*THE HON’BLE SRI JUSTICE C.V. NAGARJUNA REDDY + WRIT PETITION No.17209 of 2000 % Dated: 19-02-2009 # K. Srinivas … Petitioner VERSUS $ The Govt., of A.P., rep., by its Secretary, Panchayat Raj, Secretariat, Hyderabad & others. … Respondents ! Counsel for the petitioner : Smt. N. Shoba ^ Counsel for respondents 1-4 : GP for Panchayat Raj Counsel for respondent No.5: Smt. G. Jhansi Counsel for respondent No.6: GP for Irrigation <GIST: > HEAD NOTE: ? Cases referred 1) (2009) 1 SCC 150 2) 2008 (6) ALD 103 3) (1991) 2 SCC 362 4) AIR 1993 AP 1 5) (1990) 3 SCC 182. 6) (1994) 3 SCC 552 7) (2008) 8 SCC 172 8) (2003) 12 SCC 91 9) 2006 (3) ALT 274 10) AIR 2007 SC 1503. 11) 2009 (4) ALT 414 (DB) 12) AIR 1938 Privy Council 67 IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE NINETEENTH DAY OF FEBRUARY, TWO THOUSAND TEN PRESENT: THE HON’BLE SRI JUSTICE C.V.NAGARJUNA REDDY WRIT PETITION No.17209 of 2000 Between: K. Srinivas … Petitioner And The Government of A.P., rep., by its Secretary, Panchayat Raj, Secretariat, Hyderabad & others. … Respondents Counsel for the petitioner : Smt. N. Shoba Counsel for respondents 1to 4: GP for Panchayat Raj Counsel for proposed R.5: Smt. G. Jhansi Counsel for proposed R.6: GP for Irrigation This Court made the following: JUDGMENT:- The petitioner, who is a sand contractor, filed this writ petition for a Mandamus to declare the action of the respondents in not refunding various amounts paid by him in connection with grant of leasehold rights over sand mining, as illegal and arbitrary. The petitioner sought for a consequential direction to the respondents to refund Rs.1,19,00,000/- paid towards lease amount, Rs.5,95,000/- paid towards stamp duty and Rs.29,75,000/- towards the security deposit along with interest. Background facts: The District Level Sand Committee (for short, “the Committee”) constituted under G.O.Ms.No.71, PR&RD (Pts-III) Department, dated 29.02.2000, issued Notification, dated 23.03.2000, notifying sealed tenders for auctioning the leasehold rights for sand quarry in various reaches of Krishna river within the Krishna District. The petitioner submitted his tender for Reach No.6, Vijayawada-1. The minimum bid value for sand quarry up to 30.09.2000 was notified as Rs.81,33,000/-. The offer of Rs.1,19,00,000/- made by the petitioner emerged as the highest and was accordingly accepted by the Committee. In terms of the tender conditions, the petitioner deposited Rs.29,75,000/- towards 25% of the bid amount on 15.04.2000 and he deposited the balance amount of Rs.89,25,000/- within the stipulated time. The petitioner has also deposited Rs.5,95,000/- towards stamp duty for entering into an agreement. On 29.04.2000, the Sub- Collector, Vijayawada, entered into an agreement with the petitioner on behalf of the State; and in pursuance thereof, work orders were also issued on the same day. As the petitioner was required to use the authorized ramp for conveying the sand from the river with the permission of the River Conservator, on the same day of his entering into the agreement, he applied to the River Conservator for grant of ramp permission. Simultaneously, the petitioner has also approached respondent No.4-District Panchayat Officer, Krishna District, for issuing way bills. On 20.05.2000, the petitioner approached the Divisional Panchayat Officer, on the direction of respondent No.4, for issuing way bills. According to the petitioner, the Divisional Panchayat Officer directed him to approach the Municipal Corporation of Vijayawada (for short “the Corporation”), the impleaded respondent No.5, for issuance of way bills and that as the Commissioner of the Corporation refused to issue the way bills and in the absence of official communication, the petitioner made several representations to the District Collector for issuance of way bills. Meanwhile, certain persons filed Public Interest Litigation by way of Writ Petition No.9873 of 2000 questioning the sand auction in respect of the reaches falling under Vijayawada-1 on the ground that it would endanger the railway bridge and the Prakasam barrage. Initially, the petitioner was not impleaded in the said writ petition. A Division Bench of this Court passed interim order on 28.06.2000, wherein it has directed the District Collector to visit the quarry area within one week and that if he finds that there was danger to any structures of any nature, he will be at liberty to restrain the quarry operations forthwith. According to the petitioner, on account of the said interim order, sand quarrying was not permitted by the district administration. The said writ petition was disposed of by the Division Bench on 01.08.2000. In the said order, the Division Bench - after recording the submissions of the learned Government Pleader that no excavation has taken place because of rainy season and that as the lease period was coming to an