{"id":255378,"date":"2008-10-24T00:00:00","date_gmt":"2008-10-23T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/ms-karnataka-state-forest-vs-ms-indian-rocks-on-24-october-2008"},"modified":"2018-11-16T23:59:57","modified_gmt":"2018-11-16T18:29:57","slug":"ms-karnataka-state-forest-vs-ms-indian-rocks-on-24-october-2008","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/ms-karnataka-state-forest-vs-ms-indian-rocks-on-24-october-2008","title":{"rendered":"M\/S. Karnataka State Forest … vs M\/S. Indian Rocks on 24 October, 2008"},"content":{"rendered":"
Supreme Court of India<\/div>\n
M\/S. Karnataka State Forest … vs M\/S. Indian Rocks on 24 October, 2008<\/div>\n
Author: S.B. Sinha<\/div>\n
Bench: S.B. Sinha, Cyriac Joseph<\/div>\n
                                                                    REPORTABLE\n\n\n                  IN THE SUPREME COURT OF INDIA\n\n                    CIVIL APPELLATE JURISDICTION\n\n                 CIVIL APPEAL NO. 6274 OF 2008\n              [Arising out of SLP (Civil) No. 24242 of 2005]\n\n\nM\/s. Karnataka State Forest Industries Corporation     ...Appellant\n\n                                     Versus\n\nM\/s. Indian Rocks                                      ...Respondent\n\n\n                                  WITH\n\n                  CIVIL APPEAL NO. 6275 OF 2008\n              [Arising out of SLP (Civil) No. 23148 of 2005]\n\n\n\nM\/s. Karnataka State Forest Industries Corporation             ...\nAppellant\n\n\n                                     Versus\n\nState of Karnataka and others                          ... Respondents\n\n\n\n                            JUDGMENT\n<\/pre>\n
S.B. SINHA, J :\n<\/p>\n
                                     2<\/span><\/p>\n
\n
1.    Leave granted.\n<\/p>\n
2.    These two appeals involving similar questions of law and fact were<\/p>\n
taken up for hearing together and are being disposed of by this common<\/p>\n
judgment. We may, however notice the fact of the matters involving in both<\/p>\n
the appeals separately.\n<\/p>\n
\n
      Civil Appeal arising out of SLP ) No. 24242 of 2005<\/p>\n
3.    Appellant is a Government of Karnataka Undertaking engaged in sale<\/p>\n
of granite of seized and confiscated granite blocks to persons who intend to<\/p>\n
purchase in the Tender-cum-Allotment sale on “as is where is basis”. The<\/p>\n
relevant terms of the said tender were:\n<\/p>\n
\n
             “6.   The tender\/bidder should make arrangements to
\n                   obtain transit permit at his own cost from Forest
\n                   Department\/KSFIC.\n<\/p><\/blockquote>\n
             9.    The successful Tenderer\/Bidder should pay 1\/10th
\n                   amount of the sale value plus taxes as follows:-\n<\/p><\/blockquote>\n
                   (a)    Un-polished Granite Blocks     10% S.T.\n<\/p><\/blockquote>\n
                   (b)    Sur-charge on S.T.             15%\n                   (c)    Forest Development Tax          5%\n                   (d)    Income Tax                     15%\n                   (e)    Surcharge on I.Tax                   5%\n\n<\/pre>\n
                   On the same day, the balance amount will be
\n                   payable as follows:\n<\/p><\/blockquote>\n
                                                                        2<\/span>
\n                       3<\/span><\/p>\n
      (a)   50% within 15 days of the intimation of
\n            confirmation of tender.\n<\/p><\/blockquote>\n
      (b)   the remaining amount shall be paid by the
\n            end of the June, 1995 or before the stones
\n            are lifted whichever is earlier. The period
\n            of the contract shall be upto April, 30th
\n            1995.\n<\/p><\/blockquote>\n
11.   In case of breach of any of the conditions
\n      mentioned above, the Managing Director, KSFIC
\n      Ltd., is at liberty to cancel the Tender\/Bid amount
\n      and make materials at the risk and cost of the
\n      original Tenderer\/Bidder and the EMD\/Security
\n      Deposit furnished by the Tenderer\/Bidder be
\n      forfeited. If the K.S.F.I.C. incurs any extra
\n      expenditure in this regard the same will be
\n      recoverable from the original Tenderer\/Bidder.<\/p>\n
18.   The successful Tenderer\/Bidder shall make their
\n      own arrangements for inspection of seized and
\n      confiscated Granite blocks at their own cost
\n      located at different places in the Ranges as the
\n      offer for sale is on. AS IS WHERE IS BASIS.\n<\/p>\n
      Rejection due to colour, cracks etc. will not be
\n      entertained once the offer is submitted.\n<\/p>\n
19.   Sale of granite blocks is agreed upon in good faith
\n      and K.S.F.I.C. Ltd. shall not be liable for any
\n      damages or otherwise for failure to carryout the
\n      obligation which may be occasioned by Act of
\n      God, War, Civil Disturbance disorders, strike etc.,
\n      or regulation of Government authorities or
\n      agencies or similar circumstances beyond its
\n      control.\n<\/p>\n
20.   Breach of any of the conditions specified supra, by
\n      the purchaser will entail forfeiture to K.S.F.I.C. of
\n      all deposits paid by him. Further, the Granite
\n      Blocks already paid for and lying in the field will<\/p>\n
                                                              3<\/span>
\n                                          4<\/span><\/p>\n
                        also be liable to be attached towards the balance
\n                        due. The Granite Blocks purchased, whether paid
\n                        or not will also be resold at the risk and cost of the
\n                        original Tenderer\/Bidder who will be liable to
\n                        make good to Government any loss arising out of
\n                        such resale but shall not be entitled to profits.<\/p>\n
                  34.   No material shall be removed from the contract
\n                        area unless it is covered by transit pass in
\n                        accordance with the rules under Section 50 of the
\n                        Karnataka Forest Act, 1963. If any problems arise
\n                        while lifting the blocks from site, necessary
\n                        assistance will be provided if need be under
\n                        special circumstances.”\n<\/p>\n
\n
4.          Respondent participated in the tender process. It was successful in<\/p>\n
purchase of:\n<\/p>\n
     (i)       one lot containing 25 blocks (Mulegundi Area),<\/p>\n<\/blockquote>\n
     (ii)      one lot containing 37 blocks (Mulegundi Area) and<\/p>\n<\/blockquote>\n
     (iii)     one lot containing 43 blocks (Nehrudoddi Area).\n<\/p><\/blockquote>\n
5.          The total sale value of the granite sold to the respondent herein was<\/p>\n
Rs. 21,24,574.85.          Out of the aforementioned sum, admittedly, the<\/p>\n
respondent on or about 11.07.1995 had deposited a sum of Rs.<\/p>\n
