
decided not to confirm the said sale proceedings.
In the meanwhile the Chairman & Managing
Director of the Corporation reported to the
Government that the purchasers are pressurizing
for issue of transit permit to lift the Granite Blocks
or refund their amount. They also requested the
Government to bring these facts to the notice of
the Legislative Committee.
Since the Joint Legislative Committee has
objected for issue of transit permit by the Forest
Department and also KSFIC Ltd., to granite blocks
as there was no provision for the same in the
KMMC Rules, 1994, the Government has
suggested to the KSFIC Ltd., to take action with
regard to transfer the Granite blocks to the
Department of Mines and Geology and for refund
of amount to the bidders (copy enclosed). But,
directed to keep the Granite blocks in safe custody6
7till the decision of the Joint Legislative
Committee.
I have been directed to bring the contents of
the Corporation letter and the Government
suggestion to the Corporation thereon, to the
notice of the Joint legislative Committee.”
9. However, as there exists a dispute with regard to its correct
translation, we may also notice the text of the said letter from the judgment
of the learned Single Judge, which reads as under:
“In between this, the President and Managing
Director of the Corporation reported to the
Government that the purchasers are insisting on
the Corporation to issue permit for transportation
of granite and also to refund the amount received
from them. The Corporation has also prayed for
bringing the said matter to the notice of the Joint
House Committee.
Since the Joint House Committee has objected the
issue of permits by the Forest Department as well
as by the Corporation and since there is no
provision for the same in K.M.M.C. Rules, 1994,
Government has directed the Corporation to take
appropriate action for transferring the granite
blocks which are under its custody to the
Department of Mines and Geology and also to
return the amount (liable to be refunded) to the
concerned bidders, which is already collected from
them. But, it has further directed to preserve the
granite stones safely till the decision of the Joint
House Committee.”
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10. It is, however, stated that the appellant did not agree to the
aforementioned suggestions/direction of the State and responded thereto
stating that it was not feasible to refund the sale price. It had been stated
that necessary permit should be directed to be issued in this behalf. By its
letter dated 2.12.1996, appellant requested the respondent to remit the
balance amount, stating:
“You are requested to remit the balance amount of
the total purchase value of the Granite Blocks
purchased by you in the auction sale conducted by
the KSFIC Ltd. during the Month of March –
1995.”
11. However, the said request was not acceded to. Appellant allegedly
issued various other letters to the same effect on 29.01.1997, 25.04.1997
and 30.06.1997. Ultimately by its letter dated 5.06.1999, the appellant
informed the respondent to immediately remit the amount and lift the
granite blocks by 30.06.1999 failing which, it was threatened, the amount
deposited shall be forfeited, stating:
“We therefore request you to kindly make
immediate arrangements for remitting balance
amount and lift the granite blocks purchased by
you in Tender-cum-Auction-Sale held during the8
9month of March-1995 within 30th June 1999
without any further delay. If we do not hear
anything from your side within the time stipulated,
action will be initiated to forfeit all deposit amount
paid by you as per clause (11), (16) and (20) of the
Tender Conditions, which may please be noted.”
12. Respondent filed a writ petition, which was marked as Writ Petition
No. 27456 of 1999. It is not in dispute that those permits were not granted
in favour of the respondents. Respondents in their writ petition while
contending that the agency of the appellant was terminated, stated :-
“8. It is humbly submitted that the petitioner
has paid sum of Rs.11,84,447.90 towards the cost
of granite blocks. The petitioner after paying the
huge amount of Rs.11,84,447.90 requested the
Respondent to obtain the mineral dispatch permit
from the Department of Mines and Geology for
transporting the granite blocks. After receipt of
the money the Respondent did not pursue the
matter in obtaining the mineral dispatch permits
from the department of transport the granite
blocks. The effort of the petitioner to convince the
Respondent to obtain the mineral dispatch permit
did not yield and result and the Respondent failed
to obtain the mineral dispatch permits in terms of
Rule 42 of the Rules.