end on 30-9-2000 and the lease for the following year would be granted only after the matter is examined by the authorities in detail - directed that the contractors shall be at liberty to quarry the sand, subject to their furnishing security to the satisfaction of the Collector and giving an undertaking that in the event of the bridge being damaged on account of the quarry operations conducted by them, they shall reimburse the damages to the State. It was further directed that the Collector shall determine the amount of security to be furnished by the contractors covering the damages that may likely to be caused and that the Collector is not precluded from permitting excavation of sand by the lessees. Pleadings: It is the specific case of the petitioner that the District Collector has not made an estimate of the damage that is likely to be caused and has not specifically permitted the petitioner to operate the sand. The petitioner further averred that the River Conservator has not given ramp permission and the Corporation has not issued the way bills and that on account of these cumulative reasons, he could not at all carry on the sand mining even on a single day during the subsistence of the lease period, which expired on 30.09.2000. A counter affidavit was filed by respondent No.4. As a plea was taken by respondent No.4 that the writ petition was bad for non-joinder of necessary parties, the petitioner filed an implead application for impleadment of the Corporation and the Executive Engineer, Irrigation Department (River Conservator) as party respondents. On 11.09.2008, the learned Standing Counsel for the Corporation and the learned Government Pleader for Irrigation have taken notices on behalf of the proposed parties and sought time for filing counter-affidavits and arguing the case on merits. Though no formal order of impleadment was made, proposed respondent Nos. 5 and 6 filed their counter affidavits. In his counter-affidavit, respondent No.4 admitted that in the auction held by the Committee, of which he is the Convener, the petitioner offered highest bid for Reach No.6 of Vijayawada-1 and that the same was accepted. He also admitted that the petitioner has complied with all the formalities necessary for commencing the sand mining. He averred that the Sub-Collector, Vijayawada, issued work order on 29-4-2000 and that the petitioner shall obtain way bills from the Corporation, under whose control the sand quarrying shall take place, as the sand quarry falls within its area. Respondent No.4 maintained that, he being the Convener of the Committee, his role is being limited to holding the auction, he is not concerned with either the ramp permission to be given by the River Conservator or the way bills to be issued by the Corporation. He, however, stated that he and the Divisional Panchayat Officer, Vijayawada, have assisted the petitioner in approaching the Corporation for issuance of way bills and that if the Corporation does not co- operate, he cannot force it to act. In the counter-affidavit filed by respondent No.5- Corporation, substantial part of the counter is devoted to the aspect of sharing of the lease amounts amongst the Corporation, Zilla Parishad, Mandal Parishad and the Government. Respondent No.5, however, made a vague denial of its responsibility to issue way bills and the claim of respondent No.4 that he has sent the signed/certified way bills to it. In the counter-affidavit filed by respondent No.6- Executive Engineer of Krishna Central Division,Vijayawada, who is also River Conservator, he denied the plea of the petitioner that he has not given ramp permission. He has pleaded that he has given ramp permission vide Proceedings No.701-M, dated 6-6-2000; and that the same was handed over to Sri V.Seshagiri Rao, Sand Quarry Supervisor of sand Reach No.6 on 13- 6-2000. He filed a copy of the acknowledgment in support of this averment. He also averred that as soon as the work orders were given by the Sub-Collector, Vijayawada, both the quarries of Reach Nos.6 and 8 were started for transportation of sand from the river bed. In the reply affidavit filed to the counter-affidavit of the Executive Engineer-cum-River Conservator, the averment of grant of ramp permission on 6-6-2000 is denied. The petitioner also denied operation of quarry at Reach No.6 by pointing out that even as per the version of the Executive Engineer ramp permission dated 6-6-2000 was served on 13-6-2000 and that in view of the interim order, dated 8-6-2000, granted by this Court in Writ Petition No.9873 of 2000, there was no possibility of sand quarrying. Submissions of the counsel: At the hearing, Smt. N.Shobha, learned counsel for the petitioner, submitted that due to several reasons referred to in the pleadings, the petitioner is prevented from operating the sand quarry and the contract has got frustrated on