il Appeal No 255 of 1964 Appeal by special leave from the judgment and order dated November 14 1960 of the Madhya Pradesh High Court in Misc
Petition No 273 of 1959
B Sen R P Kapur and 1
N Shroff for the appellants
section P Sinha and section Shaukat Hussain for the respondent
The Judgment of the Court was delivered by Shah J
Under a contract dated October 14
1956 the respondent was granted a right to the forest produce from Coupe No 9 Lendara in the Saiura Borgain Reserved Forest in the Kanker Forest Division of Bastar District of Madhya Pradesh for the period October 14 1956 to March 31 1958
The Divisional Forest Officer held an enquiry in respect of certain breaches committed by the respondent of the terms of the contract and by order dated January 30 1958 directed the respondent in exercise of the authority under r 151 of the Forest Contract Rules framed by the Government of Cenytral Provinces  Berar to pay Rs 8500 as compensation assessed by him for damage done in the reserved 159 forest and Rs 500 as penalty under r 301 of the Forest Contract Rules
An appeal against the order to the Conservator of Forests and a revision petition to the Chief Conservator of Forests Madhya Pradesh were unsuccessful
The respondent then moved the High Court of Madhya Pradesh by a petition under article 226 of the Constitution for a writ quashing the order dated January 30 1958 directing payment of compensation and penalty and restraining enforcement of the order
The High Court granted the petition and restrained the State and the forest authorities from recovering Rs 9000 ordered on January 30 1958 from the respondent
In this appeal the appellants contended in the first instance that the High Court was in error in holding that by r 15 of the Forest Contract Rules the Divisional Forest Officer was not authorized to direct the contractor to pay compensation for damage done by him or his agents or servants because the coupe was not in a reserved forest
Such a case it was said was never pleaded by the contractor in his petition and the High Court in granting relief to the respondent made out a case which the appellants had no opportunity to meet
In support of their case that the coupe is a part of the reserved forest the appellants have annexed to their petition for special leave a true copy of a notification issued under section 20 of the  as applied to the Central Provinces declaring that the State forests of the Bastar District in Tahsil Kanker Sainmura Borgaon specified in the Schedule shall be reserved forests
We agree with the appellants that the High Court has without any plea or evidence assumed that compensation under r 151 could not be directed to be paid by the contractor for damage done in the coupe for which he was given a contract because the coupe was not included in a reserved forest
The plea which appealed to the High Court was not raised in the petition nor in the objections to the Divisional Forest Officer in reply to the notice to show cause nor in the memorandum of appeal before the Conservator of Forests nor in the petition invoking the revisional jurisdiction of the Chief Conservator of Forests
The High Court assumed that because the forest authorities charged the contractor with illegal fellings in the coupe granted to him the fellings could not be in a reserved forest
For this assumption there is no warrant
The High Court was therefore in error in setting up the ground that the impugned order was not authorised by the terms of r 151
But the appeal filed by the appellants must still fail on the grounds to be presently set out
The following are the relevant terms of the contract 1
The Governor hereby agrees to sell to the forest contractor and the forest contractor agrees to purchase the forest produce described in the First Schedule hereunder 160  situated in the area specified in the said Schedule  on the conditions hereinafter stated
 The First Schedule describes the area of the forestand sets out the forest produce sold under the contract
The forest contractor shall be subject to the Forest Contract Rules as amended from time to time a copy of which has been furnished to the forest contractor the receipt of which the forest contractor hereby acknowledges and the Rules shall be deemed to De part of this contract in so far as they are applicable thereto Provided that the said Rules shall be deemed to be modified to tile extent and in the manner laid down in the Second Schedule hereunder 7
The forest contractor hereby binds himself to perform all acts and duties required and to abstain by himself and his servants or agents from performing any act forbidden by the  by the Forest Contract Rules and by this contract
In the event of any doubt or dispute arising between the parties as to the interpretation of any of the conditions of this contract or as to the performance or breach thereof the matter shall be referred to the Chief Conservator of Forests Madhya Pradesh Nagpur whose decision shall be final and binding on the parties hereto By cl 6 of the contract the Forest Contract Rules framed by the local Government are made part of the contract
