IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Civil Suit No. 14 of 1987. Judgement reserved on: 12.8.2008. Date of decision: September 8, 2008. M/s Friends & Company ….. Plaintiff. Vs. State of H.P. & anr. …. Defendants. Coram The Hon’ble Mr. Justice Kuldip Singh, Judge. Whether approved for reporting?1 For the plaintiff : Mr. Shrawan Dogra, Advocate. For the defendants : Mr. A.K. Bansal, Addl. Advocate General. Kuldip Singh, Judge. The plaintiff has filed the present suit for accounts and for recovery of Rs.18,05,000/- with future interest at the rate of 18% per annum etc. 2. The facts in brief as per pleaded case of the plaintiff are that plaintiff is a registered partnership firm and had been working as forest lessee at Mandi in Himachal Pradesh. The plaintiff in an open auction had purchased forest lot No. 6/81-83 in Chamba Circle, Bharmour Division, District Chamba for a consideration of Rs.11,01,000/-. The plaintiff had deposited an amount of Rs.1,10,100/- as security for exploitation and conversion of standing Whether the reporters of the local papers may be allowed to see the Judgment? …2… trees into scants/ logs. An agreement was executed on 13.8.1981 and plaintiff started work and converted marked trees into scants/ logs after spending heavily. The plaintiff submitted progress reports to the forest department. The plaintiff had paid in all Rs.7,00,000/- towards royalty of the lot from time to time. The period of lease was two years up to 31.3.1983, but the lease period for exploitation of lot was extended up to 31.1.1984. 3. The plaintiff converted trees into 25600 scants of different sizes/ species of deodar, kail and fir, which were floated into two Ghals, only 25055 scants of different sizes and species were caught at catching point and taken into possession and stacked at boom head. The remaining scants, it appears were lost during ghal operation as river loss. On payment of proportionate royalty, the plaintiff was permitted to lift 14520 scants for which the authorities issued export permits from time to time. According to plaintiff after excluding the scants which were permitted to be taken away by the plaintiff under export permits, balance 10536 scants remained stacked at the boom head. The plaintiff could not pay the balance royalty. In these circumstances 10536 scants remained in possession of defendant No. 1 and it was for defendants to account for 10536 scants. 4. The plaintiff later on learnt that instead of 10536 scants, only 5005 scants were available at boom head and remaining scants were either misappropriated or stolen with the connivance of forest department of defendant No. 1. The plaintiff in para 22-A of the plaint has pleaded that price/ value of 10536 scants was Rs.19,80,605/- …3… and after adjusting various amounts mentioned in said para, plaintiff has claimed Rs.18,05,000/- from the defendants. It has been pleaded that notice dated 15.9.1987 under Section 80 CPC was served on State of Himachal Pradesh, Secretary Forest and Collector, Chamba. The plaintiff has ultimately filed the suit. 5. The suit has been contested by the defendants by filing written statement. The defendants admitted that plaintiff is a registered forest lessee and had purchased lot No. 6/81-83 Upper Ravi (Bharmour) forest division in general auction held in February 1981. The agreement was executed and signed by lessee on 2.3.1981 and by the government on 13.8.1981. The lessee had paid only Rs.6,68,873.23 towards royalty. The lease period was up to 31.3.1983. The plaintiff failed to clear the dues of the lot within stipulated period. On the request of the plaintiff the Conservator of Forests, Chamba under clause 19 of the agreement had granted extension for payment up to 31.1.1984, but the plaintiff failed to clear the dues even in the extended period. It has been admitted that 25600 scants of deodar, kail and fir were extracted by the lessee and launched in two ghals, 25055 scants were caught by the lessee at rafting points, which were never taken into possession by forest department, those scants remained in the possession of the lessee. The river loss comes to 545 scants. The export permits of 14520 scants were issued. The balance timber remained in the custody of plaintiff, who was responsible for shortage or pilferage. On verification 5005 scants were found on the spot by the field staff. …4… 6. In pursuance of letter dated 