THE HON'BLE SRI JUSTICE A.GOPAL REDDY and THE HON'BLE SRI JUSTICE K.S.APPA RAO DATED: 30-09-2011 CCCA Nos. 272 AND 275 OF 2007 CCCA No. 272 OF 2007 Between: The State of Andhra Pradesh, rep., by its Principal Secretary, Industries & Commerce (Mines-I) Dept., Secretariat Buildings, Saifabad, Hyderabad ..... APPELLANT AND M/s. Sri Vijaya Lakshmi Minerals Trading Company, Head Office at No.1-A, Prof. Subrahmanian Street, Kilpauk, Madras – 600 010, rep., by its Managing Partner Smt. Y.S. Vijaya, 47 years, w/o Sri Y.S. Raja Shekar Reddy, r/o. No. 8-2-269/A-5, Road No.2, Banjara Hills, Hyderabad and another .....RESPONDENTS THE HON’BLE SRI JUSTICE A. GOPAL REDDY AND THE HON’BLE SRI JUSTICE K.S.APPA RAO CCCA Nos. 272 AND 275 OF 2007 JUDGMENT: (Per the Hon’ble Sri Justice A. Gopal Reddy) These two appeals by defendants 1 and 2 respectively arise out of the judgment and decree dated 28-03-2007 passed in O.S No. 247 of 2002 on the file of the learned II Additional Chief Judge, City Civil Court, Hyderabad, wherein the suit filed by the respondent – plaintiff was decreed with costs for an amount of Rs.12,09,40,339/- with interest at the rate of 12% per annum from the date of suit till the date of realization towards compensation. The said suit is an offshoot of the observations made by the Supreme Court in judgment dated 18-09-2001 passed in Civil Appeal Nos.6656 and 6657 of 1994 with C.A Nos.6658-6659 of 1994, 6642- 6646 of 1994, 6647-6650 of 1994 and 6651-6655 of 1994 and Civil Appeal Nos. 5115-5117 of 1996 with C.A Nos.5118-5120 of 1996. The facts which gave rise to filing of this appeal are as under: The Government of Andhra Pradesh through G.O.Ms.No.27, Industries and Commerce (Mines. III) Department, dated 07-01-1974 declared that excluding the lands that are already leased out to private persons, barytes ore bearing areas in the villages of Mangampet and Anantharajupet of Kadapa District were reserved with immediate effect for exploitation in the public sector, as it noticed large extents of lands bearing gray varieties of barytes in Anantharajupet and Mangampet Villages of erstwhile Inam Village of Kadapa District. Pursuant to the declaration reserving exploitation in public sector, the Government of Andhra Pradesh sanctioned mining lease of barytes over an extent of 22.799 hectares in various survey numbers for a period of 20 years in favour of M/s. the Andhra Pradesh Mining Corporation Limited, Hyderabad which is subsequently renamed as the Andhra Pradesh Mineral Development Corporation, the 2nd defendant (hereinafter referred to as ‘the Corporation’) in G.O.Ms.No.151, Industries and Commerce (Mines III) Department, dated 10-02-1975 subject to the provisions of Mines and Minerals (Regulation and Development) Act, 1957 (for short ‘the Act’) and the rules made thereunder and also subject to the condition in Form ‘K’ prescribed under the Mineral Concession Rules, 1960 (for short ‘the Rules’). Pattedars of the said lands filed revision petitions before the Central Government challenging the validity of the order granting the lease in favour of the Corporation and also obtained stay of operation of the lease granted in favour of the Corporation in G.O.Ms.No.151, dated 10-02-1975. As the Corporation was disabled from undertaking the mining operation, to resolve the impasse a tripartite agreement was entered into among the State, the Corporation and the pattedars. In view of the said agreement, the pattedars withdrew the revision petitions and the State undertook to give consent for granting of sub- leases under the Rules in respect of the defined extents in favour of the pattedars and the Corporation agreed to grant sub-leases of the said defined extents of lands in favour of the pattedars. On 06-01- 1991, the Government of Andhra Pradesh accorded permission for grant of sub-leases by the Corporation subject to certain terms and conditions mentioned in G.O. Ms. No. 215, dated 22-04-1980. Accordingly, the Corporation entered into sub-lease on 04-06-1991 with the plaintiff Company vide Ex.A-2 for barytes over an extent of Acs.4.49 cents in Mangampet Village, Obulavaripally Mandal, Kadapa District to hold the same for a period ending with 18-02-1995 subject to the conditions stipulated under the sub-lease. As large-scale irregularities in the mining operations were noticed, the Andhra Pradesh Legislative Assembly appointed a House Committee to enquire into the complaints of illegal mining operations of barytes and the House Committee submitted its report. After considering the report of the House Committee, the Government of Andhra Pradesh took a policy decision and issued G.O.Ms.No.402, Industries and Commerce (Mines I) Department, dated 01-12-1993 (Ex.A-5) reserving the entire barytes ore bearing areas in Mangampet and Anantarajupet Villages of Kadapa