The material clauses of the Rules read as follows 2
All contracts whereby Government sells forest produces to a purchaser shall be subject to the following rules in so far as they are applicable and these rules in so far as they are applicable shall be deemed to be binding on every forest contractor not only as rules made under the Forest Act but also as conditions of his forest contract Provided that the forest officer executing a forest contract shall have power to vary these rules by express provision in such contract and where these rules are in conflict with such an express provision such express provision shall prevailProvided further 151 A forest contractor shall be responsible for any damage that may be done in a reserved forest by himself or his servants and agents
The compensation for such damage shall be assessed by the Divisional Forest Officer whose decision shall be deemed to be that of an arbitrator and shall be 161 final and binding on the parties except to the extent that it shall be subject to an appeal to the Conservator of Forests
Explanation  2 Any sum assessed as damages under this rule shall be recoverable as arrears of land revenue   301 Where the forest contractor commits a breach of any of the conditions of his contract but it is not proposed to terminate his contract on account thereof the whole penalty provided for in rule 28 shall not be recovered from him but the Divisional Forest Officer shall have power to recover a portion thereof not exceeding five hundred rupees in accordance with the provisions of section 85 of the Act
2 An order of the Divisional Forest Officer under this rule shall be subject to appeal to the Conservator of Forests if the amount levied exceeds two hundred rupees but shall otherwise be final
3The payment of a sum assessed under this rule shall absolve the forest contractor from all further liabilities under his contract in respect of such breach except his liability under rule 15 for damage done in a reserved forest
 On behalf of the respondent it was urged before the High Court as also before this Court that where a dispute arose between the Divisional Forest Officer and the contractor whether the contractor his servants or agents had caused damage in a reserved forest the question could be decided in the manner appointed in cl 9 of the contract alone ie by arbitration of the officer denominated and not by the Divisional Forest Officer
In dealing with the validity of the order imposing penalty upon the contractor the High Court upheld that argument
Rule 15 in the first instance declares that the forest contractor shall be responsible for any damage done either by himself or his servants or agents it then proceeds to state that compensation shall be assessed by the Divisional Forest Officer whose decision shall be deemed to be that of an arbitrator subject to an appeal to the Conservator of Forests
The rule does not confer upon the Divisional Forest Officer authority to determine when a dispute is raised whether damage has been caused in a reserved forest by the contractor his agents or his servants
The rule only declares that for damage that may be done by the contractor his servants or agents in the forest the contractor shall be liable the rule also invites the Divisional Forest Officer with authority to determine the amount of compensation payable by the contractor but not to determine whether the contractor his servants or his agents have committed breach of the contract
Clause 9 of the contract confers authority upon the Chief Conservator of Forests to adjudicate upon disputes inter alia as to the performance or breach of the contractor
I read with the Schedule to the contract the contractor had to fell or uproot 162 trees marked with a geru band or to fell trees on coupes and section lines which bear a marking hammer impression on the stump buttends and all Karra over 9 at BH whether marked or not
It was the case of the Divisional Forest Officer that the contractor had contrary to the terms of the contract cut trees not marked with the geru band
Plainly the Divisional Forest Officer claimed that the contractor had committed a breach of the terms of the contract and when the contractor denied the breach a dispute arose between the parties as to the performance or breach of the terms of the contract and it had to be referred to the Chief Conservator of Forests
It is conceded and in our judgment counsel is right in so conceding that the expression shall be referred to means shall be referred to the Officer denominated as an arbitrator to decide the dispute
It was argued however that by virtue of cl 6 of the contract the Forest Contract Rules were made part of the contract and the Divisional Forest Officer was invested with authority not only to determine the amount of compensation which may be payable by the contractor for damage done in a reserved forest but also to determine whether the contractor or his agents or servants had been responsible for causing the damage
This for reasons already stated we are unable to accept
There is no inconsistency between cl 9 of the contract and r 15