9.4.1985 of Deputy Inspector General of Police (Enforcement), FIR No.7 dated 6.4.1985 was registered at Police Station Enforcement, North Zone, Dharamshala. The timber of the lot was seized during investigation. The learned Chief Judicial Magistrate on 25.9.1985 passed an order for disposal of 5415 scants. These scants were later on sold by H.P. State Forest Corporation. It has been submitted that in these circumstances, there is no question of auctioning 10535 scants. It has been denied that value of balance timber on 13.8.1982 was Rs.9,12,000/-. It has not been denied that security amount Rs.1,06,619.55 is lying with Divisional Forest Officer, Bharmour, which cannot be refunded, rather the security amount is to be adjusted against the balance dues of the lot. It has been pleaded that after adjusting the amounts received in the account of the plaintiff, still an amount of Rs.7,19,633.46 is payable by the plaintiff to the defendants. The defendants have denied the claim of the plaintiff and prayed for dismissal of the suit. 7. The plaintiff filed replication and reiterated its stand. On the pleadings of the parties issues were framed on 30.4.1990, issue No. 1 was reframed on 5.8.2008 and now the following issues require determination by this court- 1. Whether 10536 scants were lying in the custody, care and possession of the Forest Department at boom heads and were lost for which the Forest Department is responsible to account for? OPP. …5… 2. If issue No. 1 is proved, whether the plaintiffs are entitled to recover Rs.18,05,000/- or any other amount from the defendants. 3. Relief. 8. On 3.8.1999, the suit was dismissed by a learned single Judge of this court by holding that suit is hit by bar under section 69(2) of the Indian Partnership Act. No findings on the merits of the suit were given by the learned single Judge. In LPA No. 2 of 2000, judgement, decree dated 3.8.1999 passed by learned single Judge was set aside on 12.3.2007 and the suit was remanded for fresh decision. After remand of the suit, statement of DW 8 was recorded, who brought on record some documents. The plaintiff did not adduce any evidence in rebuttal after the statement of DW 8. The learned counsel appearing for the parties vide orders dated 5.8.2008 and 12.8.2008 did not lead any evidence after reframing of issue No.1. 9. I have heard the learned counsel for the parties and gone through the record. My findings on the above issues are as under:- Issue Nos. 1 & 2: 10. Issues No. 1 and 2 are interconnected and for their decision same set of evidence is to be considered, therefore, both the issues are being disposed of collectively. 11. There is nothing in the agreement Ex. DW 4/A that the property in 25600 scants would transfer to plaintiff on the happening of some future event. In fact, the scants were in deliverable state …6… when those were taken out from forest by the plaintiff. The scants were ascertained, floated in the ghal and caught at the catching point. The terms and conditions of the agreement Ex. DW 4/A were for regulating the contract but that does not mean that property in ascertained scants which were in deliverable state was not transferred to the plaintiff. On plaintiff committing default, the title in the scants was to revert back to the defendants as per agreement, but the property in the scants when those were caught at the catching point was with the plaintiff. It is not the case of the defendants that before the scants were caught at the catching point, the scants were taken over by the defendants by invoking default clause under the agreement. The defendants in Para-20 of the written statement have pleaded that huge amount of Rs.7,19,633.46 still remains recoverable from the plaintiff. In other words, the defendants by pleading recovery of balance amount from the plaintiff on account of sale of the lot have admitted that the property in scants stood transferred to the plaintiff under the agreement. Therefore, it can be safely inferred that plaintiff was the owner of the scants of the lot when those were caught at the catching point. 