account thereof and that, therefore, the respondents are not justified in withholding the amounts collected from the petitioner towards the mining lease. She further submitted that the respondents should have taken a realistic view of the problem faced by the petitioner and refunded the lease amount along with stamp duty and security deposit and that having not returned the amounts, the petitioner suffered enormous financial loss, for which the respondents are liable to compensate by paying reasonable interest. In support of her submissions, the learned counsel relied upon the following decisions: Karnataka State Forest Industries Corporation Vs. Indian Rocks[1], A.Narayana Murthy Raju Vs. District Collector, Visakhapatnam[2], Uberoi Mohinder Singh & Associates Vs. State of Haryana and others[3], M/s. Krishna & Company Vs. Government of Andhra Pradesh[4] and Assam Sillimanite Ltd., Vs. Union of India[5]. The learned Government Pleader for Panchayat Raj, representing respondents 1 to 4, contended that the dispute raised by the petitioner in the Writ Petition arises out of a concluded contract and that, therefore, the Writ Petition is not maintainable, as proper remedy for the petitioner is to approach the competent civil Court by way of a civil suit. He further submitted that the amount paid by the petitioner has been distributed among the Government, Zilla Parishad, Mandal Parishad and the Corporation; and that, if at all the amount is liable to be refunded, all the said agencies shall be directed to refund their respective shares. He had also contended that the petitioner is not entitled to payment of interest. In support of his contentions, the learned Government Pleader placed reliance on the following decisions: State of Gujarat Vs. M.P.Shah Charitable Trust[6], Pimpri Chinchwad Municipal Corporation Vs. Gayatri Construction Company[7], Ganga Retreat & Towers Ltd., Vs. State of Rajasthan[8], M/s.MRKR-MBGEC Vs. Chief Administrative Officer, Construction, South Central Railway[9] and Government of A.P., Vs. G.Jaya Prasad Rao[10]. Except filing a counter-affidavit, no specific contentions have been advanced on behalf of respondent No.5-Corporation. Discussion: I have carefully considered the submissions of the learned counsel for the parties and perused the record. In support of his plea that he could not operate the sand quarry, the petitioner had put-forth three reasons, viz: (a) Non-issue of way bills by the Corporation; (b) failure of River Conservator to issue ramp permission; and (c) orders passed by this Court restraining quarry operations. Let me consider these aspects. Re-reason (a):- It is not and it cannot be disputed that ramp permission and way bills are essential requirements for transportation of sand. The petitioner placed reliance on Rules 20(b) and 23 of the Andhra Pradesh Panchayat Raj (Auction of Sand in the Water Courses Vesting in Gram Panchayat) Rules, 2000 (for short “the Rules”) framed under Section 268 read with Section 95 of the A.P. Panchayat Raj Act, 1994, which deal with using of authorized ramp and obtaining of way bills. Though Rule 23 refers to the Gram Panchayat as the authority to issue the way bills, as the sand quarry is situated within the Corporation limits, it is the plea of respondent No.4 that the Corporation is empowered to issue the way bills. A perusal of the material filed by the petitioner shows that the Divisional Panchayat Officer addressed a letter vide Rc.No.762/99 dated 20-5-2000, to the Commissioner of the Corporation, wherein he has stated that as per the instructions of the Government the respective Gram Panchayat or the Corporation, within whose jurisdiction the Reach is situated, has to issue the way bill books to the lessee. He further stated that he was sending 30 way bill books, signed by respondent No.4, through his Attender-Sri Koteswara Rao, and requested the Commissioner to issue the way bills and to maintain the register and connected records. The correspondence filed by the petitioner shows that he repeatedly approached the District Collector and respondents 4 and 5 for issue of way bills. This correspondence includes letter dated 7-5-2000 addressed to the District Collector, Krishna; separate sets of letters dated 15-5-2000, 29-5-2000, 10-6-2000, 21-6- 2000 and 10-7-2000 addressed to the District Collector and respondent No.4; and letters dated 22-5- 2000 and 6-7-200 addressed to respondent No.5- Corporation. The petitioner filed copies of acknowledgments for these letters. None of the respondents have denied receipt of these letters. In the context of the petitioner’s claim for refund of the amount, it is not necessary for this Court to adjudicate as to which of the respondents is responsible for issuing the way bills and the only relevant aspect in this regard is whether the way bills were issued or not. Though there is a dispute between