9. It is humbly submitted that the Respondent
Corporation appointed the Jadhav, Range Forest
Officer to issue the permits. The said Range
Forest Officer has issued permits which are termed
as fake permits. Several persons appear to have
transported the granite blocks on those fake9
10permits. Under those circumstances the Karnataka
Legislative Assembly constituted Committee of
legislators to go into the question of fake permits
issued by the said Jadhav. It may also be relevant
to mention that the criminal case was filed against
various persons and the matter was handed over to
the COD of Police for investigation. It is also
relevant to mention that both the houses of the
legislature was rocked by the fake permits scandal.
10. It is humbly submitted that the Legislative
Committee which was appointed for the purpose
of looking into the fake permits has took (sic) a
decision that the entrustment of selling of the
seized and confiscated granite blocks in favour of
the Respondent Corporation should be dispensed
forthwith thereby terminating the agency given to
the Respondent. The Government on the
instructions of the Legislators Committee
cancelled the agency that was given to the
Respondent and instructed the forest corporation
to return the granite blocks to the department of
Mines and Geology (sic) is the owner of those
Granite blocks. Only for the purpose of selling
those granite blocks it was entrusted to the
Respondent Corporation. The Corporation ceased
to have its power or jurisdiction to continue to sell
the granite blocks with effect from 16.01.1996.
The true copy of the Government Notification
dated 16.01.1996 is produced herewith as
ANNEXURE-C.”
In the aforementioned premise, it was inter alia prayed :-
b) ISSUE an order, direction or writ in the
nature of Mandamus, directing the Respondents to
implement the Government Order Annexure-C
dated 16.01.1996.
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c) ISSUE an order, direction or in the nature of
mandamus, directing the Respondents to refund
sum of Rs.9,44,478.55 together with interest
calculated at 18% in terms of the Government
order dated 16.01.1996 Annexure-C.”
13. Appellant filed its counter-affidavit in the said writ petition.
14. It also filed an additional affidavit, stating:
“10. It is relevant to submit here that the
petitioner should have completed the entire tender
cum auction transaction by the end of 15th July
1995 by making payment of taking delivery of the
entire granite blocks purchased as per Respondent
letter dated 26.06.1995 at ANNEXURE R14.
However, the petitioner delayed the same. In fact,
the petitioner should have completed all these
transactions before the issue of Government letter
dated 16.01.1996 at Annexure-C. The Respondent
cannot be blamed for failure and delay of the
petitioner in not completing the transaction before
the Government letter dated 16.01.1996. In fact,
the petitioner in letter dated 19.04.1997 expressed
willingness to take the granite as per
ANNEXURE-R15. Then Respondent sent a letter
dated 28.4.1997 as per ANNEXURE-R16 to the
Deputy Conservator of Forest. Inspite of reminder
dated 30.06.1997 as per ANNEXURE-R17 the
petitioner has not complied with the directions in
payment of the balance amount. This Respondent
is entitled to forfeit the entire amount as per clause
….illegible ….. the tender for failure of the
petitioner in not paying amount and taking11
12delivery of the goods within the stipulated time.
Therefore, the petitioner cannot blame this
Respondent.
11. Inspite of all this, and without prejudice to
the various contentions, the Respondent humbly
submits that, if the petitioner pays the balance
amount of Rs.9,40,426.55 and penalty
immediately as per conditions of sale, this
Respondent is ready and willing to complete the
sale transactions by obtaining necessary permits
from the concerned authorities as is being done in
the case of other bidders who have paid full value
after 16.1.1996 Annexure-C.
15, A learned Single Judge of the High Court by its order dated
19.02.2001 allowed the writ petition directing the appellant – Corporation
to refund a sum of Rs. 3,75,905.35 with interest from the date of issuance of
the letter, stating :
“8. In view of terms of Auction notice, if the
balance amount of the sale considerations is not
paid, the sale could not have been confirmed and a
forfeiture would have resulted. The forfeiture
would have been unconditional but for the
intervention of Annexure C, where the owner of
goods sold, called upon the agent to refund the
excess amount. The agent has to abide by the
instructions of the Principal. He has to deal with
the estate of his principal as he commands.