12. The next question is whether 10536 scants of deodar, kail and fir were in the custody, care and possession of the forest department at the catching point and were lost for which forest department of defendant No.1 is responsible to account for. The parties are not in dispute that plaintiff extracted 25600 scants of different species from the lot. This fact has been proved by Ex. PC letter dated 31.10.1984 of Divisional Forest Officer, Bharmour …7… addressed to Conservator of Forests, Chamba. In Ex. PC, it has been stated that at catching point (boom head) 25055 scants were caught. On payment of royalty the plaintiff had exported 14520 scants and 10535 scants (290 deodar + 9555 kail + 790 fir) should have remained on the spot, but on physical verification, only 5005 scants (15 deodar + 3721 kail + 1269 fir) were found on the spot. In Ex. PC, it has further been stated that timber mentioned in para-4 (5005 scants) and security amount to the tune of Rs.1,10,100/- plus interest accrued thereon up to date is lying with the Divisional Forest Officer, Bharmour. Ex. PC does not state when 5005 scants were actually taken into possession by the Divisional Forest Officer, Bharmour. 13. It is also the case of the defendants that on the basis of FIR No. 7 dated 6.4.1985 timber of the lot was seized during investigation and ultimately in pursuance of order dated 25.9.1985 of learned Chief Judicial Magistrate, Chamba 5415 scants were sold. DW 4 Madhusudan Lal Vaidya was the Conservator of Forests, Chamba from 1978 to August, 1982. During his tenure the plaintiff had taken the lot vide agreement Ex. DW 4/A. In his statement, he has stated that at the boom point the timber collected and stacked by the lessee above the flood point is checked and verified by the forest officials. He has also stated that while seeking export permit the lessee is required to give details of the size-wise scants intended to be exported and export permit is given only after verification, before an export permit is granted, timber of the value of half times to the royalty payable by the lessee is required to be retained. DW 5 R.A. Singh …8… was the Divisional Forest Officer in whose tenure the plaintiff was granted the lot vide agreement Ex.DW 4/A. In his statement, he has stated that even in respect of the extracted timber lying in the road side depot outside the leased area, the lessee could not remove the timber therefrom without the express permission of the forest department. PW 12 Balak Ram, who had worked as Manager of the plaintiff’s firm from 1975 to 1984 has stated that ghals were launched and the timber was collected at the boom head at Kalsuin under his supervision. At Kalsuin, timber was under the watch and ward of the forest department. PW 11 P.C. Anand, partner of plaintiff’s firm has stated that 10536 scants remained at the boom. The timber was under the control of forest department at boom. This stand of the plaintiff has been disputed by the defendants. 14. The lease was cancelled vide order dated 24.4.1985 Ex. P/O. It has also been stated in Ex. P/O that balance timber of the lot is ordered to be confiscated to the government and will be sold in an open auction. The outstanding dues recoverable from the lessee in respect of the lot will be recovered by way of auctioning the confiscated timber of the lot and loss if any occurred by sale of confiscated timber of the lot will be recovered from the lessee as arrears of land revenue. In case of profit by auction sale of timber confiscated the same shall accrue to government and lessee shall have no right whatsoever to such profit. Clause 25 of agreement Ex. DW 4/A covers cancellation of the lease. According to clause 25, in the event of cancellation of the lease, the forest officer may proceed under Sections 82, 83 and 85 of the Indian Forest Act, 1927 (for …9… short, the Act). It has been proved that lease of the lot was cancelled on 24.4.1985. Section 82 of the Act, as amended in H.P., provides that money due to the government under any contract relating to the timber shall be recovered under the law for the time being in force as it were an arrears of land revenue. Section 83 of the Act provides that when money is payable in respect of any forest produce, the amount thereof shall be deemed to be a first charge on such produce. Sub-section (2) of Section 83 empowers the forest officer to sell such produce by public auction and the proceeds of the sale shall be applied first in discharging such amount, sub-section (3) further provides that surplus, if any, if not claimed within two months from the date of sale by the person entitled thereto shall be forfeited to the government. In other words, if claim is made by the lessee of the