It is unnecessary therefore to consider whether in case of inconsistency the terms of the contract expressly setting out a certain covenant may supersede the terms of the rule
Under r 15 the liability for damage done in a reserved forest is declared against the contractor
He is also declared liable to pay compensation as may be assessed by the Divisional Forest Officer
But the Divisional Forest Officer is not invested with authority to determine whether the damage was done by the contractor his agents or servants
That is a matter which must be determined in a reference under cl 9 of the contract
It was urged by the appellants that it could not have been intended by the rule making authority who had also prescribed the form as part of the rules in which the contract was required to be executed to set Lip a complicated and clumsy procedure for determination of a dispute about the breach of contract if the language of the rules were ambiguous this may be a relevant consideration
When a dispute arises between the contractor and the forest authorities relating to the performance or breach of the contract there has under the terms of cl 9 to be a reference to the Officer denominated in the contract
After liability is determined there may have to be an assessment by the Divisional Forest Officer of compensation payable by the contractor to the State
163 That would necessitate another inquiry
The procedure is apparently clumsy and likely to be dilatory
But we are unable to ignore the plain terms of the contract and the rules and to hold that in respect of the determination of responsibility for damage done in a reserved forest there need be no reference under cl 9 of the terms of the contract
It was then urged that in any event a decision was in fact given by the Chief Conservator of Forests in this case and that decision complied with the requirements of cl 9 of the contract
But as already stated the Divisional Forest Officer passed an order holding the respondent liable to pay compensation for damage done in a reserved forest and assessing the compensation at Rs 8500 and penalty at Rs 500
That order was confirmed in appeal by the Conservator of Forests and in exercise of his revisional jurisdiction the Chief Conservator of Forests upheld the order of the Conservator of Forests
The Chief Conservator of Forests did not even purport to act as an arbitrator he recorded no evidence and expressly held that the Divisional Forest Officer was not obliged to refer the case for arbitration under cl 9 of the contract The trial was not of a proceeding in arbitration but of a proceeding in exercise of supervisory or revisional jurisdiction
If in truth the dispute had to be referred for adjudication to the Chief Conservator of Forests his decision that he found no reason to interfere with the findings of the Divisional Forest Officer who was one of the parties to the dispute cannot conceivably be regarded as an award between two contesting parties
It must therefore be held that the order passed by the Divisional Forest Officer imposing liability for compensation for damage done by illegal fellings cannot be sustained
The second part of the order imposing penalty under r 301 also suffers from the same infirmity
It is true that under the rule the Divisional Forest Officer had power to impose penalty in a sum not exceeding Rs 500
But exercise of that power is conditioned by the existence of a breach by the forest contractor of any of the terms of the contract
Where a dispute arises whether there has been a breach of any of the terms of the contract it is for reasons already stated to be determined by the Chief Conservator of Forests
That has admittedly not been done
The order imposing penalty under r 301 must also be set aside
The appeal therefore fails and is dismissed with costs
Appeal dismissed


Summary:
Under r 151 of the Central Provinces and Berar Forest Contract Rules a forest contractor is responsible for any damage done in a reserved forest by himself or his servants or agents and compensation for such damage is to be assessed by the Divisional Forest Officer
The respondent was under a contract granted a right to the forest produce
By cl 9 of the Contract any doubt or dispute arising between the parties as to the performance or breach of any of the conditions of the contract had to be referred to the Chief Conservator of Forests for decision
The Divisional Forest Officer acting under r 151 held that the contractor committed a breach of the contract and assessed the compensation for damages
HELDRule 151 does not invest the Divisional Forest Officer with authority to determine whether the contractor his servants or his agents have committed a breach of the contract
When a dispute arises between the contractor and the forest authorities relating to the performance or breach of the contract there has to be under the terms of cl 9 a reference to the officer denominated in the contract
After liability is determined there may have to be an assessment by the Divisional Forest Officer of compensation payable by the contractor to the State There is no inconsistency between cl 9 of the Contract and r 15 161 F H 162 E F