District for exclusive exploitation by the Corporation and cancelled all existing sub-leases entered into by the Corporation and the sub-lessees withdrawing the permission given to the Corporation permitting it to sub-lease. The Government also issued G.O.Ms.No.417, Industries and Commerce (Mines I) Department, dated 07-12-1993 (Ex.A-4) to withdraw with immediate effect the consent given to the Corporation to enter into sub-leases and asked the Corporation to take all necessary steps in that regard. Challenging the said action of the State Government, the sub-lessees filed several writ petitions which were allowed by a learned single Judge of this Court. On appeals being filed, the same were referred to a Full Bench of this Court in Govt. of A.P., vs. Y.S. Vivekananda Reddy[1] which upheld the orders of the learned single Judge holding G.O.Ms.Nos. 402 and 417, dated 01-12-1993 and 07-12-1993 respectively and the consequential termination of the sub-leases of the Corporation as illegal and void. The Full Bench also left it open to the State Government and the Corporation that if they propose to terminate the sub-leases or withdraw the consent, they have to issue notices to the sub-lessees as to why such action should not be taken, grant them reasonable time for submitting their explanation, consider the same and pass appropriate orders in accordance with law. For the purpose, it was also considered just by the Full Bench to direct the parties to maintain status quo obtaining as on that date for a period of three months and if no fresh orders are passed within the said period, it was left open to the sub-lessees to proceed with the sub-leases granted to them. Aggrieved by the same, the State and the Corporation carried the matter to the Supreme Court in the civil appeals referred to above. Pending the appeals, the Supreme Court by its order dated 06-10- 1994 was pleased to stay the direction given by this Court in the above batch of cases only with regard to maintaining of status quo for a period of three months and allowed the sub-lessees to carry on mining operations. Pursuant to the interim order granted by the Supreme Court, the respondent – plaintiff carried the mining operations. As the period of lease granted to the plaintiff – sub-lessee has come to an end on 18-02-1995, the plaintiff filed Writ Petition No. 22580 of 1994 claiming extension of period of lease for the period they could not took up mining operations i.e., from 17-12-1993 to 06-10-1994 – nine months and 19 days. The above writ petition was allowed on 04-03-1996 by another Full Bench of this Court in Y.S. Vivekananada Reddy vs. Govt. of A.P[2] directing the respondents therein to put the writ petitioners including the plaintiff in possession of the respective mines covered by the respective sub- leases by 18-03-1996 and permit them to continue their mining operations and transportation of barytes under specific permit on condition as laid down by the Supreme Court viz., “the sub-lessees shall, however, maintain true and faithful account of the mining operation which would be verified by the appropriate Mining Officer every fortnight. It is clarified that the exercise of the right of the Corporation as well as the State Government to proceed in accordance with law as a result of the High Court’s judgments is not stayed”. The Full Bench further directed the writ petitioners to deposit 5% of the sale price as determined by the Corporation before issuing permits for transportation. The interrupted period, as stated above, shall be deemed to commence on the date the writ petitioners assume work and continue until completion of the period. Aggrieved by the same, the Government and the Corporation filed Civil Appeal Nos.5115 – 5117 of 1996 and 5118 – 5120 of 1996 respectively. The Supreme Court by common judgment dated 18-09-2001 in Civil Appeal Nos.6656-6657 of 1994, 6658 – 6659 of 1994, 6642 – 6646 of 1994, 6647 – 6650 of 1994 and 6651 – 6655 of 1994 and 5115 – 5117 of 1996 and 5118 – 5120 of 1996 taking note of expiry of the lease period either in the year 1995 or 1998 and taking note of the State Government cancelling the sub-leases including that of the plaintiff and dismissal of the revisions filed against the cancellation of the sub-leases by order dated 09-09-1998, disposed of the appeals as having become infructuous, except to the extent indicated in case of one Sri V. Ramalingaiah measuring about Ac.1.89 cents which is not expired and set aside the orders of the High Court in Writ Petition Nos.22579 of 1994 and batch, dated 04-03-1996 to the extent of granting relief of sub-leases in favour of the petitioners including the plaintiff. It was also observed by the Supreme Court as under: “Insofar as claim for damages is concerned, it is unnecessary for us to decide the same inasmuch