surplus amount within two months from the date of sale then there shall not be any forfeiture in favour of the government under sub- section 3 of Section 83. The forfeiture of the amount is possible only if the lessee has the notice of sale. In fact, there is nothing on record that forest officer invoked sub-section (2) of Section 83 and sold the timber by way of public auction at his own level. The sale ordered on 25.9.1985 by Chief Judicial Magistrate, Chamba cannot be termed a sale under the agreement Ex. DW 4/A or under sub-section (3) of Section 83. The condition in Ex. P/O dated 24.4.1985 that in case of profit by auction sale of timber confiscated, the same shall accrue to the government and the lessee shall have no right whatsoever to such profit is not inconsonance with clause 25 of the agreement Ex. DW 4/A nor it is inconformity with Section 83 of the Act, and, …10… therefore, defendants cannot take benefit of said condition mentioned in lease cancellation order dated 24.4.1985 Ex. P/O. On cancellation of the lease agreement the scants left on the date of cancellation of agreement of the lot came in possession of defendants and the defendants are answerable to account for those scants to plaintiff. 15. Ex. PZ letter appears to have been written on 28.12.1983, wherein balance timber of lot No. 6/81-83 has been shown 10435 scants (290 deodar + 9355 kail + 790 fir), Ex. PY is the last permit issued to the plaintiff on 28.12.1983. The pleaded case of the defendants is that after excluding 14520 scants which were permitted to be taken away by the plaintiff, only 5005 scants were left on boom head and so found on verification, but how later on number of scants increased from 5005 to 5415 scants when timber of lot was seized in FIR No. 7 dated 6.4.1985 and ultimately ordered to be sold by learned Chief Judicial Magistrate, Chamba that has not been explained by defendants. DW 2 D.S. Pathania, Divisional Manager H.P. Forest Corporation at Bhaderwah has stated that 5762 scants belonging to plaintiff were sold in auction in different lots up to 30.4.1987. The auction was carried out under the order of court. Here again, how the number of scants increased from 5415 seized scants to 5762 remains a mystery. In cross-examination, DW 2 has stated that 42 deodar scants, 3830 kail scants and 1890 fir scants were put to auction. He has also stated that statement Ex.PX/A was prepared by forest corporation, wherein unstacked timber to the extent of 5415 scants were also received. He has stated that it is not clear from the record what happened to unstacked 5415 scants. In …11… re-examination, he has stated that scants detailed in Ex.PX/A were received from Divisional Manager, Forest Corporation, Chamba. The statement Ex. PX/A pertains to the details of timber of plaintiff sold up to 30.4.1987. The statement of DW 2 makes it clear that in addition to 5762 scants which were sold by way of auction up to 30.4.1987 there were 5415 unstacked scants of plaintiff but what happened to those unstacked 5415 scants that has not been explained by the defendants. Therefore, number of scants of plaintiff as per DW 2 comes to (5762 + 5415 ) =11177. Thus 11177 scants of plaintiff came to H.P. Forest Corporation from defendants, but plaintiff is claiming only 10536 scants. The increase in number to 11177 scants in Ex. PX/A is due to unexplained reasons. The fact remains grievance of plaintiff is for 10536 scants only which is on lower side in comparison to 11177 scants of plaintiff which came to H.P. Forest Corporation as per DW 2. In these circumstances, there is no difficulty in holding that 10536 scants of the lot of the plaintiff were in custody, possession and control of the defendants and they are liable to account for these scants to plaintiff. 