IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA R.F.A.No. 160 of 2003. Judgment reserved on : 4.11.2009. Date of decision : 21.12.2009. M/s Lehnu Mal Ram Krishan & Others …Appellants. Versus H.P.S.F.C. ....Respondent. Coram The Hon’ble Mr. Justice Kuldip Singh, Judge. Whether approved for reporting?1 No For the Appellants : Mr. Ajay Kumar, Advocate. For the Respondent : Mr. N.S.Chandel, Advocate. Kuldip Singh, Judge The appellants were plaintiffs in Civil Suit No. 2-S/1 of 2002/1997 which has been dismissed by the learned District Judge, Shimla on 23.04.2003. 2. The appellants had filed a suit for recovery of Rs.6,47,085/- against respondent. The pleaded case of the appellants is that appellant No.1 is a registered firm. The firm was having some dispute with the State in connection with lease of forest lots No.4 and 5/1971-76. The firm moved an application in the High Court for appointment of Arbitrator which was registered as 1 Whether reporters of Local Papers may be allowed to see the Judgment ? yes 2 Civil Suit No. 92 of 1985. The objections in the said arbitration proceedings were registered as Civil Suit No. 175 of 1992 in the High Court. The Civil Suit No. 92 of 1985 and Civil suit No. 175 of 1992 were decided by the High Court on 16.7.1993. 3. The High Court in OMP No. 234 of 1987 in Civil Suit No. 92 of 1985 on 10.8.1987 directed the respondent to bring the disputed timber to Parwanoo for the purpose of sale and all expenses, commission, royalty etc. incurred by the respondent were to be the first charge on the sale proceeds of the said timber. The balance amount of the sale proceeds was required by the respondent to be deposited in the High Court. 4. It has been alleged that the Corporation in terms of order dated 10.8.1987 transported the timber from the forest to Parwanoo and made sale thereof. The respondent submitted the account statement regarding the sale and expenses of the disputed timber to the High Court only on 26.5.1994 after the final decision of the case. It has been alleged that a copy of the said account was supplied to the appellant firm which was received around 28.5.1994. In the account statement, it was allegedly shown that the timber was sold for Rs. 15,21,747/-, out of which the respondent had deducted a sum of Rs. 7,47,340/- as expenses under different heads. It is the case of the appellants that respondent has illegally deducted an amount of Rs. 4,75,798.10 out of sale proceeds. The timber was sold from 1990 to 1992, but statement of account was submitted in the High Court in May, 1994. As a result of the delayed payment by the respondent, the State has levied interest against the appellants. The appellants have thus claimed Rs. 4,75,798.10 3 along with 12% interest per annum total amounting to Rs. 6,47,085/- from the respondent and for recovery of Rs. 6,47,085/- the suit was filed. 5. The suit was contested by the respondent. The order dated 10.8.1987 of the High Court for selling the timber was not denied. It has been alleged that sale of timber was completed in the year 1992 and appellants were informed of the same on 20.8.1992. The commission and expenses allowed by the High Court were only deducted in accordance with the economic system which was applicable to the respondent-Corporation at the relevant time. It has been denied that unauthorized deductions were made from the sale proceeds. The entire amount was withdrawn by the appellants without any protest or objections and therefore, the entire matter stood finally decided between the parties. The suit is not maintainable on account of act, conduct and acquiescence of the appellants. It has also been alleged that the suit is time barred. The details of Rs. 4,49,638/- were given in the written statement. It has been alleged that the appellants were informed about the deposit of the said amount in the High Court after deduction of expenses and commission etc. The respondent has denied its liability to pay any amount to the appellants. In replication, the appellants reiterated their stand. On the pleadings of the parties, the following issues were framed:- 1. Whether plaintiff No.1 is a registered partnership firm as alleged ? …OPP. 2. Whether the defendant made arbitrary, illegal and unilateral deduction of Rs.4,75,798.10 contrary to the orders of the High Court out of the sale proceeds of timber as alleged? …OPP. 4 3. In case issue No.2 is proved in the affirmative, whether the plaintiffs are entitled to interest on Rs. 4,75,798.10 as claimed by them? …OPP 4. Whether the suit is not maintainable as alleged? …OPD. 5. Whether the plaintiffs are estopped from filing the suit on account of their acts, deeds, conduct and acquiescence etc. as alleged? …OPD. 6. Whether the plaintiffs have no locus standi to file the suit? …OPD. 7. Whether the suit is not within time ? …OPD. 8. Relief. The issue No.1 was decided in affirmative, issues No. 2 to 7 in negative and suit was dismissed on 23.4.2003. In these circumstances, plaintiffs have filed the appeal against the judgment, decree dated 23.4.2003. 6. I have heard the learned counsel for the parties and I have also gone through the record. The learned counsel for the appellants has submitted that learned District Judge has mis- construed, mis-interpreted the pleadings, evidence and order dated 10.8.1987 of this Court. The Court below has not framed proper issues, inadmissible evidence has been considered and material evidence has been ignored. The learned District Judge has erred in not taking into consideration important discrepancies, contradictions in the pleadings and evidence of the respondent. The respondent has unauthorisedly deducted Rs. 4,75,798.10 from the sale proceeds of the timber. The appellants are entitled to 12% interest per annum on the amount of Rs. 4,75,798.10 upto the date of filing of the suit which comes to Rs. 1,71,287/- and, therefore, the appellants are entitled to recover Rs. 6,47,085/- suit amount from the respondent. 