IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.SASIDHARAN NAMBIAR TUESDAY, THE 22ND NOVEMBER 2011 / 1ST AGRAHAYANA 1933 RSA.No. 472 of 2004() --------------------- AS.46/1995 of I ADDL. DISTRICT COURT, KOLLAM OS.114/1989 of SUB COURT, KOTTARAKKARA .................... APPELLANTS/RSPONDENTS/DEFENDANTS, ----------------------------------------------------- 1. THE DIVISIONAL FOREST OFFICER, PUNALUR. 2. THE CONSERVATOR OF FOREST, KOLLAM CIRCLE KOLLAM. 3. THE RANGE OFFICER, ANCHAL RANGE, ANCHAL P.O. ANCHAL VILLAGE, PATHANAPURAM TALUK. 4. THE STATE OF KERALA, REP. BY THE SECRETARY TO GOVERNMENT, FOREST DEPARTMENT, THIRUVANANTHAPURAM. BY SPECIAL GOVERNMENT PLEADER (FORESTS) SRI T R RAVI RESPONDENT(S): APPELLANT/PLAINTIFF. ----------------------------------- V.GANESH KUMAR, S/O.VISWANATHA PANICKER, GANESH MANDIRAM, KULATHUPUZHA & VILLAGE, PATHANAPURAM TALUK. ADV. SRI.THOMAS ABRAHAM FOR R1 SRI.K.B.ARUNKUMAR FOR R1 THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD ON 22/11/2011 THE COURT ON THE SAME DAY PASSED THE FOLLOWING: M.SASIDHARAN NAMBIAR, J ........................................... RSA No.472 of 2004 ............................................ DATED THIS THE 22nd DAY OF NOVEMBER, 2011 JUDGMENT Defendants in O.S.114 of 1959 on the file of Sub Court, Kottarakkara are the appellants. Plaintiff is the respondent. 4789.350 tons of firewood collected from Coupe No.16 of Anchal range were sold in public auction held on 13.12.1981. It was bid by 15 persons. Though ten persons remitted the balance 2/3 of the total consideration, five persons failed to remit the balance. Hence a re-auction of the remaining 2020.70 M.T of firewood was conducted on 16.6.1982 after publication effected in the Kerala Gazette on 15.6.1982. Respondent was one of the bidders. He successfully bid 563.80 M.T firewood for Rs.52,890.90 and remitted Rs.5000/- being its 1/3 inclusive of the Earnest Money Deposit in terms of the sale conditions. As per the terms and conditions of the sale, he has to remit the balance 2/3 within 52 days from the date of intimation of confirmation of sale. According to the respondent, no intimation was served on him and he was not informed about the confirmation of sale. He Rsa 472/2004 2 sent Ext.A7 letter dated 22.10.1982, directing the Range Officer to return the advance of Rs.5000/- remitted, contending that due to the delay in confirmation, the firewood has become non merchantable. It is alleged that being softwood and were stacked in open site, they were exposed to sun and rain and thereby became useless. Respondent sent Ext.A17 notice dated 4.2.1983 intimating the confirmation, directing to deposit the balance and to remove the firewood and threatening that on the failure balance of Rs.50,218.10 would be realised from the respondent. Respondent filed O.P.2331 of 1983 before this court contending that he is entitled to get back the amount remitted and is not liable to pay the balance as due to the delay the firewood became useless. By Ext.A20 judgment, O.P was dismissed granting liberty to the respondent to approach the authorities or to institute the suit. The suit was instituted thereafter seeking a decree for declaration that respondent is not liable to deposit the balance amount and to declare Ext.A17 notice illegal and abinitio void and that the order of first respondent confiscating Rs.5000/- paid by the respondent is unauthorised and that respondent is not liable to pay any amount to the appellants on the basis of the Rsa 472/2004 3 auction sale held on 16.6.1982 and to permit the respondent to reallise Rs.9290.73 with interest at 12% per annum on Rs.5000/-. It was contended that there was no concluded contract and though auction was conducted on 16.6.1982, the acceptance of the bid was not confirmed within a reasonable time and as a result the firewood became useless and under Ext.A7, A12 and A15 letters, it was informed to the Divisional Forest Officer and the fact that the firewood became useless was not denied and still the loss was claimed under Ext.A17 and A21 notices and it is illegal. A decree for permanent prohibitory injunction restraining appellants from realising the amount was also sought. 