11,84,447.90. The balance amount due to the appellant from the respondent<\/p>\n
was Rs. 9,40,126.55.          In terms of the said tender, the respondent was<\/p>\n
required to pay not only 10% of the value of the goods but also taxes and<\/p>\n
                                                                                 4<\/span>
\n                                     5<\/span><\/p>\n
other statutory dues paid by the appellant herein. Appellant has paid an<\/p>\n
amount of Rs.6,85,642\/- being the royalty amount, Forest Development Tax,<\/p>\n
Karnataka Sales Tax and Surcharge on Karnataka Sales Tax etc.<\/p>\n
6.    Respondent allegedly refused to pay the amount to which it was said<\/p>\n
to be otherwise liable in terms of Clause 8 of the terms and conditions of the<\/p>\n
tender.\n<\/p>\n
\n
7.    There appears to be a dispute as regards the amount payable by the<\/p>\n
respondent on the aforementioned account insofar as whereas according to<\/p>\n
the appellant the amount of granite including tax and other statutory<\/p>\n
liabilities in respect of 10 blocks of granite which had been received by the<\/p>\n
respondent and transported by it is Rs. 3,25,193.90; according to the<\/p>\n
respondent, the total amount of goods received was Rs. 2,39,969.35.<\/p>\n
Appellant contended that the contract was not concluded within the<\/p>\n
stipulated period of time as the entire payment was not made by June, 1995<\/p>\n
or before lifting of the stones whichever is earlier, as envisaged under<\/p>\n
Clause 9(b) of the terms and conditions of the tender.<\/p>\n
                                                                          5<\/span>
\n                                    6<\/span><\/p>\n
8.    Concededly the Government of Karnataka was approached.                   A<\/p>\n
question was also raised in the Legislative Assembly.           The Principal<\/p>\n
Secretary, Forest, Ecology and Environment Department, Government of<\/p>\n
Karanataka issued a letter on or about 16.01.1996, which reads as under:<\/p>\n
            “Sub: Permission to Karnataka State Forest
\n            Industries Corporation Ltd., for the sale of
\n            Confiscated Granite Block through Tender.\n<\/p><\/blockquote>\n
                   With reference to the above subject, a copy
\n            of the Letter dated 14.12.1995 received from the
\n            Chairman & Managing Director, KSFIC Ltd., is
\n            here with enclosed. The KSFIC Ltd., has sold the
\n            Granite Blocks which were seized by the Forest
\n            Department, through public auction during the
\n            month of March 1995. Since the Granite scandal
\n            is under enquiry of Legislative Committee, it was
\n            decided not to confirm the said sale proceedings.
\n            In the meanwhile the Chairman & Managing
\n            Director of the Corporation reported to the
\n            Government that the purchasers are pressurizing
\n            for issue of transit permit to lift the Granite Blocks
\n            or refund their amount. They also requested the
\n            Government to bring these facts to the notice of
\n            the Legislative Committee.\n<\/p><\/blockquote>\n
                   Since the Joint Legislative Committee has
\n            objected for issue of transit permit by the Forest
\n            Department and also KSFIC Ltd., to granite blocks
\n            as there was no provision for the same in the
\n            KMMC Rules, 1994, the Government has
\n            suggested to the KSFIC Ltd., to take action with
\n            regard to transfer the Granite blocks to the
\n            Department of Mines and Geology and for refund
\n            of amount to the bidders (copy enclosed). But,
\n            directed to keep the Granite blocks in safe custody<\/p>\n
                                                                           6<\/span>
\n                                    7<\/span><\/p>\n
            till the decision      of   the   Joint   Legislative
\n            Committee.\n<\/p><\/blockquote>\n
                  I have been directed to bring the contents of
\n            the Corporation letter and the Government
\n            suggestion to the Corporation thereon, to the
\n            notice of the Joint legislative Committee.”\n<\/p><\/blockquote>\n
9.    However, as there exists a dispute with regard to its correct<\/p>\n
translation, we may also notice the text of the said letter from the judgment<\/p>\n
of the learned Single Judge, which reads as under:<\/p>\n
            “In between this, the President and Managing
\n            Director of the Corporation reported to the
\n            Government that the purchasers are insisting on
\n            the Corporation to issue permit for transportation
\n            of granite and also to refund the amount received
\n            from them. The Corporation has also prayed for
\n            bringing the said matter to the notice of the Joint
\n            House Committee.\n<\/p><\/blockquote>\n
            Since the Joint House Committee has objected the
\n            issue of permits by the Forest Department as well
\n            as by the Corporation and since there is no
\n            provision for the same in K.M.M.C. Rules, 1994,
\n            Government has directed the Corporation to take
\n            appropriate action for transferring the granite
\n            blocks which are under its custody to the
\n            Department of Mines and Geology and also to
\n            return the amount (liable to be refunded) to the
\n            concerned bidders, which is already collected from
\n            them. But, it has further directed to preserve the
\n            granite stones safely till the decision of the Joint
\n            House Committee.”\n<\/p><\/blockquote>\n
                                                                         7<\/span>
\n                                         8<\/span><\/p>\n
10.   It is, however, stated that the appellant did not agree to the<\/p>\n
aforementioned suggestions\/direction of the State and responded thereto<\/p>\n
stating that it was not feasible to refund the sale price. It had been stated<\/p>\n
that necessary permit should be directed to be issued in this behalf. By its<\/p>\n
letter dated 2.12.1996, appellant requested the respondent to remit the<\/p>\n
balance amount, stating:\n<\/p>\n
\n
             “You are requested to remit the balance amount of
\n             the total purchase value of the Granite Blocks
\n             purchased by you in the auction sale conducted by
\n             the KSFIC Ltd. during the Month of March –
\n             1995.”\n<\/p><\/blockquote>\n
11.   However, the said request was not acceded to. Appellant allegedly<\/p>\n
issued various other letters to the same effect on 29.01.1997, 25.04.1997<\/p>\n
and 30.06.1997. Ultimately by its letter dated 5.06.1999, the appellant<\/p>\n