5 7. The learned counsel for the respondent has supported the impugned judgment, decree and submitted that deductions have been made from the sale proceeds of the timber in accordance with the order dated 10.8.1987 of this Court. The deductions are legal and authorized. The learned District Judge has considered the case of both the sides properly, legally and no fault can be found with the impugned judgment, decree. 8. The appellants have questioned the deductions from the sale proceeds which they have pleaded in para 9 of the plaint as follows:- i) Depot handling charges Rs. 30,436.10 ii) Profit @ 15% on gross sales Rs.2,28,277.00 iii) Indirect expenses of Divisional Rs.1,19,037.75 Office iv) Indirect expenses of direct Rs. 27,916.90 rates (South). v) Interest on direct expenses at Rs. 43,678.50 the rate of 15% P.A. _______________ Total Rs.4,75,798.10 _______________ 9. The issues No.2 and 3 have been decided against the appellants and other issues have been decided against the respondent. In appeal, the respondent has not filed cross- objections, therefore, the findings returned on issues No.1, 4 to 7 have become final. Therefore, only adjudication of issues No. 2, 3 is required in the appeal. 10. It is the case of the appellants that respondent has made deductions from the sale proceeds of the timber in violation of order dated 10.8.1987 passed by this Court in OMP No. 234 of 6 1987. The relevant part of the order dated 10.8.1987 passed in OMP No. 234 of 1987 is as follows:- “After hearing the learned counsel for the parties, the following directions are issued: 1. Let the Forest Department to the Govt. of Himachal Pradesh hold an auction of the timber in question on “as it is, where it is” basis. This would be done within a period not later than 2 months from today and the bid would be accepted subject to the approval of the Court. The Forest Department would inform the Court immediately after holding of the said auction; 2. The possibility that some of the timber presently lying in the forest has deteriorated to such an extent that it may be no longer economical to carry it to Parwanoo depot for sale cannot be ruled out. The plaintiff, notwithstanding the process of auction as directed above, would separate such timber and proceed to prepare a list of timber which, in their opinion, can be profitably carried to Parwanoo; 3. In case the timber in question is not disposed of by auction to be held by the Forest Department, the plaintiff would hand over the timber in question (less that timber which cannot be profitably brought to Parwanoo for sale) at site to the representative of the Himachal Pradesh Forest Corporation. The Managing Director of the Forest Corporation would designate his representative within a period of one month from today; 4. In case the timber has to be brought to Parwanoo and sold by the Forest Corporation, all expenses, commission, royalty etc. incurred by the Forest Corporation would be the first charge on the sale proceeds of the said timber. The Forest Corporation, after deducting all such expenses, would deposit the remaining sale proceeds with the High Court Registry within 4 weeks from the date of sale; 5. The Managing Director Forest Corporation would, through the learned Advocate General, inform the Court within a period of one month from the date of handing over of the timber to the representative of the Corporation, the approximate time within which the timber would be carried to Parwanoo and sold. This application be now listed before the Court on October 14, 1987 or on the date when the Advocate General moves an application 7 informing the Court about the result of the auction, whichever is earlier.” 11. PW-1 Vishwanath has stated that during the pendency of Civil Suit No. 92 of 1985 an application was filed by the plaintiffs for removal of timber which application was disposed of 10.8.1987. The Corporation was required to submit the account to the High Court with a copy to the plaintiffs with regard to the timber removed. On the spot, 34385 scants of timber having volume of approximately 1900 cubic meters were lying. The Corporation had removed approximately about 22000 scants. The account was submitted by the Corporation to the High Court in the year 1994. As per statement of account furnished by the Corporation a sum of Rs.4,75,798.10 was wrongly deducted, the details of such deductions have been given in para 9 of the plaint. He has also stated that as per practice, the forest lessee allowed 1% commission to the commission agent in respect of the sale of timber made through them. The deduction of Rs. 4,75,798.10 was made by the Corporation under the economic system which is applicable to private sale contractor. Under that formula, the work of felling conversion is carried out by the Corporation. In cross-examination, he has stated that he does not know if the economic system is the approved formula by the State Government for making the deductions by the Forest Corporation. 