16. In Ex. PC 10535 scants have been identified as follows:- Species No. of scants Vol. in cft. Deodar 290 640.04 Kail 9455 17696.13 Fir/ Spruce 790 877.17 ________ _________ Total: 10535 19213.34 ________ _________ …12… The lease was cancelled on 24.4.1985 vide Ex. P/O, balance timber of the lot was confiscated and ordered to be sold in an open auction. Ex. PW 4/A is the timber price bulletin for the quarter ending 31.12.1983, issued by the Department of Forest Farming and Environmental Conservation H.P. PW 4 S.P. Gupta, Forest Utilisation Officer, office of Principal Chief Conservator of Forests, Shimla has proved Ex. PW 4/A. He has stated that rates given in the brochure were applicable up to 31.3.1984. It is admitted case of the parties that lease period of the lot was extended up to 31.1.1984. There is nothing on record that rates of timber on 31.1.1984 were higher than rates of timber on 24.4.1985. There is nothing wrong in presuming that rates of timber on 31.1.1984 must be less in comparison to rates of timber on 24.4.1985 keeping in view general price rise with the passage of time. Therefore, rates mentioned in brochure Ex. PW 4/A can be safely applied for determining the market value of the scants, in question. In Ex. PW 4/A, the rates of H.P. Forest Corporation of deodar, kail and fir are given as follows:- Deodar: Section 26 cms x 13 cms. 366 cms 3409/- p.cum 305 cms 3634/- 244 cms 3251/- Kail Section 26 cms x 13 cms. 366 cms 2578/- p. cum. 305 cms 2630/- 244 cms 2256/- …13… Fir Section 26 cms x 13 cms 366 cms 1784/- p. cum. 305 cms 2029/- 17. There is no evidence on record what were the sizes of 10536 scants. In these circumstances, it will be appropriate to take out the average rates of deodar, kail and fir scants on the basis of Ex. PW 4/A. The average rate of deodar comes to Rs.3431.33 per m3, average rate of kail comes to Rs. 2488/- per m 3 and average rate of fir comes to Rs.1906.50 per m3, hence rate of deodar comes to 3431.33 x 0.02832 = 97.18 per cft., rate of kail comes to 2488.00 x 0.2832 = 70.46 per cft., and rate of fir comes to 1906.50 x 0.02832 = 53.99 per cft. 18. As per Ex. PC out of 10535 scants, deodar scants were 290 or 640.04 cft., kail scants were 9455 or 17696.13 cft, fir scants were 790 or 877.17 cft. In accordance with the rates discussed above, the value of deodar, kail and fir scants comes as follows:- (i) Deodar = 640.04 x 97.18 = Rs. 62,199.08 (ii) Kail = 17696.13 x 70.46 =Rs. 12,46,869.32 (iii) Fir = 877.17 x 53.99 =Rs. 47,358.41 ________________ Rs. 13,56,426.81 ________________ 19. Thus on 31.1.1984 the market value of (290 deodar + 9455 kail + 790 fir) 10535 scants comes at Rs.13,56,426.81. The plaintiff in para 22-A of the plaint has deducted from the market price various expenses at the rate of Rs.10/- per cubic feet. In Ex. PC …14… volume of 10535 scants has been shown 19213.34 cubic feet. Thus expenses for handling 19213.34 cubic feet timber at the rate of Rs.10/- per cubic feet comes at Rs. 1,92,133/- and therefore, amount of Rs.1,92,133/- is to be deducted from the market price of Rs.13,56,421.81. The defendants in the written statement have admitted that security amount of Rs.1,10,100/- of the plaintiff is lying with Divisional Forest Officer, Bharmour and plaintiff has paid Rs.6,68,873.23 towards royalty. The plaintiff has not proved how much amount it had paid to defendants towards royalty of the lot. There is no reason to disbelieve the defendants that plaintiff had paid only Rs.6,68,873.23 towards royalty. Therefore, balance royalty amount payable by the plaintiff comes to Rs.4,32,126.77 (Rs.11,01,000/- - Rs.6,68,873.23). The claim of the defendants as per Ex. PC towards sales tax and surcharge comes to Rs.1,26,891.05. The total balance amount payable by the plaintiff to the defendants is Rs.4,32,126.77 + Rs.1,26,891.05 + Rs.1,92,133/- = Rs.7,51,150.82. The market price of 10535 scants comes at Rs.13,56,421.81. The plaintiff is thus entitled to Rs.7,15,375.99 or say Rs.7,15,376/- (Rs.13,56,426.81 + Rs.1,10,100 – Rs.7,51,150.82). 20. The defendants have unnecessarily withheld Rs.7,15,376/- which was payable to plaintiff. The plaintiff has claimed interest at the rate of 18% per annum, in my opinion, the interest claimed by the plaintiff is very excessive. The interest rates have now fallen down considerably. In my opinion, the plaintiff is entitled to interest at the rate of 6% per annum on Rs.7,15,376/- w.e.f. 15.9.1987 the date from which the interest has been claimed in the …15… plaint till payment. The issues No. 1 and 2 are accordingly decided in favour of the plaintiff and against the defendants. 21. No other point was urged. Relief: 22. As a result of the above discussion, the suit is decreed and a decree of Rs.7,15,376/- is passed in favour of the plaintiff and against the defendants jointly and severally alongwith interest at the rate of 6% per annum w.e.f. 15.9.1987 till realization of entire decretal amount alongwith proportionate cost of the suit. September 8, 2008. ( Kuldip Singh ) (Hem) Judge.