informed the respondent to immediately remit the amount and lift the<\/p>\n
granite blocks by 30.06.1999 failing which, it was threatened, the amount<\/p>\n
deposited shall be forfeited, stating:\n<\/p>\n
\n
             “We therefore request you to kindly make
\n             immediate arrangements for remitting balance
\n             amount and lift the granite blocks purchased by
\n             you in Tender-cum-Auction-Sale held during the<\/p>\n
                                                                         8<\/span>
\n                                    9<\/span><\/p>\n
            month of March-1995 within 30th June 1999
\n            without any further delay. If we do not hear
\n            anything from your side within the time stipulated,
\n            action will be initiated to forfeit all deposit amount
\n            paid by you as per clause (11), (16) and (20) of the
\n            Tender Conditions, which may please be noted.”\n<\/p><\/blockquote>\n
12.   Respondent filed a writ petition, which was marked as Writ Petition<\/p>\n
No. 27456 of 1999. It is not in dispute that those permits were not granted<\/p>\n
in favour of the respondents.     Respondents in their writ petition while<\/p>\n
contending that the agency of the appellant was terminated, stated :-<\/p>\n
            “8. It is humbly submitted that the petitioner
\n            has paid sum of Rs.11,84,447.90 towards the cost
\n            of granite blocks. The petitioner after paying the
\n            huge amount of Rs.11,84,447.90 requested the
\n            Respondent to obtain the mineral dispatch permit
\n            from the Department of Mines and Geology for
\n            transporting the granite blocks. After receipt of
\n            the money the Respondent did not pursue the
\n            matter in obtaining the mineral dispatch permits
\n            from the department of transport the granite
\n            blocks. The effort of the petitioner to convince the
\n            Respondent to obtain the mineral dispatch permit
\n            did not yield and result and the Respondent failed
\n            to obtain the mineral dispatch permits in terms of
\n            Rule 42 of the Rules.\n<\/p><\/blockquote>\n
            9.    It is humbly submitted that the Respondent
\n            Corporation appointed the Jadhav, Range Forest
\n            Officer to issue the permits. The said Range
\n            Forest Officer has issued permits which are termed
\n            as fake permits. Several persons appear to have
\n            transported the granite blocks on those fake<\/p>\n
                                                                        9<\/span>
\n                              10<\/span><\/p>\n
      permits. Under those circumstances the Karnataka
\n      Legislative Assembly constituted Committee of
\n      legislators to go into the question of fake permits
\n      issued by the said Jadhav. It may also be relevant
\n      to mention that the criminal case was filed against
\n      various persons and the matter was handed over to
\n      the COD of Police for investigation. It is also
\n      relevant to mention that both the houses of the
\n      legislature was rocked by the fake permits scandal.\n<\/p><\/blockquote>\n
      10. It is humbly submitted that the Legislative
\n      Committee which was appointed for the purpose
\n      of looking into the fake permits has took (sic) a
\n      decision that the entrustment of selling of the
\n      seized and confiscated granite blocks in favour of
\n      the Respondent Corporation should be dispensed
\n      forthwith thereby terminating the agency given to
\n      the Respondent.        The Government on the
\n      instructions of the Legislators Committee
\n      cancelled the agency that was given to the
\n      Respondent and instructed the forest corporation
\n      to return the granite blocks to the department of
\n      Mines and Geology (sic) is the owner of those
\n      Granite blocks. Only for the purpose of selling
\n      those granite blocks it was entrusted to the
\n      Respondent Corporation. The Corporation ceased
\n      to have its power or jurisdiction to continue to sell
\n      the granite blocks with effect from 16.01.1996.
\n      The true copy of the Government Notification
\n      dated 16.01.1996 is produced herewith as
\n      ANNEXURE-C.”\n<\/p><\/blockquote>\n
In the aforementioned premise, it was inter alia prayed :-<\/p>\n
      b)    ISSUE an order, direction or writ in the
\n      nature of Mandamus, directing the Respondents to
\n      implement the Government Order Annexure-C
\n      dated 16.01.1996.\n<\/p><\/blockquote>\n
                                                              10<\/span>
\n                                      11<\/span><\/p>\n
            c)    ISSUE an order, direction or in the nature of
\n            mandamus, directing the Respondents to refund
\n            sum of Rs.9,44,478.55 together with interest
\n            calculated at 18% in terms of the Government
\n            order dated 16.01.1996 Annexure-C.”\n<\/p><\/blockquote>\n
13.   Appellant filed its counter-affidavit in the said writ petition.<\/p>\n
14.   It also filed an additional affidavit, stating:<\/p>\n
            “10. It is relevant to submit here that the
\n            petitioner should have completed the entire tender
\n            cum auction transaction by the end of 15th July
\n            1995 by making payment of taking delivery of the
\n            entire granite blocks purchased as per Respondent
\n            letter dated 26.06.1995 at ANNEXURE R14.
\n            However, the petitioner delayed the same. In fact,
\n            the petitioner should have completed all these
\n            transactions before the issue of Government letter
\n            dated 16.01.1996 at Annexure-C. The Respondent
\n            cannot be blamed for failure and delay of the
\n            petitioner in not completing the transaction before
\n            the Government letter dated 16.01.1996. In fact,
\n            the petitioner in letter dated 19.04.1997 expressed
\n            willingness to take the granite as per
\n            ANNEXURE-R15. Then Respondent sent a letter
\n            dated 28.4.1997 as per ANNEXURE-R16 to the
\n            Deputy Conservator of Forest. Inspite of reminder
\n            dated 30.06.1997 as per ANNEXURE-R17 the
\n            petitioner has not complied with the directions in
\n            payment of the balance amount. This Respondent
\n            is entitled to forfeit the entire amount as per clause
\n            ….illegible ….. the tender for failure of the
\n            petitioner in not paying amount and taking<\/p>\n
                                                                         11<\/span>
\n                                      12<\/span><\/p>\n
              delivery of the goods within the stipulated time.