9. A perusal of Annexure H shows that the
Respondent has collected whatever tax is due
under the sale and prima facie there is no scope for12
13fresh demand. Besides, the petitioner cannot also
dispute its liability to pay the stipulated tax, it
being a condition of sale. In these circumstances,
there is a no justification in the demand made by
the Respondent in Annexure H. In such
circumstances, Annexure H is quashed. There will
be direction to the Respondent to refund the
amount, a sum of Rs.3,75,905.35 with the interest
from the date of Annexure C. The right of the
Respondent to claim any damage sustained from
its principal is left open. W.P. is disposed of.”
16. A writ appeal preferred thereagainst by the appellant has been
dismissed by reason of the impugned judgment.
Civil Appeal arising out of SLP (C) No. 23148 of 2005
17. Respondent No.3, on 6th March, 1995, participated in the tender-cum-
auction sale and was a successful bidder in respect of 3 lots of granite
containing 75 granite blocks. It again participated in the tender auction on
14th March, 1995 and was declared successful in respect of 41 granite
blocks. The total sale value of the granites purchased by respondent No.3,
according to the appellant, was Rs.21,91,234.60 ps. Out of said amount, it
deposited a sum of Rs.11,47,149.77. The sale price included various
taxes/royalty.
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18. Appellant released 31 granite blocks of the value of Rs.5,92,556.57
ps. Vide its letter dated 28th June, 1995 appellant requested the respondent
No.3 to lift the remaining granite blocks after remitting 100% of the total
purchase value plus taxes on or before 15th July, 1995 failing which the
amount already deposited was threatened to be forfeited.
19. Respondent No.3 filed a writ petition before the Karnataka High
Court being Writ Petition No.25613 of 1996 praying inter alia for issuance
of direction to issue permits for lifting the granite blocks. Appellant did not
object to the release of the granite blocks towards which payments had
already been made. While issuing Rule on 19th September, 1996 the High
Court gave an interim direction which reads as under :-
“There shall be an interim direction to
Respondents 4 and 5 to issue Mineral Despatch
Permits to Petitioner for transporting the granite
block purchased by the Petitioner from first
Respondent and released by the first Respondent,
without requiring payment of any royalty
charges.”
20 Vide its letter dated 3rd October, 1996 and 29th November, 1996, the
appellant requested the respondent No.3 to remit the balance amount and lift
the granite blocks purchased by it. However, no transit permit was issued.
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21. Third respondent was not prepared to pay the balance of amount to
get the granite blocks released and once again requested the appellant to
refund the balance amount deposited by it.
22. Another writ petition being W.P. (C) No. 7611 of 1997 was filed by
respondent No.3 to refund the payment made by it amounting to
Rs.5,54,593/- with interest and further not to insist for making payment of
balance bid amount.
23. However, the High Court by its judgment dated 21st October, 1997
directed :-
“13. For the reasons stated, the relief sought for
by the petitioner company in this writ petition
cannot be granted by this Court. The only relief
that can be granted to the petitioner-company is to
direct the respondent Corporation to consider the
request that may be made by the petitioner –
Company for refund of a sum of Rs.1,51,594.06
ps., if terms and conditions of tender-cum-auction
sale notification permits for such refund within
two months from the date of request that may be
made by the petitioner company and secondly, if
the petitioner company deposits the balance of sale
consideration for purchase of granite blocks, the
respondent-corporation is directed to lift the
balance or rough granite blocks which it had15
16purchased in the auction sale without insisting on
the payment of interest on the balance of amounts
or for production of proof of payment of royalty
under KMMC Rules, 1994.”
The High Court also opined :-
“Pursuant to such confirmation of sale, Petitioner-
Company has already lifted granite blocks worth
Rs.4,40,562.50 ps. and the taxes paid in full on
the entire sale value has already been deposited
with the State and Central Government. Therefore
submits, the only amount that is remaining with
the third respondent- Corporation is a sum of
Rs.1,51,554.05 ps. The learned counsel further
submits that the third Respondent-Corporation is
prepared to refund the aforesaid amount, if the
Petitioner-Company so desires. ”
24. Pursuant to or in furtherance thereof a representation for refund of
Rs.1,51,594.05 ps. was made. However, the appellant by its letter dated
15th November, 1999 rejected the said request. Aggrieved, the third
respondent filed a writ petition before the High Court which was numbered
as W.P. 45825 of 1999 praying inter alia for the following reliefs :-
“i) issue a writ of certiorari or any other writ
order or direction quashing the letter/order
bearing No. TEC-II/Sale/GNR/94-95/99-
2000 dated 15.11.1999 passed by the 3rd
Respondent (Annexure-T).