as it would be appropriate for the parties to work out their respective rights by making an appropriate claim in a civil suit to be filed by each of them. We have refused the relief of restitution by way of extension of lease period without examining the question as to whether there is breach of contract as a consequence of which the party aggrieved is entitled to damages. That aspect is left open to be considered or to be dealt with in the civil suit irrespective of and uninfluenced by the observations or findings of the High Court on this as--pect. If such a civil suit is filed, the cause of action should be reckoned only from the date of this order when we finally pronounced upon the rights of the parties, which protection will adequately take care of the interests of the writ petitioners.” On disposal of the appeals by the Supreme Court, the plaintiff got issued notices to the defendants under Section 80 of CPC on 29- 10-2001 under Exs.A-8 and A-9 and on receipt of reply from the defendants under Exs.A-10 and A-11 filed the above suit narrating the facts till the date of disposal by the Supreme Court claiming damages for the period of nine months 16 days i.e., from 17-12-1993 to 06-10- 1994 as it could not extract the mineral during the said period. The plaintiff also detailed the quantity of mineral which it could have extracted and the value of it and the expenditure for extraction of mineral and compensation towards loss of wages from 17-12-1993 to 06-10-1994 and also for the amount spent on machinery to a tune of Rs.12,09,40,339/- stating that 2nd defendant – Corporation who has acted under the illegal orders of 1st defendant – Government stopped illegally mining operations due to which it suffered loss as claimed in para 12 of the plaint. The 1st defendant – Government filed a written statement inter alia contending that the suit is not maintainable as it was filed by the reconstituted firm bearing the same name but not vested with the same rights. The sub-lease dated 04-06-1991 was executed in favour of M/s. Vijayalakshmi Minerals Trading Company represented by Sri Y.S. Vivekananda Reddy with the partners existing at that time and at the time of cancellation of the sub-lease all the partners were not there and from the date of granting of mining lease till the date of filing of suit, the partnership was reconstituted several time and ultimately at the time of filing of suit, only two partners are in the firm and they are not the partners at the time of granting of sub-lease and it was specifically pleaded in para 9 that the Supreme Court left open the issue of illegal cancellation of sub-lease and the consequential damages at large and by virtue of doctrine of merger, the decisions of the High Court do not survive which have to be adjudicated afresh taking into consideration the further developments. The first Full Bench permitted the Government to pass fresh orders after due notice to the sub-lessees. The said direction was not stayed by the Supreme Court. The State Government passed orders after notice cancelling the sub-leases. The sub-lessees including the plaintiff’s previous firm filed revisions before the Central Government which dismissed the revisions. When the Supreme Court permitted the said proceedings to go on, the orders of the Central Government passed on 09-09-1998 were not challenged by the plaintiff or its previous partners which has become final and the same cannot be challenged in view of lapse of time. By virtue of these orders, neither the plaintiff nor its previous partners can question the order of cancellation. Once they cannot question the cancellation, they cannot claim for damages as the issue has already been decided upholding the cancellation. In para 10 of the written statement, it was pleaded that there is no privity of contract between the plaintiff or the previous firms and the 1st defendant. The area in question has been reserved under old Rule 58 (Section 17-A) and the lease was granted to the 2nd defendant. The Government was then advised that it could permit sub-leases under Rule 37 and accordingly in exercise of the said statutory power, it granted permission. Subsequently, a scandal erupted about illegal mining operations which lead to the constitution of a House Committee and based on its report, the permissions granted under Rule 37 were cancelled leading to cancellation of the sub-leases. The functions of the Government were purely statutory and it had no contractual relationship of any kind with the sub-lessees. No question of breach of contract by the State Government arises on the facts. The claim for damages does not lie against the Government in any event. Even assuming that the State Government’s statutory order was not lawful, no claim for damages can be founded thereon. Clause 1 of the