2. Appellants resisted the suit contending that the reauction on 16.6.1982 was conducted after publication of re-auction notification in Kerala Gazette on 15.6.1982 and respondent being the successful bidder of 563.80 metric tons of firewood for Rs.5289.90 remitted Rs.5000/- on that date as provided under the sale conditions and he has to deposit the balance within 52 days from the date of intimation of confirmation. As notification of auction was published only on 15.6.1982 and sale was Rsa 472/2004 4 conducted on 16.6.1982, before confirming the sale, sanction is to be obtained as there was no sufficient time after publication of notification and before the auction and hence there was some delay in intimating the confirmation of sale and on confirmation of sale under Ext.B2 order dated 22.1.1983, Ext.A17 confirmation letter was sent to respondent directing him to deposit the balance 2/3rd and instead of remitting the amount, he filed O.P which was dismissed on 29.7.1987. It was contended that though respondent was permitted to approach the Government, he did not deposit the balance amount and instituted the suit. It is contended that as per the conditions of sale, respondent is bound to deposit the balance consideration and on his failure, the advance is liable to be forfeited and the loss sustained by the department on account of the loss sustained in the reauction is to be paid by the respondent and the firewood was later reauctioned and the department thereby sustained a loss of Rs.31831.80 and respondent is bound to pay the same and he is not entitled to the declaration, damages or injunction sought for. 3. Learned Munsiff, on the evidence dismissed the suit relying on the Full Bench decision of this court in Abdul Rsa 472/2004 5 Rahiman V. Divisional Forest Officer (1988 (2) KLT 290) holding that no separate contract is to be executed and as per the conditions of the auction, respondent cannot withdraw from the contract and he is liable to pay the loss sustained to the department on account of the reauction, consequent to his failure to deposit the balance consideration. Respondent challenged the decree before District Court, Kollam in A.S.46 of 1995. Learned District Judge, on re-appreciation of the evidence, without considering the Full Bench decision relied on by the learned Munsiff, interpreting the auction conditions in Ext.B1, containing the terms and conditions of the auction, held that under the conditions, respondent is to be intimated about the confirmation of the auction and till 22.10.1982, when Ext.A7 letter was sent by the respondent to the appellants intimating that he has withdrawn from the contract, the auction sale was not confirmed and as it was not confirmed within a reasonable period, the firewood was damaged. It was held that respondent is therefore not liable to pay the loss, if any, sustained by the department. Learned District Judge also found that appellants are not entitled to realise the alleged loss from the respondent and set aside the Rsa 472/2004 6 findings of learned Munsiff and granted a decree in favour of respondent declaring that Ext.A17 and A21 notices are unauthorised, illegal and invalid and respondent is not liable to pay any amount to the appellants on the basis of the reauction held on 16.6.1982 and first appellant is not entitled to confiscate Rs.5000/- remitted by the respondent as part of the value of the firewood bid by him. Respondent was permitted to realise the amount with interest at 6% per annum from the date of the suit. First appellant was also restrained by a permanent prohibitory injunction, from realising any amount pursuant to Ext.A21 notice. It was also made clear that Government may realise the loss occasioned by the delay in confirming the sale from the responsible officers. Appeal was allowed accordingly. Second appeal is filed challenging the decree. 4. Appeal was admitted formulating the following substantial questions of law. “1) Is the lower appellate court justified in holding that there is no concluded contract without adverting to sec.79 of the Kerala Forest Act as interpreted by the Full Bench in the decision reported in 1988(2) KLT 290 ? Rsa 472/2004 7 2)Are not the courts below wrong in not adverting to the bar of limitation for the suit claim in view of the mandate of sec.3 of the Limitation Act, 1963 ?”. 5. Learned Special Government Pleader appearing for appellants was heard. Learned counsel submitted that respondent admittedly participated in the auction conducted on 16.6.1982 and bid 563.80 metric tons of firewood in six logs for Rs.52,890/- and inclusive of the Earnest Money Deposit, Rs.5000/- was remitted on the date of the auction, as he was the highest bidder in respect of the said portion of the firewood. Learned Special Government Pleader submitted that though learned Munsiff followed the decision of the Full Bench, which is identical on facts, first appellate court failed to even consider the said decision and wrongly held that respondent is not liable for the loss sustained. It was pointed out that as in the case of the conditions of auction sale considered by the Full Bench, Ext.B1 contains a specific clause that none of the participants in the auction are permitted to withdraw from the auction before the confirmation of sale or Rsa 472/2004 8 not and if any person withdraws, he is liable for the loss