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ii) issue a writ of mandamus or any other writ
order or direction directing the 3rd
Respondent to refund a sum of
Rs.1,51,594.05 with interest @ 18% per
annum from the date of deposit till the date
of refund.
iii) issue a writ of mandamus or any other writ
order of direction directing the respondents
1 and 2 to refund a sum of Rs.95,088.60
deposited by the 3rd Respondent on account
of Forest Development Taxes on the
unreleased granite blocks.
iv) issue a writ of mandamus or any other writ
order or direction directing the Respondent
No.5 to refund the amount of
Rs.1,36,689.90 deposited by the 3rd
Respondent on account of Sales Tax and
Surcharge on the unreleased granite blocks.
v) issue a writ of mandamus or any other writ
order or direction directing the Respondent
No. 6 to refund the sum of Rs.1,78,290.60
deposited by the 3rd Respondent on account
of Income Tax on the unreleased granite
blocks.
25. As regards further performance of the contract as well as release of
the amount, the appellant in its counter-affidavit before the High Court
stated:-
“8. IN REPLY TO PARA NO. 5: It is pertinent
to note that the prayer of the petitioner in the
earlier writ petition bearing No. 25613/96 there is17
18no whisper of the claim of refund. Further there is
no prayer for refund of the granite blocks. When
the Petitioner has sought for a direction for the
issue of dispatch permits it is not now open to the
Petitioner to make the claim for refund. Further,
the submission made on behalf of this Respondent
that it has no objection to release the blocks
corresponding to the payment made cannot be
interpreted to mean that the granite blocks worth
Rs.5,54,593.22 should be released. It is pertinent
to note that even before the filing of the earlier
Writ Petition, the Petitioner had lifted 29 granite
blocks.
It is submitted that the application produced
at Annexure-G is not brought to the notice of this
respondent. It appears to have been rejected as the
Petitioner did not pay the balance consideration
towards 85 granite blocks and consequently as this
respondent also could not pay the same to the
fourth respondent.”
“11. IN REPLY TO PARA-8: Out of
Rs.11,47,149.32 paid by the petitioner a sum of
Rs.5,62,063.25 is towards the applicable taxes.
What remains is Rs.5,85,086.07 which is to be
adjusted towards the value of the granite blocks.
Out of this the Petitioner has already lifted
176.225 Cmt. of granite blocks in Yadamarahalli-
III worth Rs.4,40,562.50 ps. The remaining
amount is Rs.1,51,594.05. In the absence of any
indication by the petitioner, this amount cannot be
adjusted to any of the remaining lots. As the
petitioner has not indicated to which lot this
amount has to be adjusted, the question of
releasing the granite blocks corresponding to the
payment does not arise at all. It is incorrect to say
that the petitioner has deposited the necessary
amount without any lapses. The watch and warde
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and maintenance of the granite blocks purchased
by the petitioner in the auction is the responsibility
of the petitioner. As the terms and conditions of
tender notification do not provide for the refund of
the amount, petitioner’s request could not be
conceded to. Against the order, dated 19.8.1999
passed by the learned Single Judge in W.P. No.
7611/97, the petitioner filed W.A. No. 8250/99.
The petitioner withdrew this Appeal.”
26. A learned Single Judge of the High Court by his order dated 26th
September, 2002 allowed the writ petition. While quashing the letter dated
15th November, 1999 directed to refund the moneys stated at Prayer Nos. 2,
3,4 and 5 of the petition.
Aggrieved, the appellant filed a writ appeal which was dismissed by
the impugned order.
