IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE HARUN-UL-RASHID FRIDAY, THE 30TH JULY 2010 / 8TH SRAVANA 1932 SA.No. 872 of 1996 -------------------- AS.138/1994 of SUB COURT,NEYYATTINKARA OS.738/1991 of I ADDL.M.C.,NEYYATTINKARA .................... APPELLANT/RESPONDENT/DEFENDANT: ------------------------------------------ K.SIMON, PLANKALA PURAMBOKE, KULATHOOR DESOM KULATHOOR PAKUTHY BY ADV. MR.PIRAPPANCODE V.SREEDHARAN NAIR MR.S.P.ARAVINDAKSHAN PILLAY MR.PIRAPPANCODE V.S.SUDHIR RESPONDENT/APPELLANT/PLAINTIFF: ----------------------------------------- KULATHOOR PANCHAYATH REPRESENTED BY ITS EXECUTIVE OFFICER, NEYYATTINKARA TALUK. THIS SECOND APPEAL HAVING BEEN FINALLY HEARD ON 30/07/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: HARUN-UL-RASHID, J. ------------------------ S.A.No.872 Of 1996 ---------------------- Dated this the 30th day of July, 2010. J U D G M E N T The defendant in O.S.No.738 of 1991 on the file of the I Additional Munsiff Court, Neyyattinkara, is the appellant. The appeal is directed against the judgment and decree in A.S.No.138 of 1994 of the Sub Court, Neyyattinkara. The suit was filed by the Kulathur Panchayath for damages. The trial court dismissed the suit and allowed the counter claim. The lower appellate court set aside the judgment and decree passed by the trial court and decreed the suit and dismissed the counter claim. Parties hereinafter are referred to as the plaintiff and defendant as arrayed in the suit. 2. The plaintiff is the Kulathur Panchayath. Panchayath auctioned the right to remove the sand from AVM canal for the period 1990-91. The auction was conducted on 12.3.1990. The defendant bid in auction the right to collect sand for an amount of Rs.48,200/-. Bid was confirmed on 15.3.1990. The defendant executed an agreement on 19.3.1990 pursuant to confirmation of the bid. The terms in the agreement directs the defendant to S.A.No.872 Of 1996 ::2:: deposit 1/3 of the bid amount on 19.3.1990 and the balance 2/3 to be paid on or before 15.6.1990 and 15.9.1990 in two equal instalments. In violation of the provisions of the agreement it is alleged that the defendant failed to produce the solvency certificate and failed to remit the balance 2/3 of the bid amount. The plaintiff's case is that the terms in the agreement empowers the plaintiff to cancel the auction and to re-auction the right if the defendant violates the terms in the agreement and to realise the loss if any sustained in the re-auction. The plaintiff issued notice on 27.7.1990 demanding the balance amount due and directing to produce the solvency certificate. It is stated that no reply was sent by the defendant. Therefore another notice was issued on 22.8.1990. In that notice the defendant was asked to show cause why re-auction shall not be conducted at the risk and cost of the defendant. The defendant did not care to show cause and failed to reply to the said notice as well. Therefore, the plaintiff Panchayath decided to cancel the agreement and to re-auction the right to collect the sand. It is further stated by the plaintiff that re-auction was conducted on 18.9.1990. The bid amount on re-auction is Rs.20,670/- and due to the re-auction plaintiff S.A.No.872 Of 1996 ::3:: sustained a loss of Rs.11,463/-. Hence the suit was filed for realisation of the said amount with interest at the rate of 12%. 3. In the written statement filed by the defendant the execution of the agreement and proceedings of auction are admitted. It is contended inter alia that the defendant was unable to remove sand due to various reasons. On 5.4.1990 one person filed O.S.No.536 of 1990 and obtained injunction against the defendant and on 31.5.1990, another person filed O.S.No.705 of 1990 and he also obtained injunction against the defendant. On the basis of these two orders passed by the civil court it is averred that the Panchayath had also informed the defendant not to remove sand. In these circumstances, it is contended that the agreement has become impossible for performance, that the order of injunction restrained the defendant from collecting sand, thereby the agreement has become void and therefore the plaintiff is not entitled to realise the amount based on the void agreement. The defendant raised a counter claim seeking realisation of Rs.15,000/- and interest stating that the plaintiff Panchayath is liable to return the money deposited by the defendant with the plaintiff on 19.3.1990. S.A.No.872 Of 1996 ::4:: 4. The agreement was executed between the parties. Ext.A3 is the agreement by which the defendant bid the right to collect sand from AVM Canal for the period 1990-91. Defendant had deposited Rs.16,067/- being the 1/3 of the total bid amount, being the successful bidder in the auction conducted by the Panchayath. The defendant agreed to deposit the balance 2/3 of the bid amount in two equal instalments payable on 15.6.1990 & 15.9.1990. By virtue of one of the clauses in the agreement the plaintiff reserved the right to cancel the auction and to re-auction the right if the defendant violates the provisions in the agreement. The agreement also provides that the plaintiff Panchayath can realise the loss if any sustained in the re-auction. Ext.A4 is the copy of the notice issued to the defendant directing him to produce the solvency certificate. Ext.A6 is another notice issued to the defendant to show cause why re-auction shall not be conducted for violation of the terms in the agreement. Ext.A8 is the resolution of the Panchayath dated 28.8.1990 to cancel the agreement and to conduct re-auction. Ext.A10 is the re-auction notice dated 1.9.1990. Ext.A11 is the resolution of the Panchayath dated 22.9.1990 to confirm the re-auction in favour S.A.No.872 Of 1996 ::5:: of a third person for Rs.20,670/-. According to the plaintiff since the defendant violated the terms of the agreement they are compelled to resort to re-auction the right at a reduced amount of Rs.20,670/- and thus sustained a loss of Rs.11,463/- which the Panchayath is entitled to realise from the defendant with interest. 