sustained by the department and in the light of the Full Bench decision, even if by Ext.A7 letter, respondent has withdrawn from the contract, as he is not entitled to withdraw under the terms of the auction sale, respondent is bound to pay the loss sustained by the department on account of the re-auction. Learned Government Pleader pointed out that Ext.B1 notification shows that it was issued in accordance with the terms and conditions of Government Order 62/76/AD dated 23/2/1976 published in gazette on 9.3.1976 and made available a copy of the said Government Order. It was argued that the said order provides that on acceptance of the tender, respondent bound himself and he need not enter into a separate written instrument for that purpose, unless specifically so required by the forest officer with whom he contracts, and therefore the fact that respondent did not enter into a separate contract will not enable him to contend that he is not liable for the loss sustained or to get back the advance amount which is already forfeited. 6. Learned counsel appearing for the respondent supported the judgment of the learned District Judge submitting that there Rsa 472/2004 9 was no concluded contract. Learned counsel, relying on the Division Bench decision of this court in State of Kerala V. A.S.Arumughaswamy Nadar and Co.(1964 KHC 59) and the decision of Apex Court in Haridwar Singh V. Bagun Sumbrui and others (1973(3) SCC 889) argued that Ext.B1 conditions of auction establish that the confirmation of auction is to be made later and though the auction was conducted on 16.6.1982, as the auction was not confirmed, Ext.A7 letter was sent by the respondent on 22.10.1982 intimating the authorities that the firewood has already been destroyed and therefore the amount of Rs.5000/- remitted by him is to be refunded. It was pointed out that again Ext.A12 notice was sent on 16.12.1982 and as no reply was sent, Ext.A12 notice was sent on 16.12.1982 and respondent did not dispute the case of appellant that firewood was destroyed because it was kept in open air due to time lag even in Ext.A17 letter dated 4.2.1983. Learned counsel pointed out that Ext.A17 confirmation letter dated 4.2.1983 was in fact received by the respondent much later and in such circumstances, as the sale was not confirmed within a reasonable period and there is no concluded contract, respondent is entitled Rsa 472/2004 10 to rescind from the contract and hence first appellate court was justified in holding that appellants are not entitled to claim loss and respondent is entitled to realise the amount originally remitted. Relying on Section 5 to 7 of Indian Contract Act, learned counsel argued that respondent is entitled to revoke the offer made, before it was accepted by the appellants and even if no time limit was prescribed for acceptance of the offer, as provided under Section 6(2) of the Indian Contract Act, acceptance should be within a reasonable time and as within the reasonable time, offer was not accepted, respondent is not liable to pay any damages and he is also entitled to get back the amount already remitted. Learned counsel, relying on the decision of Apex Court in Mohammed Basheer V. State of Kerala ( 2003(3) KLT 478) argued that Full Bench decision of this court in Abdul Rahiman's case (supra) was distinquished in that case and the facts are identical and when the facts in Mohammed Basheer's case show that there was a fire and consequential destruction, in the present case due to the time lag, there was destruction of the firewood and in such circumstances, first appellate court was fully justified in allowing Rsa 472/2004 11 the appeal and there is no reason to interfere with the decree. 7. Ext.B1, the auction notification contains the relevant conditions of the auction sale. It is accepting the said conditions, respondent participated in the auction and bid 563.80 metric tons of firewood in six logs for Rs.52,890/-. Being the highest bidder as provided under the conditions in Ext.B1, respondent admittedly remitted Rs.5000/- inclusive of the Earnest Money Deposit of Rs.500/-. Conditions of the auction sale in Ext.B1 specifically provide that the conditions are subject to the Government Order SRO 267/1976 dated 23.2.1976. The said rule reads: “ Persons entering into contract with Forest Officers shall execute a written agreement for the due performance of the contract and to reimburse damages and loss in case of breach. Whoever enters into any such contract with any Forest Officer acting on behalf of the Governor of Kerala shall, if so required by such Forest Officer, binds himself by a written instrument to perform such contract and to pay to such Forest Officer on behalf of the Governor of Kerala the expenses Rsa 472/2004 12 necessary for or