IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN TUESDAY, THE 16TH NOVEMBER 2010 / 25TH KARTHIKA 1932 RFA.No. 360 of 2006(F) --------------------------------- [OS.NO.9/1992 DTD. 31/10/1988 OF SUB COURT, MANJERI] .................... APPELLANT/PLAINTIFF: ----------------------------------- P.KUNHAHAMMEDKUTTY HAJI, S/O.KOYIMMER, AGED 76 YEARS, BUSINESSMAN, PROPRIETOR OF BAJEENA TIMBERS, RESIDING AT PATHAYAKKODAN HOUSE, EDAVANNA AMSOM AND DESOM. BY ADVS. SRI.DINESH MATHEW J.MURICKEN, SRI.P.V.BALAKRISHNAN. RESPONDENTS/DEFENDANTS: --------------------------------------------- 1. GOVERNMENT OF KERALA, REP. BY THE CHIEF SECRETARY TO THE GOVERNMENT, SECRETARIAT, THIRUVANANTHAPURAM. 2. DIVISIONAL FOREST OFFICER, TIMBER SALES DIVISION, KOZHIKODE. 3. THE CONSERVATOR OF FORESTS, NORTH CIRCLE OF THE FOREST DEPARTMENT, KOZHIKODE. R1 TO R3 BY GOVERNMENT PLEADER (FOREST) SRI. M.P. PRAKASH. THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 16/11/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: prv. M.N.KRISHNAN,J ----------------------------- R.F.A.No.360 of 2006 ---------------------------------------- Dated this the 16th day of November, 2010 JUDGMENT This is an appeal preferred against the judgment and decree of the Subordinate Judges Court, Manjeri in OS No.9/1992. The suit is one for setting aside the order of Divisional Forest Officer and so many other declarations. The trial court did not find in favour of the plaintiff and therefore, dismissed the suit. It is against that decision the plaintiff has come up in appeal. 2. Heard the learned counsel for the appellant as well as the respondent. The brief facts necessary for the disposal of the appeal are stated as follows. The plaintiff is the original bidder in a public auction for the sale of timber at Nedumkayam Depot. He had bid for removal of 429.14 cubic meter of timber for Rs.2,15,563.03/-. He had deposited 5,000/- by way of earnest money deposit. He also paid Rs.38,500/- towards value of timber and Rs.9,592.40/- as additional security and removed 25.971 cubic meter on timber. He could not remove the remaining timber as he did not pay the balance amount and therefore, it was reauctioned at the risk and loss of plaintiff as per the terms of notification. One K.T.Aboobacker bid the above said balance R.F.A.No.360 of 2006 2 of timber for Rs.1,76,000/- and EMD deposited Rs.5,000/-. The balance said price was Rs.1,72,000/- and since the reauction had taken place for Rs.1,76,000/- there was no loss to the Government and therefore, the plaintiff is not liable for any damages. It s true that subsequently, the timber had to be reacutioned at the risk and loss of K.T. Aboobaker. In that reauction it is contended by the Government that there was a loss of Rs.56,870.52/. When the plaintiff participated in another auction and bid it as a condition precedent the Government insisted for the clearance for the loss alleged to be sustained by it. Since the plaintiff had not caused any loss to the Government and as it was on account of the cancellation of auction of K.T.Aboobacker it is submitted the Government is not entitled to proceed against the plaintiff nor forfeit the earnest money deposit and additional security deposit. 3. On the other hand, the Government would contend that the plaintiff has committed breach and that had necessitated in reauciton and the person who participated in the reauction was agent of the plaintiff and he only deposited the earnest money but did not deposit the amount and therefore, the Government were forced to reauciton which resulted in loss to the R.F.A.No.360 of 2006 3 Government a sum of Rs.56,870.52. When the Government found that the plaintiff was a bidder in another auction they directed the plaintiff to make loss that had been caused to the Government. It is alleged that it is perfectly within the terms of the contract and therefore, it is contended by the defendants that the suit is not liable to be entertained. The trial court did not accept the contention of the plaintiff and therefore, dismissed the suit. It is against that decision the plaintiff has come up in appeal. 4. Heard both sides. The learned counsel for the appellant would contend before me, that it is true that he had no deposited the amount which resulted in reacution in favour of K.T.Aboobaker. According to him when K.T.Aboobacker had bid the auction for Rs.1,76,000/- which is Rs.4,000/- more than what is due to the Government then no loss had been occasioned on account of the breach of contract committed by the plaintiff. Therefore if at all anybody is liable on account of the default committed by K.T.Aboobacker it is for the Government to proceed against him and not against the plaintiff. The Government would take up a contention that this, K.T.Aboobacker is non other that an agent of the plaintiff and on R.F.A.No.360 of 2006 4 account of the breach of contract committed by him reauction again had to be done and the timber was sold only