respondents 4 and 5 as to which of the respondents was responsible for issuing way bills, the fact remains that neither respondent No.4, nor respondent No.5 had issued the way bills. As noted above, while respondent No.4 disowned his responsibility for issuing way bills, the Corporation has not come forward with any explanation whatsoever for not issuing the way bills. In the absence of any refutation on the part of the respondents regarding the plea of non-issue of way bills by the petitioner, it is firmly established that way bills were not issued to enable the petitioner to transport the sand from the river bed. Re-reasons (b & c):- With regard to the ramp permission, the parties are at issue. As against the plea of the petitioner that ramp permission was never given, respondent No.6 pleaded in emphatic terms that ramp permission was given on 6-6- 2000 and served the same on the quarry Supervisor, by name, Sri V.Seshagiri Rao, on 13-6-2000. A copy of the said proceedings is filed by respondent No.6 along with a copy of acknowledgment, dated 13-6-2000, of Sri V.Seshagiri Rao. In the face of this material, it has to be held that the petitioner was given ramp permission on 13- 6-2000, though the permission was dated 6-6-2000. The fact, however, remains that in view of the PIL referred to above and the orders passed therein by this Court and in the absence of the way bills, the ramp permission given in favour of the petitioner would not have been of any help to him in transporting the sand. Neither the factum of institution of PIL nor passing of orders by this Court, due to which the petitioner was disabled from quarrying sand, has been disputed by any of the respondents. While respondent Nos.4 and 5 have never pleaded that the petitioner has, at any point of time during the subsistence of the lease, excavated and transported sand; a vague allegation was made by respondent No.6 that from 29-4- 2000, when the Sub-Collector, Vijayawada, has given the work order, “the sand contractor” has started quarrying operations. This, in my opinion, is a mere assertion without conviction overlooking the fact that, even according to him, ramp permission dated 6-6-2000 was handed over to the quarry supervisor only on 13-6-2000 and that it was not possible for carrying on quarry operations and transportation of sand before obtaining ramp permission by the petitioner. Barring the above plea, which is quite incredulous, there is no dispute over the fact that the petitioner could not at all carry on sand mining and transportation. In the light of the above proven facts, whether the petitioner is entitled to refund of the money is the question that requires to be adjudicated. Whether contract got frustrated I n A.Narayana Murthy Raju (2 supra), I had an occasion to deal with a case where the lessee of a sand quarry was prevented for the reasons beyond his control from operating the sand quarry. In that case, due to the violent attitude of the residents of the village, where the sand quarry was situated, the lessee was restrained from carrying on quarry operations. This Court, after analyzing Section 56 of the Indian Contract Act, 1872 (for short “the Act”) held that on account of prevention of sand quarrying by the villagers, the contract was rendered impossible of performance and thereby the whole contract was frustrated. In this context it is useful to extract the second limb of Section 56 of the Act. “Contract to do act afterwards becoming impossible or unlawful – A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.” In the present case, due to non-issue of way bills and the orders passed by this Court in the PIL, apart from absence of ramp permission up to 13-6-2000, the contract has become impossible of performance. All the three events discussed above were such that the petitioner could not prevent them from happening. The second limb of Section 56 of the Act is clearly attracted to the facts of the case. As a consequence of frustration of contract, the respondents cannot retain the money paid by the petitioner under the contract with any legitimacy and are, accordingly, liable to refund the same. Apart from the judgment in A.Narayana Murthy Raju (2 supra), the Apex Court and this Court have dealt with cases involving similar, though not identical, facts. In Uberoi Mohinder Singh (3 supra), the sand contractor was denied no objection from the Flood Control Department, on account of which he was disabled from excavating and taking out the sand. The Apex Court held that the State and its Officers are not entitled to forfeit the amount paid by the contractor and, accordingly, directed refund of the amount to the contractor within two months, failing which the respondents therein were directed to pay interest at the rate of 12% per annum from the date of the judgment, till realization. Similar is the case decided