\n              Therefore, the petitioner cannot blame this
\n              Respondent.\n<\/p><\/blockquote>\n
              11. Inspite of all this, and without prejudice to
\n              the various contentions, the Respondent humbly
\n              submits that, if the petitioner pays the balance
\n              amount      of    Rs.9,40,426.55    and    penalty
\n              immediately as per conditions of sale, this
\n              Respondent is ready and willing to complete the
\n              sale transactions by obtaining necessary permits
\n              from the concerned authorities as is being done in
\n              the case of other bidders who have paid full value
\n              after 16.1.1996 Annexure-C.\n<\/p><\/blockquote>\n
15,    A learned Single Judge of the High Court by its order dated<\/p>\n
19.02.2001 allowed the writ petition directing the appellant – Corporation<\/p>\n
to refund a sum of Rs. 3,75,905.35 with interest from the date of issuance of<\/p>\n
the letter, stating :\n<\/p>\n
\n
              “8. In view of terms of Auction notice, if the
\n              balance amount of the sale considerations is not
\n              paid, the sale could not have been confirmed and a
\n              forfeiture would have resulted. The forfeiture
\n              would have been unconditional but for the
\n              intervention of Annexure C, where the owner of
\n              goods sold, called upon the agent to refund the
\n              excess amount. The agent has to abide by the
\n              instructions of the Principal. He has to deal with
\n              the estate of his principal as he commands.\n<\/p><\/blockquote>\n
              9.    A perusal of Annexure H shows that the
\n              Respondent has collected whatever tax is due
\n              under the sale and prima facie there is no scope for<\/p>\n
                                                                         12<\/span>
\n                                    13<\/span><\/p>\n
             fresh demand. Besides, the petitioner cannot also
\n             dispute its liability to pay the stipulated tax, it
\n             being a condition of sale. In these circumstances,
\n             there is a no justification in the demand made by
\n             the Respondent in Annexure H.               In such
\n             circumstances, Annexure H is quashed. There will
\n             be direction to the Respondent to refund the
\n             amount, a sum of Rs.3,75,905.35 with the interest
\n             from the date of Annexure C. The right of the
\n             Respondent to claim any damage sustained from
\n             its principal is left open. W.P. is disposed of.”\n<\/p><\/blockquote>\n
16.   A writ appeal preferred thereagainst by the appellant has been<\/p>\n
dismissed by reason of the impugned judgment.<\/p>\n
Civil Appeal arising out of SLP (C) No. 23148 of 2005<\/p>\n
17.   Respondent No.3, on 6th March, 1995, participated in the tender-cum-<\/p>\n
auction sale and was a successful bidder in respect of 3 lots of granite<\/p>\n
containing 75 granite blocks. It again participated in the tender auction on<\/p>\n
14th March, 1995 and was declared successful in respect of 41 granite<\/p>\n
blocks. The total sale value of the granites purchased by respondent No.3,<\/p>\n
according to the appellant, was Rs.21,91,234.60 ps. Out of said amount, it<\/p>\n
deposited a sum of Rs.11,47,149.77.       The sale price included various<\/p>\n
taxes\/royalty.\n<\/p>\n
\n
                                                                        13<\/span>
\n                                     14<\/span><\/p>\n
18.   Appellant released 31 granite blocks of the value of Rs.5,92,556.57<\/p>\n
ps. Vide its letter dated 28th June, 1995 appellant requested the respondent<\/p>\n
No.3 to lift the remaining granite blocks after remitting 100% of the total<\/p>\n
purchase value plus taxes on or before 15th July, 1995 failing which the<\/p>\n
amount already deposited was threatened to be forfeited.<\/p>\n
19.   Respondent No.3 filed a writ petition before the Karnataka High<\/p>\n
Court being Writ Petition No.25613 of 1996 praying inter alia for issuance<\/p>\n
of direction to issue permits for lifting the granite blocks. Appellant did not<\/p>\n
object to the release of the granite blocks towards which payments had<\/p>\n
already been made. While issuing Rule on 19th September, 1996 the High<\/p>\n
Court gave an interim direction which reads as under :-<\/p>\n
             “There shall be an interim direction to
\n             Respondents 4 and 5 to issue Mineral Despatch
\n             Permits to Petitioner for transporting the granite
\n             block purchased by the Petitioner from first
\n             Respondent and released by the first Respondent,
\n             without requiring payment of any royalty
\n             charges.”\n<\/p><\/blockquote>\n
20    Vide its letter dated 3rd October, 1996 and 29th November, 1996, the<\/p>\n
appellant requested the respondent No.3 to remit the balance amount and lift<\/p>\n
the granite blocks purchased by it. However, no transit permit was issued.<\/p>\n
                                                                           14<\/span>
\n                                     15<\/span><\/p>\n
21.   Third respondent was not prepared to pay the balance of amount to<\/p>\n
get the granite blocks released and once again requested the appellant to<\/p>\n
refund the balance amount deposited by it.\n<\/p>\n
\n
22.   Another writ petition being W.P. (C) No. 7611 of 1997 was filed by<\/p>\n
respondent No.3 to refund the payment made by it amounting to<\/p>\n
Rs.5,54,593\/- with interest and further not to insist for making payment of<\/p>\n
balance bid amount.\n<\/p>\n
\n
23.   However, the High Court by its judgment dated 21st October, 1997<\/p>\n
directed :-\n<\/p>\n
\n
              “13. For the reasons stated, the relief sought for
\n              by the petitioner company in this writ petition
\n              cannot be granted by this Court. The only relief
\n              that can be granted to the petitioner-company is to
\n              direct the respondent Corporation to consider the
\n              request that may be made by the petitioner –
\n              Company for refund of a sum of Rs.1,51,594.06
\n              ps., if terms and conditions of tender-cum-auction
\n              sale notification permits for such refund within
\n              two months from the date of request that may be
\n              made by the petitioner company and secondly, if
\n              the petitioner company deposits the balance of sale
\n              consideration for purchase of granite blocks, the