12. PW-2 Yogesh Chander, Forest Lessee-cum-Timber Merchant, Yamuna Nagar has stated that their firm is in timber business for the last hundred years. They had been financing various forest lessees and charged 2 ½ % commission from the 8 forest lessees financed by them in addition to the depot charges. As per the practice prevalent in their area commission used to be charged at 2 – 2 ½ % from the forest lessees financed by the traders and in other cases it used to be 1 – 1 ½ %. 13. PW-3 Kundal Lal Verma has stated that he is in the business of forest lessee since 1970. He had been dealing with the H.P. State Forest Corporation. In case of private sale the Corporation applies economic formula for the purpose of conversion, felling, carriage of timber. This also includes transportation. They (witness) have been charging commission at the rate of 1 ½ % from forest lessees in respect of the sale of timber. In cross-examination, he has stated that Forest Corporation has only one economic system with regard to the sale of timber. All deductions are carried out by the Forest Corporation in accordance with the system. There is no other system being applied by the Forest Corporation. PW-4 Amar Lal Verma, Senior Assistant, State Forest Department has placed on record Ex.PW-4/A, Ex. PW-4/B, proceedings of the Pricing Committee of the State Government of the year 1983. 14. DW-1 S.K.Gupta, Divisional Manager, Forest Corporation, Rampur has stated that at the time of his earlier posting at Rampur there was an order of the Court issued in the year 1987 for sale through auction of timber belonging to the plaintiffs. The timber which was to be auctioned was stacked at two places in Koot. The timber from one place was to be carried by manual labour to the other place from where it was to be transported by roap-way-span to the road side depot. The other lot of timber was to be transported by roap-way-span only and from the road head it 9 was to be carried to Parwanoo by trucks. The manual carriage of the timber was done in the year 1989 and roaping down was carried out in the year 1989 and 1990. He has also stated that during the carriage and stacking of the timber at different places, the watch and ward Chowkidars and Forest officials like Forest Guard had to be deputed separately at different places. The process of carriage and sale was completed in the year 1992. Ex.PW-1/G-3 is the true copy of the account. The gross amount fetched at the auction sale was Rs. 15,21,847/-. Expenses of manual carriage of the timber incurred by the Corporation were Rs.94,981/-, expenses incurred on roap-way-spanning were Rs. 2,52,815/- and on truck transportation Rs. 1,62,423/- totaling Rs. 5,10,219/-. 15. DW-1 has further stated that the Corporation has charged interest on these expenses incurred by it in the sum of Rs. 43,678.50. The Corporation, apart from aforesaid expenses has incurred over-head expenses for deployment of watch and ward staff, Forest Officers/officials to carry out the carriage etc. The Corporation has a prescribed formula to work out such over-head expenses which is called economic system, a copy of which is Ex.DW-1/A. This system is provided for the carriage of timber purchased by private sale by the Corporation. In respect of purchase of the timber from the private owner it has got the approval of the Government. 16. DW-1 continued and stated that in the present case, transportation, watch and ward etc. charges have been worked out on the basis of this system. The over-head expenses in respect of 10 the Divisional Office worked out and deducted in this case are Rs.1,19,037.75, over-head expenses in respect of Director South and M.D. Office are Rs.27,916.90. Interest on these expenses has also been charged at the rate of 18% per annum for one year which comes out to Rs. 26,431.85. The transported timber in this case was insured against loss by fire etc. on insurance premium Rs. 20,036/-. The expenses incurred by the Incharge Sale Depot, Parwanoo were in the sum of Rs. 96,592.15. As per the aforesaid system the Corporation deducts 15% of the gross sale on account of profit. In fact the expression ‘profit’ is the commission charged by the Corporation for doing the work. The total deductions made by the Corporation from the sale proceeds of the timber on account of profit is Rs. 2,28,277/-. Thus, the total deductions made from the sale proceeds are in the sum of Rs. 10,72,209.15. Balance of the sale proceeds was deposited in the High Court amounting to Rs. 4,49,637.85. 17. In cross-examination, DW-1 has stated that policy Ex.DW-1/A amongst other applies to extraction, felling and conversion of the timber. He has denied that economic policy Ex.DW-1/A will apply only to a case where Corporation purchases trees from the private owners and does making, felling, carriage etc. but not to the present case. He has denied that deduction of Rs. 4,75,798.10 reflected in para 9 of the plaint was illegal and arbitrary. DW-2 Ajit Kumar Vaidya has placed on record the statement of the amounts Ex.DW-2/A deposited by the defendant in the High Court in the case regarding sale of the timber. 