by a Division Bench of this Court in M/s. Krishna & Company (4 supra), wherein the sand contractor was prevented by the local villagers headed by the Sarpanch, President of the Mandal Praja Parishad and the MLA from carrying on quarry operations, as a result of which, the contractor could operate the quarry only for a period of ten days. This Court held that the contract was frustrated and, accordingly, the State was directed to refund the amount paid by the contractor. Maintainability of the writ petition: The only submission of the learned Government Pleader for Panchayat Raj was on the maintainability of the Writ Petition. In my considered opinion, the objection as to the maintainability of the Writ Petition deserves to be rejected for two reasons – (1) The contract in question is undoubtedly a statutory contract, as the terms of the agreement are settled by the rules made under the Mines and Minerals (Regulation and Development) Act, 1957. The self-imposed restraint by this Court in entertaining a dispute arising under a non-statutory contract under Article 226 of the Constitution was never applied by the superior Courts to a statutory contract as the public law limitations on the conduct of the State and its officers as much apply while judging their conduct in acting under a statutory contract as they apply in administrative and executive spheres; and (2) even in respect of non- statutory contracts by a series of recent judicial pronouncements by the Supreme Court and this Court the disputes are held amenable to writ jurisdiction where the action of the public authorities is patently arbitrary and discriminatory and they do not involve serious disputed questions of fact, adjudication of which requires appreciation of evidence. A Division Bench of this Court, speaking through me in Superintending Engineer, TGP Circle, Cuddapah and another vs. M/s. Pioneer Builders[11] after noticing a vertical dichotomy in the views of the Apex Court on this aspect summarized the legal position as under: “A careful analysis of the judgments of the Supreme Court referred to above reveals that the earlier conservative view of non-interference in cases arising under non- statutory contracts has given way to a some what liberal approach of limited interference. In effect, the Constitutional law limitations on the State actions while acting in administrative sphere are also applied even to contractual sphere. Though ordinarily the superior Courts relegate the parties to the common law remedies such as arbitration (wherever such a provision in the concluded contracts is made) or a civil suit, in specific situations such as term of contract being against the public policy or while enforcing a term of contract the State acts arbitrarily, unfairly or unreasonably or makes discrimination amongst the persons similarly situated, they exercise extraordinary jurisdiction under Article 226 or Article 32 of the Constitution in such particular situations.” In Karnataka State Forest Industries Corporation (1 supra), the Supreme Court, on the authority of its earlier judgments including the one in ABL International Ltd. Vs. Export Credit Guarantee Corporation – (2004) 3 SCC 553, held that although ordinarily a superior Court in exercise of its writ jurisdiction would not enforce the terms of a contract, when an action of the State is arbitrary or discriminatory and thus violative of Article 14 of the Constitution of India, a Writ would be maintainable. In that case, the Supreme Court upheld the directions given by the Division Bench of the Karnataka High Court to consider refund of the amounts paid by the highest bidder towards value of granite and also to permit the bidder to lift the balance of rough granite rocks it had purchased in the auction sale without insisting on payment of interest. On the premises as above, the judgments, on which reliance has been placed by the learned Government Pleader, are of no help to him and his objection as to the maintainability of the Writ Petition is, accordingly, rejected. Interest: Coming to the claim for interest, it is noteworthy that originally the petitioner has not claimed any interest. Almost nine years after filing of the Writ Petition, he has filed an application for amendment of the prayer in the Writ Petition, wherein he has claimed interest for the first time. The entire basis for claiming refund of the amount is frustration of contract and the claim for interest is made to recompense for the loss the petitioner has allegedly sustained due to withholding of the lease amount by the respondents. Award of compensation as a consequence of frustration of contract is governed by the third limb of Section 56 of the Act. It is useful to reproduce this part of the provision, herein below: “Compensation for loss through non- performance of act known to be impossible or unlawful:- Where one