\n              respondent-corporation is directed to lift the
\n              balance or rough granite blocks which it had<\/p>\n
                                                                       15<\/span>
\n                                     16<\/span><\/p>\n
             purchased in the auction sale without insisting on
\n             the payment of interest on the balance of amounts
\n             or for production of proof of payment of royalty
\n             under KMMC Rules, 1994.”\n<\/p><\/blockquote>\n
      The High Court also opined :-\n<\/p><\/blockquote>\n
             “Pursuant to such confirmation of sale, Petitioner-
\n             Company has already lifted granite blocks worth
\n             Rs.4,40,562.50 ps. and the taxes paid in full on
\n             the entire sale value has already been deposited
\n             with the State and Central Government. Therefore
\n             submits, the only amount that is remaining with
\n             the third respondent- Corporation is a sum of
\n             Rs.1,51,554.05 ps. The learned counsel further
\n             submits that the third Respondent-Corporation is
\n             prepared to refund the aforesaid amount, if the
\n             Petitioner-Company so desires. ”\n<\/p><\/blockquote>\n
24.   Pursuant to or in furtherance thereof a representation for refund of<\/p>\n
Rs.1,51,594.05 ps. was made.      However, the appellant by its letter dated<\/p>\n
15th November, 1999 rejected the said request.          Aggrieved, the third<\/p>\n
respondent filed a writ petition before the High Court which was numbered<\/p>\n
as W.P. 45825 of 1999 praying inter alia for the following reliefs :-\n<\/p><\/blockquote>\n
             “i)   issue a writ of certiorari or any other writ
\n                   order or direction quashing the letter\/order
\n                   bearing No. TEC-II\/Sale\/GNR\/94-95\/99-
\n                   2000 dated 15.11.1999 passed by the 3rd
\n                   Respondent (Annexure-T).\n<\/p><\/blockquote>\n
                                                                        16<\/span>
\n                                   17<\/span><\/p>\n
            ii)    issue a writ of mandamus or any other writ
\n                   order or direction directing the 3rd
\n                   Respondent to refund a sum of
\n                   Rs.1,51,594.05 with interest @ 18% per
\n                   annum from the date of deposit till the date
\n                   of refund.\n<\/p><\/blockquote>\n
            iii)   issue a writ of mandamus or any other writ
\n                   order of direction directing the respondents
\n                   1 and 2 to refund a sum of Rs.95,088.60
\n                   deposited by the 3rd Respondent on account
\n                   of Forest Development Taxes on the
\n                   unreleased granite blocks.\n<\/p><\/blockquote>\n
            iv)    issue a writ of mandamus or any other writ
\n                   order or direction directing the Respondent
\n                   No.5    to    refund     the    amount    of
\n                   Rs.1,36,689.90 deposited by the 3rd
\n                   Respondent on account of Sales Tax and
\n                   Surcharge on the unreleased granite blocks.\n<\/p><\/blockquote>\n
            v)     issue a writ of mandamus or any other writ
\n                   order or direction directing the Respondent
\n                   No. 6 to refund the sum of Rs.1,78,290.60
\n                   deposited by the 3rd Respondent on account
\n                   of Income Tax on the unreleased granite
\n                   blocks.\n<\/p><\/blockquote>\n
25.   As regards further performance of the contract as well as release of<\/p>\n
the amount, the appellant in its counter-affidavit before the High Court<\/p>\n
stated:-\n<\/p><\/blockquote>\n
            “8. IN REPLY TO PARA NO. 5: It is pertinent
\n            to note that the prayer of the petitioner in the
\n            earlier writ petition bearing No. 25613\/96 there is<\/p>\n
                                                                      17<\/span>
\n                        18<\/span><\/p>\n
no whisper of the claim of refund. Further there is
\nno prayer for refund of the granite blocks. When
\nthe Petitioner has sought for a direction for the
\nissue of dispatch permits it is not now open to the
\nPetitioner to make the claim for refund. Further,
\nthe submission made on behalf of this Respondent
\nthat it has no objection to release the blocks
\ncorresponding to the payment made cannot be
\ninterpreted to mean that the granite blocks worth
\nRs.5,54,593.22 should be released. It is pertinent
\nto note that even before the filing of the earlier
\nWrit Petition, the Petitioner had lifted 29 granite
\nblocks.<\/p><\/blockquote>\n
       It is submitted that the application produced
\nat Annexure-G is not brought to the notice of this
\nrespondent. It appears to have been rejected as the
\nPetitioner did not pay the balance consideration
\ntowards 85 granite blocks and consequently as this
\nrespondent also could not pay the same to the
\nfourth respondent.”\n<\/p><\/blockquote>\n
“11. IN REPLY TO PARA-8:                Out        of
\nRs.11,47,149.32 paid by the petitioner a sum of
\nRs.5,62,063.25 is towards the applicable taxes.\n<\/p><\/blockquote>\n
What remains is Rs.5,85,086.07 which is to be
\nadjusted towards the value of the granite blocks.
\nOut of this the Petitioner has already lifted
\n176.225 Cmt. of granite blocks in Yadamarahalli-
\nIII worth Rs.4,40,562.50 ps. The remaining
\namount is Rs.1,51,594.05. In the absence of any
\nindication by the petitioner, this amount cannot be
\nadjusted to any of the remaining lots. As the
\npetitioner has not indicated to which lot this
\namount has to be adjusted, the question of
\nreleasing the granite blocks corresponding to the
\npayment does not arise at all. It is incorrect to say
\nthat the petitioner has deposited the necessary
\namount without any lapses. The watch and warde<\/p>\n
                                                        18<\/span>
\n                                          19<\/span><\/p>\n
                  and maintenance of the granite blocks purchased
\n                  by the petitioner in the auction is the responsibility
\n                  of the petitioner. As the terms and conditions of
\n                  tender notification do not provide for the refund of
\n                  the amount, petitioner’s request could not be
\n                  conceded to. Against the order, dated 19.8.1999
\n                  passed by the learned Single Judge in W.P. No.
\n                  7611\/97, the petitioner filed W.A. No. 8250\/99.