sub-lease specifically bars the sub-lessees from claiming compensation if the sub-lease is cancelled. Clause 14 states that in the event of withdrawal of consent given under Rule 37(1) or any other governmental action, no damages are payable and these two clauses are binding on the plaintiff and disentitles it or any other person claiming under it for damages. The 2nd defendant – Corporation also filed a written statement almost in similar lines reiterating the contentions raised by the 1st defendant – Government except para 10 of the written statement stating as under: “The subleases granted by the Corporation were dependent on the permissions granted by the State Government under Rule 37 of the Mineral Concession Rules 1960 framed under the Mines and Minerals (Development and Regulation) Act, 1956. This is a fact known to all. If the permission is withdrawn, the substratum of the sub-lease vanishes and the sublease automatically terminates. It is frustrated and need not be performed vide Section 56 of the Contract Act. In the present case on the basis of the report of the House Committee of the A.P Legislature which revealed that large scale illegal mining operations in barytes were being carried on by the sublessees, the Government decided to withdraw its permission with resultant cancellation of the sub-leases. This defendant had no role to play in that exercise and cannot be held responsible for the cancellation. For this reason also the claim for damages against the defendant is not permissible.” The 1st defendant later filed an additional written statement seeking permission of the Court by filing an interlocutory application, stating that the relationship between the 1st defendant – State Government and the plaintiff is not contractual. In exercise of the powers under the Act, the State Government initially granted consent for sublease and also withdrawn the consent as it had no contractual relationship of any kind with the plaintiff. The suit which is based on wrongful breach of contract is not available against the State Government. When there is no contractual relationship between the State Government and the plaintiff, the question of breach of contract does not arise. Equally, the plaintiff cannot claim any damages on such cancellation of sublease. The observation of the Supreme Court do not alter this legal position. The plaintiff once challenged the legality of the orders of the State Government by way of revision petition to the Central Government under Section 30 of the Act and on dismissal of the said revision petition no further proceedings have been initiated by the plaintiff and allowed the said order of upholding validity of cancellation to become final. It can no longer be characterized as illegal. The same also operates as res judicata for claiming of the damages. The 2nd defendant – Corporation also filed an additional written statement with almost same contents as stated by the 1st defendant. On the basis of the above pleadings, the trial Court settled the following issues and also additional issues: “1. Whether the cancellation of lease by the defendants is illegal? 2. Whether the plaintiff is entitled for recovery of Rs.12,09,40,339/- with interest @ 18% p.a from the date of suit till the realization? ADDITIONAL ISSUES: 1. Whether the suit is barred by section 69 of the Partnership Act? 2. Whether the suit is barred for want of proper notice under Sec.80 of C.P.C? 3. Whether the suit is maintainable?” To substantiate the respective pleadings and contentions, on behalf of the plaintiff, Sri Y.S. Vivekananda Reddy was examined as PW 1 and he has got marked Exs.A-1 to A-9. Sri Y.S. Jagan Mohan Reddy was examined as PW 2 and he has got marked Exs.A-10 and A-11. Smt. Y.S. Vijaya examined herself as PW 3 and she has got marked Ex.A-12. One A. Narayana who worked as Mines Superintendent in the plaintiff company from 02-03-1988 to 31-10- 2001 was examined as PW 4 and he has got marked Exs.A-13 to A-20 and A. Venugopal Raju, the then General Manager of the plaintiff was examined as PW 5. On behalf of the defendants, A. Dayakar Reddy, the Assistant Secretary to the Government of Andhra Pradesh (Industries and Commerce) Department was examined as DW 1 and he has got marked Exs.B-1 to B-10. One H.D. Nagaraja, the then Senior Mines Manager, Grade-II of the 2nd defendant – Corporation was examined as DW 2 and and he has got marked Exs.B-11 to B-22. The trial Court after examining the oral and documentary evidence available on record on issue No.1 held that the first Full Bench decision of the High Court clearly establishes the fact that cancellation of the lease by the defendants is illegal. On additional issue Nos. 1 to 3, referring to the second Full Bench judgment of this Court and the judgment of the Supreme Court, it was held