27. Mr. Shyam Diwan, learned senior counsel appearing on behalf of the
appellant urged :-
(i) The purported order dated 16th January, 1996 contained in the
letter from the Principal Secretary to Government, Forest Ecology
& Environment Department and addressed to the Secretary,
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20Karnataka Legislative Assembly, a copy whereof was sent to the
Chairman & Managing Director of the appellant-Corporation,
does not contain any direction which can be said to be binding on
the appellant and in that view of the mater, the impugned
judgment cannot be sustained.
(ii) For the purpose of issuance of a Writ of or in the nature of
mandamus it was obligatory on the part of the writ petitioner to
show the existence of a legal right in itself and a corresponding
legal duty in the respondent and in view of the fact that no such
legal right having been found to be existing in favour of
respondent, the impugned judgment is liable to be set aside.
(iii) The High Court could not have exercised its jurisdiction under
Article 226 to enforce a contract qua contract, particularly when
the same involved disputed questions of fact.
(iv) Respondents, being bound by the terms and conditions of tender,
could not have been given any relief in derogation thereof.
28. Mr. Vikas Rojipura, learned counsel appearing in Civil Appeal
arising out of SLP (C) No. 24242 of 2005 and Mr. P. Vishwanatha Shetty,
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learned senior counsel appearing in Civil Appeal arising out of SLP (C)
No.23148 of 2005 on the other hand, :-
(i) No disputed question of fact being involved in the Writ Petitions,
the High Court could exercise its discretionary jurisdiction even in
a matter governed by contract qua contract.
(ii) The action of the State in all situations including contractual
matters must be fair and keeping in view the fact that the appellant
had taken a wholly unfair stand, this court should not interfere
with the impugned judgment.
(iii) In any event, as in the appeal arising out of SLP ) No. 23148 of
2005 the appellant itself agreed to refund a sum of Rs.1,51,554.05
it cannot be permitted to go back on its promise and refuse to
enforce the same particularly when the other respondents against
whom directions had been issued, including the State of Karnataka
and income tax authorities have accepted the judgment.
29. Indisputably the confiscated granite blocks belonged to the State of
Karnataka. They did not belong to the appellant-Corporation. Appellant
was merely appointed as an agent of the State. It is only in that capacity the
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tender was issued by it. We may notice that although in terms of the said
tender, the concerned respondents and others were bound to deposit the
price of the granite blocks as also the amount of tax payable thereunder ;
one of the essential conditions therefor, as quoted above, was issuance of
permits to transport the same.
30. Indisputably a part of the contract was completed. It is furthermore
not in dispute that some granite blocks were transported by using forged
transit permits. A huge scam was unearthed. Questions were raised in the
Assembly. A Committee was appointed. It is pursuant to the report of the
Committee that was appointed by the Karnataka Legislative Assembly that
the policy of the State changed. It terminated the agency of the appellant. It
was only while doing so, the directions contained in the said letter dated 16th
January, 1996 were issued.
31. We agree with the contention of Mr. Divan that such a direction
which does not have any statutory force is not binding upon the appellant
but herein strictly we are not concerned with such an issue.
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32. Mr. Diwan relied on Bharat Sanchar Nigam Ltd. And another v.
BPL Mobile Cellular Ltd. and others, [ 2008 (8) SCALE 106 ] wherein it
has inter alia been held :-
“They might have been published by some
publisher but indisputably they are not statutory in
nature. They have not been framed under any
statute. The Indian Telegraph Act or the Rules
framed thereunder do not provide for issuance of
such circulars. The circular letters collected at one
place are loosely called rules. They, as noticed
hereinbefore, are meant for office use only. The
directions contained in the said circular letters are
relevant for the officers who are authorized not
only to grant licences but also enter into contracts
and prepare bills. The circular letters having no
statutory force undoubtedly would not govern the
contract. If some authorities have violated the
terms of the said circulars, they might have
committed misconduct, but when a contract is
entered into, the parties shall be bound thereby.”
It was furthermore observed :-
“25. In view of the aforementioned law laid down
by this Court, there cannot be any doubt
whatsoever that the circular letters cannot ipso
facto be given effect to unless they become part of
the contract. We will assume that some of the
respondents knew thereabout. We will assume that
in one of the meetings, they referred to the said
circulars. But, that would not mean that they are
bound thereby. Apart from the fact that a finding
of fact has been arrived at by the TDSAT that the
said circular letters were not within the knowledge23
24of the respondents herein, even assuming that they
were so, they would not prevail over the public
documents which are the brochures, commercial
information and the tariffs.”