\n                  The petitioner withdrew this Appeal.”\n<\/p>\n
\n
26.         A learned Single Judge of the High Court by his order dated 26th<\/p>\n
September, 2002 allowed the writ petition. While quashing the letter dated<\/p>\n
15th November, 1999 directed to refund the moneys stated at Prayer Nos. 2,<\/p>\n
3,4 and 5 of the petition.\n<\/p>\n
\n
            Aggrieved, the appellant filed a writ appeal which was dismissed by<\/p>\n
the impugned order.\n<\/p>\n
\n
27.         Mr. Shyam Diwan, learned senior counsel appearing on behalf of the<\/p>\n
appellant urged :-\n<\/p>\n
\n
      (i)      The purported order dated 16th January, 1996 contained in the<\/p>\n
               letter from the Principal Secretary to Government, Forest Ecology<\/p>\n
               & Environment Department and addressed to the Secretary,<\/p>\n
                                                                            19<\/span>
\n                                         20<\/span><\/p>\n
               Karnataka Legislative Assembly, a copy whereof was sent to the<\/p>\n
               Chairman & Managing Director of the appellant-Corporation,<\/p>\n
               does not contain any direction which can be said to be binding on<\/p>\n
               the appellant and in that view of the mater, the impugned<\/p>\n
               judgment cannot be sustained.\n<\/p><\/blockquote>\n
      (ii)     For the purpose of issuance of a Writ of or in the nature of<\/p>\n
               mandamus it was obligatory on the part of the writ petitioner to<\/p>\n
               show the existence of a legal right in itself and a corresponding<\/p>\n
               legal duty in the respondent and in view of the fact that no such<\/p>\n
               legal right having been found to be existing in favour of<\/p>\n
               respondent, the impugned judgment is liable to be set aside.\n<\/p><\/blockquote>\n
      (iii)    The High Court could not have exercised its jurisdiction under<\/p>\n
               Article 226<\/a> to enforce a contract qua contract, particularly when<\/p>\n
               the same involved disputed questions of fact.\n<\/p><\/blockquote>\n
      (iv)     Respondents, being bound by the terms and conditions of tender,<\/p>\n
               could not have been given any relief in derogation thereof.\n<\/p><\/blockquote>\n
28.          Mr. Vikas Rojipura, learned counsel appearing in Civil Appeal<\/p>\n
arising out of SLP (C) No. 24242 of 2005 and Mr. P. Vishwanatha Shetty,<\/p>\n
                                                                              20<\/span>
\n                                           21<\/span><\/p>\n
learned senior counsel appearing in Civil Appeal arising out of SLP (C)<\/p>\n
No.23148 of 2005 on the other hand, :-\n<\/p>\n
\n
      (i)       No disputed question of fact being involved in the Writ Petitions,<\/p>\n
                the High Court could exercise its discretionary jurisdiction even in<\/p>\n
                a matter governed by contract qua contract.\n<\/p><\/blockquote>\n
      (ii)      The action of the State in all situations including contractual<\/p>\n
                matters must be fair and keeping in view the fact that the appellant<\/p>\n
                had taken a wholly unfair stand, this court should not interfere<\/p>\n
                with the impugned judgment.\n<\/p><\/blockquote>\n
      (iii)     In any event, as in the appeal arising out of SLP ) No. 23148 of<\/p>\n
                2005 the appellant itself agreed to refund a sum of Rs.1,51,554.05<\/p>\n
                it cannot be permitted to go back on its promise and refuse to<\/p>\n
                enforce the same particularly when the other respondents against<\/p>\n
                whom directions had been issued, including the State of Karnataka<\/p>\n
                and income tax authorities have accepted the judgment.\n<\/p><\/blockquote>\n
29.          Indisputably the confiscated granite blocks belonged to the State of<\/p>\n
Karnataka. They did not belong to the appellant-Corporation. Appellant<\/p>\n
was merely appointed as an agent of the State. It is only in that capacity the<\/p>\n
                                                                                21<\/span>
\n                                     22<\/span><\/p>\n
tender was issued by it. We may notice that although in terms of the said<\/p>\n
tender, the concerned respondents and others were bound to deposit the<\/p>\n
price of the granite blocks as also the amount of tax payable thereunder ;<\/p>\n
one of the essential conditions therefor, as quoted above, was issuance of<\/p>\n
permits to transport the same.\n<\/p>\n
\n
30.   Indisputably a part of the contract was completed. It is furthermore<\/p>\n
not in dispute that some granite blocks were transported by using forged<\/p>\n
transit permits. A huge scam was unearthed. Questions were raised in the<\/p>\n
Assembly. A Committee was appointed. It is pursuant to the report of the<\/p>\n
Committee that was appointed by the Karnataka Legislative Assembly that<\/p>\n
the policy of the State changed. It terminated the agency of the appellant. It<\/p>\n
was only while doing so, the directions contained in the said letter dated 16th<\/p>\n
January, 1996 were issued.\n<\/p>\n
\n
31.   We agree with the contention of Mr. Divan that such a direction<\/p>\n
which does not have any statutory force is not binding upon the appellant<\/p>\n
but herein strictly we are not concerned with such an issue.<\/p>\n
                                                                           22<\/span>
\n                                     23<\/span><\/p>\n
32.   Mr. Diwan relied on Bharat Sanchar Nigam Ltd. And another v.<\/p>\n
BPL Mobile Cellular Ltd. and others<\/a>, [ 2008 (8) SCALE 106 ] wherein it<\/p>\n
has inter alia been held :-\n<\/p>\n
\n
             “They might have been published by some
\n             publisher but indisputably they are not statutory in
\n             nature. They have not been framed under any
\n             statute. The Indian Telegraph Act<\/a> or the Rules
\n             framed thereunder do not provide for issuance of
\n             such circulars. The circular letters collected at one
\n             place are loosely called rules. They, as noticed
\n             hereinbefore, are meant for office use only. The
\n             directions contained in the said circular letters are
\n             relevant for the officers who are authorized not
\n             only to grant licences but also enter into contracts
\n             and prepare bills. The circular letters having no
\n             statutory force undoubtedly would not govern the
\n             contract. If some authorities have violated the
\n             terms of the said circulars, they might have
\n             committed misconduct, but when a contract is
\n             entered into, the parties shall be bound thereby.”\n<\/p><\/blockquote>\n