incurred in the execution of any work or thing to be done which he had bound himself but has failed to do. Explanation - A person, who makes a written tender for a contract, or who signs the conditions of an auction sale at which he is a bidder, such tender or conditions of sale being on or in a form furnished by a Forest Officer for that purpose, whereby he - (a) binds himself to perform the contract for which he tenders or bids, in the event of his tender or bid being accepted, or (b) binds himself not to withdraw his tender or bid during the time that may lapse before its acceptance or refusal is communicated to him, shall be deemed to have been required by such Forest Officer to bind himself as aforesaid and in case - (a) on the acceptance of his tender or (b) on the making of his tender or bid, to have bound himself accordingly, within the meaning of this rule; and any such person need not enter into a separate written instrument for the purpose, unless specially so required by the Forest Officer with whom he contracts”. Rsa 472/2004 13 8. Thus it is clear from the said government order that when a person participated in the auction conducted by a Forest Officer, on behalf of the Governor of Kerala and makes a written tender for a contract, or signs the conditions of an auction sale at which he is a bidder, on the acceptance of his tender or on making of his tender or bid, he bound himself and any such person need not enter into a separate written instrument for the purpose, unless specially so required by the Forest Officer with whom he contracts. In view of the said provision, the very fact that respondent participated in the bid and signed the conditions of auction sale establishes that he is bound by the conditions and no separate written instrument is necessary to bind him on the said conditions. Ext.B1 shows that it is specifically provided that any person who participates in the auction is not entitled to withdraw from the auction, thereafter. The relevant recitals in Ext.B1 reads: Rsa 472/2004 14 9. A similar condition was considered by the Full Bench in Abdul Rahiman's case. The condition, in the scheme of auction in that case, was to the effect that “no highest bidder will be permitted to withdraw his offer till a final decision is taken by the department on his offer”. The condition in Ext.B1 was more rigorous than the condition considered by the Full Bench which was operative only as against the highest bidder, while the condition in Ext.B1 operates against any person who participates in the auction and bids. The question is, in the light of this Rsa 472/2004 15 condition, whether respondent who participated in the auction and was the highest bidder, is entitled to resile from the contract before the auction was confirmed or not. Full Bench, considering the clause that the highest bidder will not be permitted to withdraw his offer till a final decision is taken by the department on his offer, held as follows: “ Therefore the petitioner was not entitled to resile from his offer after he is declared as the highest bidder at the close of the auction on 26.12.1979 and first respondent rightly rejected his request”. 10. Condition No.10(1) of Ext.B1 provides that after the closure of the auction, the highest bidder has to remit ¾ of the bid amount inclusive of the Earnest Money Deposit of Rs.500/- or Rs.5000/- whichever is less. It also provides that if the highest bidder fails to remit the said 1/3rd, the sale would be cancelled and Earnest Money Deposit will be forfeited and the highest bidder will be liable for the loss sustained by the department on reauction of the articles. Ext.B1 also shows that Earnest Money Deposit was only Rs.500/-. It is admitted by the respondent that Rsa 472/2004 16 inclusive of the Earnest Money Deposit of Rs.500/-, he deposited Rs.5000/- which is sought to be realised by the decree in the suit. Therefore, respondent cannot be heard to contend that he was not the highest bidder or he was not aware that his bid was accepted by the department, though a formal confirmation of sale was necessary. When Ext.B1 provides that respondent, who participated in the auction sale after affixing his signature in the necessary conditions of auction sale at the time of bid, is not entitled to resile from the contract before it was confirmed or not. In view of the Full Bench decision, it could only be found that there is a concluded contract and respondent cannot rescind from the contract. 