33. To the same effect are the observations made by this Court in M/s.
New Bihar Biri Leaves Co. and others v. State of Bihar and others,
[ (1981) 1 SCC 537 ], stating :-
“46. At the time of inviting Tenders in the
prescribed Form or inviting purchasers to bid at
the publication, all tenderers or bidders are treated
equally in the sense that they can offer their rates
or bids subject to the statutory conditions
including the impugned provisions. While
accepting the highest Tender of rates per standard
bag or the highest bid, it is not possible to classify
the purchasers whose offers/bids have been
accepted into ‘honest’ purchasers and ‘dishonest’
purchasers. Everybody whose offer or bid is
accepted, is assumed to be honest.”
34. We are, however, concerned herein with a different situation.
Transport of granite blocks was subject to issuance of transit permits. Such
transit permits are granted in terms of the provisions of Rule 42 of the
Karnataka Minor Mineral Concession Rules, 1994.
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35. The question that arises for consideration is as to whether the State in
exercise of its power under Article 162 of the Constitution of India could
issue a binding direction so as to confer a legal right on a third party having
regard to cancellation of contract of agency by the State in favour of the
appellant ?.
36. The letter dated 16th January, 1996 is to be treated as a
communication from a Principal to an Agent. As an agent of the
Government of Karnataka, the appellant, which, itself is a `State’ within the
meaning of Article 12 of the Constitution of India, was bound to act
thereupon. It is true that it had responded to the aforesaid communication
of the State dated 16th January, 1996 stating its own reasons therefor. In its
letter dated 29th January, 1966 addressed to the Secretary, Forest Ecology
and Environment, it was stated :-
“The KSFIC Ltd. is facing financial crunch and
incurring heavy loss since 2-3 years due to decline
of day to day activities. It is very painful to say
that even there is no fund for payment of the
employees salary for the month of January 1996.
The Units of the KSFIC Ltd. at Mysore, Shimoga
and Dandeli are also facing same problems and
even they have not paid the salary of their
employees since last 2-3 months due to non
availability of funds. The subject was also
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discussed in the recently held Board meeting of
KSFIC on 19.12.1995 and the financial position
was made known to the Board Members. The
decision to take up granite trade by KSFIC was
taken only after thorough discussion in the Board
for nearly half a dozen times. The seized granite
blocks were auctioned by the Corporation with the
full knowledge of Government of Karnataka to the
Hon’ble Minister of Forests and the Forest
Development. In fact Forest Department gave the
full support for this activity. Moreover the Mines
and Minersals Department can dispose in the
public auction only those minerals which are
seized under sub-section (4) of 21 of the Act and
sub-rule (6) of 43 and minor Minerals left at the
quarry after expiry of termination of lease or
licences. In this instant case granite blocks are
seized under provision of Section 62 of Karnataka
Forest Act and this can be disposed off only under
Cchapter 12 of Karnataka Forest Rules, 1963.
Hence, we request you to kindly prevail upon the
Joint Legislative Committee and Mines and
Geology Department to issue necessary permits
for the remaining Blocks to KSFIC Ltd. as per the
rules in force. There is no alternative left for the
KSFIC Ltd. to make arrangement for issue of
transit permits through Mines and Geology
Department to the purchasers for lifting the
remaining blocks purchased by them in Tender
cum auction sale as the KSFIC Ltd. Is totally
unable to refund the deposit amount to the
purchasers in the circumstances explained above.”
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But there is nothing to show that the Government of Karnataka acted
thereupon or withdrawn its direction contained in its letter dated 16th
January, 1996.
37. The plea which was raised, therefore, was not a legal plea but a plea
for show of compassion expressing its inability to refund the amount
because of financial constraints. Its response to the State was not based on
legal premise but it was based on its own difficulty. If the agency had been
terminated and had not been restored, we would not know under what
authority the appellant had been asking respondents to perform their part of
contract.