      It was furthermore observed :-\n<\/p><\/blockquote>\n
             “25. In view of the aforementioned law laid down
\n             by this Court, there cannot be any doubt
\n             whatsoever that the circular letters cannot ipso
\n             facto be given effect to unless they become part of
\n             the contract. We will assume that some of the
\n             respondents knew thereabout. We will assume that
\n             in one of the meetings, they referred to the said
\n             circulars. But, that would not mean that they are
\n             bound thereby. Apart from the fact that a finding
\n             of fact has been arrived at by the TDSAT that the
\n             said circular letters were not within the knowledge<\/p>\n
                                                                     23<\/span>
\n                                     24<\/span><\/p>\n
             of the respondents herein, even assuming that they
\n             were so, they would not prevail over the public
\n             documents which are the brochures, commercial
\n             information and the tariffs.”\n<\/p><\/blockquote>\n
33.   To the same effect are the observations made by this Court in M\/s.\n<\/p><\/blockquote>\n
New Bihar Biri Leaves Co. and others          v. State of Bihar and others<\/a>,<\/p>\n
[ (1981) 1 SCC 537 ], stating :-\n<\/p>\n
\n
             “46. At the time of inviting Tenders in the
\n             prescribed Form or inviting purchasers to bid at
\n             the publication, all tenderers or bidders are treated
\n             equally in the sense that they can offer their rates
\n             or bids subject to the statutory conditions
\n             including the impugned provisions. While
\n             accepting the highest Tender of rates per standard
\n             bag or the highest bid, it is not possible to classify
\n             the purchasers whose offers\/bids have been
\n             accepted into ‘honest’ purchasers and ‘dishonest’
\n             purchasers. Everybody whose offer or bid is
\n             accepted, is assumed to be honest.”\n<\/p><\/blockquote>\n
34.   We are, however, concerned herein with a different situation.<\/p>\n
Transport of granite blocks was subject to issuance of transit permits. Such<\/p>\n
transit permits are granted in terms of the provisions of Rule 42 of the<\/p>\n
Karnataka Minor Mineral Concession Rules, 1994.<\/p>\n
                                                                        24<\/span>
\n                                      25<\/span><\/p>\n
35.   The question that arises for consideration is as to whether the State in<\/p>\n
exercise of its power under Article 162<\/a> of the Constitution of India could<\/p>\n
issue a binding direction so as to confer a legal right on a third party having<\/p>\n
regard to cancellation of contract of agency by the State in favour of the<\/p>\n
appellant ?.\n<\/p>\n
\n
36.   The letter dated 16th January, 1996 is to be treated as a<\/p>\n
communication from a Principal to an Agent.             As an agent of the<\/p>\n
Government of Karnataka, the appellant, which, itself is a `State’ within the<\/p>\n
meaning of Article 12<\/a> of the Constitution of India, was bound to act<\/p>\n
thereupon. It is true that it had responded to the aforesaid communication<\/p>\n
of the State dated 16th January, 1996 stating its own reasons therefor. In its<\/p>\n
letter dated 29th January, 1966 addressed to the Secretary, Forest Ecology<\/p>\n
and Environment, it was stated :-\n<\/p>\n
\n
               “The KSFIC Ltd. is facing financial crunch and
\n               incurring heavy loss since 2-3 years due to decline
\n               of day to day activities. It is very painful to say
\n               that even there is no fund for payment of the
\n               employees salary for the month of January 1996.<\/p><\/blockquote>\n
\n
               The Units of the KSFIC Ltd. at Mysore, Shimoga
\n               and Dandeli are also facing same problems and
\n               even they have not paid the salary of their
\n               employees since last 2-3 months due to non
\n               availability of funds. The subject was also<\/p>\n
                                                                           25<\/span>
\n                        26<\/span><\/p>\n
discussed in the recently held Board meeting of
\nKSFIC on 19.12.1995 and the financial position
\nwas made known to the Board Members. The
\ndecision to take up granite trade by KSFIC was
\ntaken only after thorough discussion in the Board
\nfor nearly half a dozen times. The seized granite
\nblocks were auctioned by the Corporation with the
\nfull knowledge of Government of Karnataka to the
\nHon’ble Minister of Forests and the Forest
\nDevelopment. In fact Forest Department gave the
\nfull support for this activity. Moreover the Mines
\nand Minersals Department can dispose in the
\npublic auction only those minerals which are
\nseized under sub-section (4) of 21 of the Act and
\nsub-rule (6) of 43 and minor Minerals left at the
\nquarry after expiry of termination of lease or
\nlicences. In this instant case granite blocks are
\nseized under provision of Section 62 of Karnataka
\nForest Act and this can be disposed off only under
\nCchapter 12 of Karnataka Forest Rules, 1963.<\/p>\n
Hence, we request you to kindly prevail upon the
\nJoint Legislative Committee and Mines and
\nGeology Department to issue necessary permits
\nfor the remaining Blocks to KSFIC Ltd. as per the
\nrules in force. There is no alternative left for the
\nKSFIC Ltd. to make arrangement for issue of
\ntransit permits through Mines and Geology
\nDepartment to the purchasers for lifting the
\nremaining blocks purchased by them in Tender
\ncum auction sale as the KSFIC Ltd. Is totally
\nunable to refund the deposit amount to the
\npurchasers in the circumstances explained above.”<\/p>\n
                                                       26<\/span>
\n                                    27<\/span><\/p>\n
      But there is nothing to show that the Government of Karnataka acted<\/p>\n
thereupon or withdrawn its direction contained in its letter dated 16th<\/p>\n
January, 1996.\n<\/p>\n
\n
37.   The plea which was raised, therefore, was not a legal plea but a plea<\/p>\n
for show of compassion expressing its inability to refund the amount<\/p>\n
because of financial constraints. Its response to the State was not based on<\/p>\n
legal premise but it was based on its own difficulty. If the agency had been<\/p>\n
terminated and had not been restored, we would not know under what<\/p>\n
authority the appellant had been asking respondents to perform their part of<\/p>\n
contract.\n<\/p>\n
\n
38.   In any view of the matter there is nothing on the records to show that<\/p>\n
the State of Karnataka and particularly the Joint Committee of the<\/p>\n