11. Though learned counsel appearing for the respondent relied on the decision of the Apex Court in Mohammed Basheer's case, that was a case where the residual of the tree growth and firewood in coupe No.3 of Pathanamthitta range was auctioned in public auction and appellant therein was the highest bidder. Appellant in that case contended that before the bid was confirmed, a fire had broken out in the forest and as a result, the residual tree growth and firewood were destroyed and he had Rsa 472/2004 17 written a letter to the forest officials demanding deduction of the money offered by him. Their Lordships distinquished that case with the facts in Adbul Rahiman's case holding that appellant had written to the Divisional Forest Officer for cancellation of his bid or reduction of the bid amount and in Abdul Rahiman's case, breach of the contract stood admitted. Their Lordships held that the question whether there is a breach of the terms of the notice inviting tender or not should be adjudicated by an authority declared to be competent thereof and in a case where there is a dispute as to whether any damages occurred, a finding of fact in that behalf must be arrived at by the competent authority whereunder the amount of damages should be quantified and such quantification must be in consonance with the terms of relevant rules. On facts it was held that the subsequent event of firewood breaking out and the resultant destruction of tree growth and firewood, which was a vis major, there was no concluded contract. It cannot be equated to the facts of the case. Though under Section 5 of the Indian Contract Act, a proposal could be revoked at any time before the communication of its acceptance is complete, as against the proposal and under Rsa 472/2004 18 Section 6, a proposal could be revoked by lapse of the time prescribed in such proposal for its acceptance, or if no time is so prescribed, by lapse of a reasonable time without communication of the acceptance, that there is a contract to the contrary, neither Section 5 nor 6 enables the respondent to revoke the proposal on the ground that it was not accepted, when he sent Ext.A7 letter on 22.10.1982. Respondent participated in the auction after agreeing with the conditions of Ext.B1 which provides that once he participated in the auction he is not entitled to withdraw from the bid, before it is confirmed or not. Therefore, even if it is taken that there was only a conditional acceptance as was the case in Arumughaswamy Nadar's case (supra), relied on by the learned counsel appearing for appellants, when Ext.B1 provides that respondent is not entitled to withdraw from the bid before it was accepted or not, by Ext.A7 or the subsequent communications, Ext.A12 and A15, he is not entitled to withdraw from the proposal. If that be so, as provided under Ext.B1, respondent is bound to pay the loss sustained by the forest department. If that be so, Rs.5000/- which was remitted by the respondent on the date of the auction being the Rsa 472/2004 19 highest bidder and in consonance with condition No.10(1) of Ext.B1 auction sale, he is not entitled to realise the amount by filing the suit. Unfortunately, first appellate court without considering the Full Bench decision and considering the question whether there is a contract to the contrary in Ext.B1, based on the commentary on Contract Act under Sections 5 and 6 held that there is no concluded contract and therefore respondent is entitled to withdraw and if so, he is entitled to get back the amount. In the light of the Full Bench decision and the conditons of Ext.B1, respondent is not entitled to withdraw the bid, especially when under Ext.B2 the same was confirmed and by Ext.A17, it was intimated to the respondent. 12. Then the question is whether appellants are entitled to realise the loss which according to them was the difference in the amount realised on re-auction and the amount bid by the respondent. Even though the Full Bench in Abdul Rahiman's case (supra) held that it is not necessary to quantify the damages in the light of the auction conditions, in view of Section 79 of the Forest Act, as held by the Apex Court in Mohammed Basheer's case (supra), when the question whether respondent committed Rsa 472/2004 20 breach of the contract and whether it resulted in loss by the reauction, the liability and the quantum of the loss sustained by the department, unless the liability is fixed by a competent authority, or by a decree of the court, it cannot be realised as provided under the Revenue Recovery Act. The case of respondent is that due to the delay in confirming the auction, and intimating the sale to the respondent, he could not remove the firewood which he bid and as a result the firewood was destroyed and its value considerably reduced. As rightly pointed out by the learned counsel appearing for the respondent, the firewood was originally auctioned on 10.11.1980. As the successful bidders failed to remit the amount, it was again re-auctioned on 16.6.1982. Respondent bid 563.80 metric tons of firewood in six logs for