11 18. The learned counsel for the appellants has submitted that under economic system many jobs including felling, conversion, stacking at the points from where the timber is to be carried further are undertaken by the Corporation, but in the present case some of the jobs were already undertaken by the appellants, therefore, economic system in vogue in the Corporation for selling the timber is not applicable for the sale of timber ordered by this Court on 10.8.1987. He has submitted that deduction of the profit by the respondent from the sale proceeds of the timber was not permitted by the Court in the order dated 10.8.1987. The Corporation has arbitrarily deducted depot handling charges at the rate of 15% of gross sale, expenses of Divisional Office, Director South Office and interest at the rate of 15% per annum on direct expenses. The appellants have questioned the applicability of economic system to the sale of timber in the present case. The appellants have however not otherwise questioned the legality of economic system. In other words, the case of the appellants is that economic system prevalent in the Corporation for selling the timber is not applicable in the present case, even though the economic system may be applicable in other cases. 19. In the order dated 10.8.1987 this Court has observed that in case the timber has to be brought to Parwanoo and sold by Forest Corporation, all expenses, commission, royalty etc. incurred by the Forest Corporation would be first charge on the sale proceeds of the said timber. The Forest Corporation after deducting all such expenses, would deposit the remaining sale proceeds with the High Court Registry within four weeks from the date of sale. It is 12 not the case of the appellants that timber was not brought to Parwanoo by the Corporation. The simple question involved in the suit is to what expenses, commission, royalty etc. the respondent is entitled to from the total sale proceeds. The appellants have not questioned the gross sale of the timber, the limited dispute has been raised about the deductions made by the Corporation. 20. The appellants have tried to project the case that the Corporation could charge only some commission from the appellants for selling the timber and such commission according to appellants ranges from 1 to 1 ½ % or at the most 2 ½ %. The learned counsel for the appellants has invited the attention of this Court that even in the order dated 10.8.1987 expression ‘commission’ has been used and not the profit. On the other hand, on behalf of the Corporation, it has been submitted that even though the expression ‘commission’ has been used in the order dated 10.8.1987, but the expression ‘commission’ is nothing but ‘profit’. The Corporation charges profit from the sale proceeds and not the commission as it is understood some times. The expression ‘commission’ in the order dated 10.8.1987 is not used in the sense as projected by the appellants. The word ‘commission’ is not qualified by any rate or trade practice in the business of sale and purchase of timber. The expression ‘commission’ used in the order dated 10.8.1987 is nothing but ‘profit’. The Corporation has incurred expenses for carrying the timber from the forest to Parwanoo. The Corporation for this purpose took the help of private contractors, labour and its own staff for watch and ward etc. on payment. The Corporation initially made such payments and 13 thereafter deducted such amounts from the sale proceeds as per economic system. The Corporation in these circumstances is also entitled to interest on such amounts. 21. The Corporation is in Public Sector. PW-3 Kundal Lal Verma has stated that Forest Corporation is having only one economic system with regard to sale of timber, all deductions are carried out by the Forest Corporation in accordance with the system. There is no other system being applied by the Forest Corporation. Thus, even PW-3 who is a Forest Lessee, has admitted that the Corporation sells the timber as per economic system. There is nothing on record why in the case of appellants the Corporation should deviate from economic system and to follow some unknown system for handling the timber of appellants. In the suit, there is no challenge to economic system, challenge has been thrown to the applicability of the economic system in the case of sale of timber of the appellants. The appellants have failed to make out a case that in their case sale should not have been regulated by the economic system prevalent in the Corporation. The expression ‘commission’ used in the order dated 10.8.1987 has been used in the sense of ‘profit’ and, therefore, the Corporation is justified in deducting profit from the sale proceeds as per the economic system. The Corporation has incurred expenses before the timber was actually sold and, therefore, the Corporation is entitled to handling charges, expenses of the Divisional Office, expenses of the Director South Office and interest at the rate of 15% per annum on the direct expenses. The Corporation has not charged interest on the indirect expenses of Divisional Office as well as Director South Office. The 14 Corporation is justified in deducting Rs. 4,75,798.10, therefore, question of payment of any interest on the amount of Rs.4,75,798.10 to appellants does not arise. 22. The learned District Judge has rightly appreciated the material on record. There is no error of misreading and mis- construction of the pleadings and evidence in the impugned judgment. The learned counsel for the appellants has failed to point out what material evidence has been ignored by the learned District Judge and what inadmissible evidence having bearing on the ultimate decision in the suit has been considered. There is no merit in the appeal. 23. No other point was urged. 24. The result of the above discussion, the appeal fails and is accordingly dismissed with no order as to costs. December 21, 2009. ( Kuldip Singh ), (GR) Judge.