Karnataka Legislative Assembly directed grant of transit permits for<\/p>\n
transportation of granite blocks. If such permits had been granted, it might<\/p>\n
have been obligatory on its part while issuing the notice upon the concerned<\/p>\n
respondents to direct lifting of the remaining blocks of granites enclosing<\/p>\n
therewith copies of the said permits, but in absence thereof, it is idle to<\/p>\n
contend, on the one hand that the respondents were bound to perform their<\/p>\n
                                                                        27<\/span>
\n                                     28<\/span><\/p>\n
part of the contract and on the other that although they have asked for<\/p>\n
supply of permits, as per rules, they did not obtain the same.<\/p>\n
39.   Appellant is also guilty of suppressio veri and suggestio falsi. Its<\/p>\n
action in the entire matter appears to be wholly unfair. It was in a dominant<\/p>\n
position in terms of the provisions of the contract but then in a case of this<\/p>\n
nature when its authority to continue to deal with the granite blocks came to<\/p>\n
be questioned, it was obligatory on its part to clear its position in this<\/p>\n
behalf. We have no words to express our displeasure also in regard to the<\/p>\n
conduct of the State. It did not take a positive stand. As a principal, the<\/p>\n
State of Karnataka was also obligated to disclose the entire facts before the<\/p>\n
High Court.\n<\/p>\n
\n
40.   Although ordinarily a superior court in exercise of its writ jurisdiction<\/p>\n
would not enforce the terms of a contract qua contract, it is trite that when<\/p>\n
an action of the State is arbitrary or discriminatory and, thus, violative of<\/p>\n
Article 14<\/a> of the Constitution of India, a writ petition would be<\/p>\n
maintainable. ( See ABL International Ltd. v. Export Credit Guarantee<\/p>\n
Corpn. of India Ltd<\/a>. [ (2004) 3 SCC 553.\n<\/p>\n
\n
                                                                          28<\/span>
\n                                      29<\/span><\/p>\n
41.   There cannot be any doubt whatsoever that a writ of mandamus can<\/p>\n
be issued only when there exists a legal right in the Writ Petition and a<\/p>\n
corresponding legal duty on the part of the State, but then if any action on<\/p>\n
the part of the State is wholly unfair or arbitrary, the superior courts are not<\/p>\n
powerless. Reliance placed by Mr. Divan on G.J. Fernandez           v. State of<\/p>\n
Mysore<\/a> and other, ( [1967] 3 SCR 636 ) is not apposite. In that case itself<\/p>\n
it was held :-\n<\/p>\n
\n
             “Thus under Art. 162<\/a> the State Government can
\n             take executive action in all matters in which the
\n             legislature of the State can pass laws. But Art. 162<\/a>
\n             itself does not confer any rule making power on
\n             the State Government in the behalf.”\n<\/p><\/blockquote>\n
      G.J. Fernandez (supra) was considered in ABL International Ltd.\n<\/p><\/blockquote>\n
(supra)<\/p>\n
42.   Furthermore the concession made by the counsel for appellants in the<\/p>\n
earlier round of litigation also cannot be lost sight of. A specific concession<\/p>\n
was made. It may be that no specific direction was issued by the High Court<\/p>\n
therein, but the stand taken by it was clear and unequivocal.<\/p>\n
                                                                            29<\/span>
\n                                      30<\/span><\/p>\n
43.    Mr. Shyam Divan, when questioned, had very fairly submitted that<\/p>\n
the conduct of the counsel who had appeared on behalf of the appellant in<\/p>\n
the earlier round of litigation is not in question and it cannot be said that he<\/p>\n
acted beyond his authority.\n<\/p>\n
\n
44.    If such a stand had taken in the earlier round of litigation we fail to<\/p>\n
see any reason as to why the concession made by it should not be given<\/p>\n
effect to. If a right has accrued to the respondents for maintaining a writ so<\/p>\n
as to compel the State to give effect to an earlier order passed by the Court<\/p>\n
as has been held by this Court in the case of Commissioner, Karnataka<\/p>\n
Housing Board v. C. Muddaiah<\/a>, [ (2007) 7 SCC 689, the same should not<\/p>\n
be denied to respondent herein.\n<\/p>\n
\n
45.    Keeping in view the facts and circumstances of the case in its entirety<\/p>\n
and having regard to the legal propositions as noticed hereinbefore, we are<\/p>\n
of the opinion that these are not the cases in which this Court should<\/p>\n
exercise its discretionary jurisdiction under Article 136<\/a> of the Constitution<\/p>\n
of India. The appeals are dismissed with costs. Counsel’s fee assessed at<\/p>\n
Rs.50,000\/- in each case.\n<\/p>\n
\n
                                                     …………………………\n<\/p>\n
……J.\n<\/p>\n
                                                                               30<\/span>
\n                   31<\/span><\/p>\n
                               ( S.B. SINHA )<\/p>\n
                        ………………………………J.\n<\/p>\n
                                    ( CYRIAC JOSEPH )<\/p>\n
New Delhi
\nOctober 24, 2008<\/p>\n
                                                         31<\/span>
\n                                    32<\/span><\/p>\n
                  IN THE SUPREME COURT OF INDIA<\/p>\n
                    CIVIL APPELLATE JURISDICTION<\/p>\n
                 CIVIL APPEAL NO.                OF 2008
\n              [Arising out of SLP (Civil) No. 24242 of 2005]<\/p>\n
M\/s. Karnataka State Forest Industries Corporation      …Appellant<\/p>\n
                                      Versus<\/p>\n
M\/s. Indian Rocks                                       …Respondent<\/p>\n
                                   WITH<\/p>\n
                 CIVIL APPEAL NO.                OF 2008
\n              [Arising out of SLP (Civil) No. 23148 of 2005]<\/p>\n
Dear Brother Cyriac Joseph,<\/p>\n
      Draft Judgment in the aforementioned matter is being sent herewith<\/p>\n
for your perusal and kind consideration.\n<\/p>\n
\n
      With kind regards,<\/p>\n
                                           [S.B. Sinha] J.\n<\/p>\n
New Delhi;\n<\/p>\n
September 15, 2008<\/p>\n
                                                                        32<\/span>
\n                                    33<\/span><\/p>\n
Hon’ble Mr. Justice Cyriac Joseph<\/p>\n
                                         33<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India M\/S. Karnataka State Forest … vs M\/S. Indian Rocks on 24 October, 2008 Author: S.B. Sinha Bench: S.B. Sinha, Cyriac Joseph 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 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-255378","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nM\/S. Karnataka State Forest ... vs M\/S. 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