that the cancellation of lease and sublease under Exs.A-4 to A-6 are illegal. Exs.B-10, B-20 and B-1 are subsequent to the lease period coming to an end and therefore the orders under Exs.B-10, B-20 and B-1 cannot operate as res judicata and decreed the suit of the plaintiff for the suit claim with interest at the rate of 12% per annum. Hence the appeals. Sri Y. Chandra Sekhar, learned Special Government Pleader contended that the suit as such filed by the firm is not maintainable as the partnership firm is not an entity or a person in law, but an association of individuals. Order XXX Rule 1 of CPC makes it clear that a suit by a firm has to be filed by any two persons who are partners at the time the cause of action arose, but the firm as such cannot maintain a suit without mentioning the partners as the plaintiffs. At the time of filing of suit, there are only two partners viz., Smt. Vijaya and Smt. Sharmila as the partnership firm has undergone a change since the date of granting lease to the date of filing of the suit. Smt. Vijaya became a partner on 01-04-1994 and Smt. Sharmila became a partner after attaining majority on 20-12-1991. At the time the cause of action arose, Smt. Vijaya was not a partner. The suit as such filed by two persons, one of whom was not a partner at the time the cause of action arose is not maintainable. In support of the submission, learned Special Government Pleader placed reliance upon the judgments in Dulichand Laxminarayan vs. Commissioner of Income Tax, Nagpur[3]; Addanki Narayanappa and another vs. Bhaskara Krishnapa (died) and thereafter his heirs and others[4] and Commissioner of Income Tax, Madras vs. R.M. Chidambaram Pillai[5]. Learned Special Government Pleader further contended that the cause of action arose when the contract was allegedly breached by the cancellation of the sub-lease in 1993 and as the suit is filed in 2002, it is barred by limitation. The Supreme Court granted extraordinary relief under Article 142 of the Constitution of India and permitted the firm which filed the writ petition in the High Court to institute the suit, but the firm which instituted the suit is not the firm of same partners which prosecuted the case in the Supreme Court. Therefore, the plaintiff cannot derive the benefit of limitation extended by the Supreme Court to the firm which existed at the time of disposing of the appeals by the Supreme Court and as such, the suit is barred by limitation since the subsequent partnership firm cannot inherit or the permission granted can be transferable to the partners of present firm. The learned Special Government Pleader further contended that in the notice issued under Section 80 of CPC, the cause title of the suit threatened to be filed is mentioned as a firm represented by its Managing Partner Sri Y.S. Jagan Mohan Reddy, who is no longer a partner and the succeeding partners cannot take advantage of the said notice. He further argued that the foundation to claim for damages for breach of contract can be maintained only when there is existence of contractual relationship between the 1st defendant – State Government and the plaintiff. Since the 1st defendant is not a party to the sub-lease which contract is alleged to have been breached, the suit against it is not maintainable. Even otherwise, right to cancel the permission was expressly reserved in Ex.A-2, dated 04-06-1991 while granting permission to the 2nd defendant – Corporation and in exercise of that power, when the 1st defendant cancelled the permission to sub- lease to the 2nd defendant, in effect withdrawing of permission, 1st defendant cannot be made liable for damages. Permission is the substratum on which the sub-lease rests. When the substratum has gone, the sub-lease automatically perishes. Hence, the suit against the 1st defendant is not maintainable. The sub-lease is a dependent contract permitted by the statute and it is not exclusively dependent on consensus ad idem. On cancellation of the permission, the substratum of the sub-lease disappeared. Therefore, the contract itself is frustrated and ceased to be a lawful contract between the 2nd defendant and the plaintiff by virtue of Section 28 of the Indian Contract Act, 1872 and thus becomes unenforceable. The partners who entered into sub-lease on 04-06-1991 were totally different from the partners who filed the suit and the managing partner referred to was inducted into partnership firm on 01-04-1994 and as the second partner who was a minor at the time when sub-lease was granted, she cannot be a party to the contract and she can only share profits but not losses. When the sub-lease specifically stipulates that no damages are payable by the Government if it withdraws consent or takes any other action and when the Government took a policy decision of terminating