for a sum of Rs.1,20,307.08/- resulting in a loss of Rs.56,870.52/- to the Government. Now the learned counsel for the appellant's contention appears to be that when reauction is conducted and in pursuance of the reauction a higher bid amount is received and even when that purchaser fails to deposit the original defaulter cannot be proceeded against for the reason that the breach is committed by the second defaulter and so the plaintiff has to be exonerated from the liability. As far as these types of contract are concerned the first and foremost thing that is to be born in mind when Governmental property are dealt with it is the duty of one and all to see that the Government did not suffer any loss. Now if the contention of the learned counsel for the appellant is accepted any person can be made to bid and walk away and then raise a contention that as there had been a subsequent bid for higher amount there is no liability for the original defaulter. The purport of the contract is that when a breach is committed by a person which results in a loss to the Government it had to be reaslised from him. Clause 12 of Ext. A7 will throw a light on the same. Clause 12(a) deals with the R.F.A.No.360 of 2006 5 deposit with balance amount. Clause B says that even after a reacution is published if the original person comes forward and deposits amount with interest etc. he shall be permitted to do it. Then the most important clause is Clause 12(c) which reads as follows: “Failure to remit all dues and execute the agreement will entail cancellation of the sale, forfeiture of all moneys deposited and resale of the coupe at the risk and loss of the purchaser” 5. Clause 12(d) contains a right tot he Government. When the original auction or reauction causes damages to the Government may at their discretion proceed against any or all of them to the extent of their liability. So clause 12(d) gives a permission to the Government to proceed against the original defaulter or the defaulter in the reauction sale to the extent of their liability. Now K.T.Aboobacker participated in the auction and walked away without furnishing anything. The original breach of contract committed by the plaintiff resulted for further reauction wherein the Government had sustained a loss of more than 56,000/- rupees. Therefore, the loss of the Government was remaining in tact inspite of a reauction bid by K.T.Aboobacker. The conduct of Aboobackeer is contumacious. The reauction was R.F.A.No.360 of 2006 6 only as a result of breach by the plaintiff. When it is so the contract envisages such a person to make loss of good suffered by the Government and applying Clause 12(d) that is a general principle, I feel that there cannot be any doubt that the Government is at liberty to proceed against the plaintiff for that amount. The plaintiff participated in another auction and was the successful bidder. By resorting to Clause 8 of the contract the previous loss sustained by the Government was ordered to be deposited for confirmation of the new bid. It is perfectly in terms of the contract and therefore the challenge against the same cannot be entertained. Therefore I find the plaintiff is not entitled to the declaratory relief. 6. The learned counsel for the appellant had submitted the decision before me reported in 1985 KLJ page1 (State of Kerala & Others v. M.E.Aly). In that case this Court found that, the principles to be applied is that there should not be unjust enrichment. Now the present plaintiff had deposited Rs.5,000/- as EMD and another Rs.9,842/- as additional security. It is true that he had committed the breach of the contract. When the Government is provided a relief to recover the entire loss sustained and if over and above this is also liable to be forfeited R.F.A.No.360 of 2006 7 it will result in unjust ice. It is submitted that an amount of Rs.56870/52 is deposited with the Government as the loss sustained by it. When it is Rs.5000 + 9592 = 14,592/-. Which is forfeited by the Government has to be given back to the plaintiff. The appellants' counsel prays for interest. It cannot be granted for the reason that the appellant has not paid any interest to the Government for the damage caused to it. Therefore, the appeal is disposed of with a direction to the Government to reimburse a sum of RS.14,592/- to the plaintiff within a period of 45 days from the date of receipt of a copy of this judgment. Parties are directed to bear their respective costs. M.N. KRISHNAN, JUDGE. pm The amounts 'Rs.9842/-' occurring in the 6th line of paragraph 6, 'Rs.9592/-' occurring in the 11 the line of paragraph 6 and 'Rs.14592/-' occurring in the 11th line of R.F.A.No.360 of 2006 8 paragraph 6 and in the last paragraph of the judgment dated 16.11.2010 in R.F.A No.360/2006 are corrected and substituted respectively as 'Rs.4592/-', 'Rs.4592/-' and 'Rs.9592/-' as per order dated 25.5.2011 in .I.A No.1127/11 in R.F.A No.360/2006. Sd/- Registrar (Judicial)