5. The appellant/defendant brought to the notice of the trial court as well as the appellate court that there were protest from the local people public against collecting river sand from the AVM Canal. The defendant also pointed out that two strangers filed two suits as O.S.Nos.536/1990 & 705/1990 for permanent injunction restraining the present defendant from collecting sand from AVM Canal. The defendant also brought to the notice of the court that the Panchayath informed the defendant that he shall not remove sand in view of the prohibitory orders passed by the civil court. The decrees and judgments of the said suits have been produced by the appellant/defendant to substantiate his contentions. Ext.B1 is the copy of the plaint in O.S.No.536/1990. The prayer in that case is to restrain the defendant from dredging sand from AVM Canal on the western side of the plaint schedule S.A.No.872 Of 1996 ::6:: property. Ext.B2 is the judgment in the said suit. A decree was passed in that suit in favour of the plaintiff restraining the defendant from removing sand from the Canal on the western side of the plaint schedule property. Ext.B3 is the interim order passed in O.S.No.705/1990 filed by another stranger against the present defendant. Exts.B7 & B8 are the judgment and decree in O.S.No.705/1990. The interim order of injunction passed by the court in O.S.No.705/1990 and O.S.No.536/1990 are dated 31.5.1990 and 6.4.1990 respectively. 6. It is pointed out by the learned counsel for the appellant that the interim order passed by the court in both suits remained in force till the suit was finally disposed of. The trial court also found that there was stiff resistance to sand dredging from the local public. Ext.A11 resolution dated 22.9.1990 passed by the Panchayath shows that there was stiff resistance to sand dredging from the local public. Therefore second auction was conducted excluding portions included in the first auction in view of the decision in O.S.No.536/1990 and because of the stiff resistance of local public. The resolution of the Panchayath also shows that the contentions of the defendant stands proved. The S.A.No.872 Of 1996 ::7:: resolution shows that dredging of snad was being opposed by the public in the locality. The trial court found that dredging of sand had come to a stand still in view of the pendency of the suits and the interim orders made wherein the Panchayath and the appellant/defendant are parties to O.S.No.536/1990. The appellant is the defendant in O.S.No.705/1990. The documents produced evidently show that there was interim order of injunction in force from 6.4.1990 & 31.5.1990 in the above said two suits. The period during which the defendant was entitled to collect river sand is for the period from 1.4.1990 till 31.3.1991. The interim order of injunction passed in O.S.No.536 of 1990 is dated 6.4.1990 and in O.S.No.705 of 1990 is dated 31.5.1990. This shows that during the beginning period itself the defendant was prevented from collecting river sand. The trial court also found that the prohibitory orders remained in force until June, 1991 when the suit was finally disposed of. The trial court also held that from Ext.A11, it appears that the agreement covers the canal lying by the side of the property scheduled in O.S.No.536 of 1990. Ext.A10 notice of re-auction has specifically excluded the said site, the area covering the interim injunction in O.S.No.536 S.A.No.872 Of 1996 ::8:: of 1990. The trial court concluded that the performance of Ext.A3 agreement had become impossible in view of the pendency of the two suits. The trial court also followed the views expressed by the Apex Court regarding the principles relying on Section 56 of the Contract Act and held that Ext.A3 agreement has become void as far as the plaintiff and defendant are concerned. The trial court also considered the counter claim filed by the defendant claiming return of Rs.15,000/- deposited with the plaintiff towards 1/3 of the bid amount. On the basis of the decision in the suit, the trial court consequently held that the defendant is entitled to realise Rs.15,000/- claimed in the counter claim with 12% interest. 7. After considering the contentions raised by the appellant, this Court is of the view that the reasons and conclusions arrived at by the trial court dismissing the suit and passing a decree in favour of the defendant is justified in the facts and circumstances of the case. The lower appellate court reversed the decree and judgment mainly referring to the decree and judgment passed in the two suits, that in none of the documents there is reference that the injunction order and decree S.A.No.872 Of 1996 ::9:: of injunction passed were in respect of AVM canal for which Ext.A3 agreement was entered into between the plaintiff and defendant. The trial court examined the interim orders and the decree and judgment passed in both suits and it is nobody's case that it does not relate to the portion of the canal from which the plaintiff bit in auction the right to collect river sand. Even the appellate court held that it is clear that there was some obstruction for removal of sand as per Ext.A3 agreement, by the suits filed by the strangers. The appellate court further held that such obstruction does not mean that the defendant was fully prevented from collecting sand when prohibitory orders are issued by the civil court restraining the defendant from collecting river sand from the area for which he bid in auction the right to collect sand. The appellate court observed that it is not clear from the interim orders and decree and judgment, up to what extent he was prevented from collecting sand. One thing is clear that he was obstructed from collecting sand from the area. Therefore, the finding of the lower appellate court that so long as there is no evidence from the defendant's side to substantiate his case of obstruction caused in performing the work, the only S.A.No.872 Of 1996 ::10:: course open to the court is to accept the contentions of the defendant. On the facts and circumstances discussed above the plaintiff is not entitled to the reliefs in the suit. At the same time the defendant is entitled to realise the amount claimed in the counter claim being the amount deposited by him towards Ext.A3 agreement. In the result, the appeal is allowed. The judgment and decree passed by the lower appellate court is set aside and the decree and judgment passed by the trial court is restored. There will be no order as to costs. HARUN-UL-RASHID, Judge. bkn/-