38. In any view of the matter there is nothing on the records to show that
the State of Karnataka and particularly the Joint Committee of the
Karnataka Legislative Assembly directed grant of transit permits for
transportation of granite blocks. If such permits had been granted, it might
have been obligatory on its part while issuing the notice upon the concerned
respondents to direct lifting of the remaining blocks of granites enclosing
therewith copies of the said permits, but in absence thereof, it is idle to
contend, on the one hand that the respondents were bound to perform their
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part of the contract and on the other that although they have asked for
supply of permits, as per rules, they did not obtain the same.
39. Appellant is also guilty of suppressio veri and suggestio falsi. Its
action in the entire matter appears to be wholly unfair. It was in a dominant
position in terms of the provisions of the contract but then in a case of this
nature when its authority to continue to deal with the granite blocks came to
be questioned, it was obligatory on its part to clear its position in this
behalf. We have no words to express our displeasure also in regard to the
conduct of the State. It did not take a positive stand. As a principal, the
State of Karnataka was also obligated to disclose the entire facts before the
High Court.
40. Although ordinarily a superior court in exercise of its writ jurisdiction
would not enforce the terms of a contract qua contract, it is trite that when
an action of the State is arbitrary or discriminatory and, thus, violative of
Article 14 of the Constitution of India, a writ petition would be
maintainable. ( See ABL International Ltd. v. Export Credit Guarantee
Corpn. of India Ltd. [ (2004) 3 SCC 553.
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41. There cannot be any doubt whatsoever that a writ of mandamus can
be issued only when there exists a legal right in the Writ Petition and a
corresponding legal duty on the part of the State, but then if any action on
the part of the State is wholly unfair or arbitrary, the superior courts are not
powerless. Reliance placed by Mr. Divan on G.J. Fernandez v. State of
Mysore and other, ( [1967] 3 SCR 636 ) is not apposite. In that case itself
it was held :-
“Thus under Art. 162 the State Government can
take executive action in all matters in which the
legislature of the State can pass laws. But Art. 162
itself does not confer any rule making power on
the State Government in the behalf.”
G.J. Fernandez (supra) was considered in ABL International Ltd.
(supra)
42. Furthermore the concession made by the counsel for appellants in the
earlier round of litigation also cannot be lost sight of. A specific concession
was made. It may be that no specific direction was issued by the High Court
therein, but the stand taken by it was clear and unequivocal.
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30
43. Mr. Shyam Divan, when questioned, had very fairly submitted that
the conduct of the counsel who had appeared on behalf of the appellant in
the earlier round of litigation is not in question and it cannot be said that he
acted beyond his authority.
44. If such a stand had taken in the earlier round of litigation we fail to
see any reason as to why the concession made by it should not be given
effect to. If a right has accrued to the respondents for maintaining a writ so
as to compel the State to give effect to an earlier order passed by the Court
as has been held by this Court in the case of Commissioner, Karnataka
Housing Board v. C. Muddaiah, [ (2007) 7 SCC 689, the same should not
be denied to respondent herein.
45. Keeping in view the facts and circumstances of the case in its entirety
and having regard to the legal propositions as noticed hereinbefore, we are
of the opinion that these are not the cases in which this Court should
exercise its discretionary jurisdiction under Article 136 of the Constitution
of India. The appeals are dismissed with costs. Counsel’s fee assessed at
Rs.50,000/- in each case.
…………………………
……J.
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( S.B. SINHA )
………………………………J.
( CYRIAC JOSEPH )
New Delhi
October 24, 2008
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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2008
[Arising out of SLP (Civil) No. 24242 of 2005]
M/s. Karnataka State Forest Industries Corporation …Appellant
Versus
M/s. Indian Rocks …Respondent
WITH
CIVIL APPEAL NO. OF 2008
[Arising out of SLP (Civil) No. 23148 of 2005]
Dear Brother Cyriac Joseph,
Draft Judgment in the aforementioned matter is being sent herewith
for your perusal and kind consideration.
With kind regards,
[S.B. Sinha] J.
New Delhi;
September 15, 2008
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Hon’ble Mr. Justice Cyriac Joseph
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