Full Judgment Text
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PETITIONER:
K. SREEDHARA REDDY
Vs.
RESPONDENT:
THE CONSERVATOR OF FORESTS AND ORS
DATE OF JUDGMENT12/09/1975
BENCH:
KRISHNAIYER, V.R.
BENCH:
KRISHNAIYER, V.R.
GUPTA, A.C.
FAZALALI, SYED MURTAZA
CITATION:
1976 AIR 782 1976 SCR (1) 770
1976 SCC (1) 106
ACT:
Hyderabad Forest Act-Forest Contract rules-Rule 29-30-
31-whether termination of contract to precede imposition of
penalty-Natural Justice.
HEADNOTE:
The appellant & Forest Contractor felled trees in
excess of the permitted number authorised by the contract
entered into by him with the State of Andhra Pradesh Certain
penalty was imposed on the appellant under rule 29 of he
Forest Contract Rules framed in exercise of the powers
conferred by Hyderabad Forest Act The Forest Officer found
that the appellant felled more trees and therefore, gave a
show cause notice to the appellant The appellant prayed for
re-enumeration of the trees given from the forest. He was
given an opportunity which was not availed by him to check
the stumps in the coupe as desired by him Consequently, a
penalty was levied. Thereafter, the contract was terminated
After the termination of the contract the process for
recovery of the penalty was started Rule 29 reads as under:
(1) Penalty on termination of a contract for breach of
conditions:-
Every forest contract shall be in writing in the
form annexed hereto and shall contain a provision
whereby the forest contractor binds him self to do all
the duties and acts required to be done by or under the
contract, and convenants that he and his servants and
agents shall abstain from all the acts forbidden by or
under such contract
(2) The sums to be mentioned in a forest contract as
payable in case of a breach of any such stipulation
shall not exceed one-quarter of the total consideration
to be paid by the contractor, and shall be recoverable
in accordance with the provisions of the Hyderabad
Forest Act 1355 and of this rule
Provided that where such consideration is not an
ascertained amount the forest officer executing the
contract shall make an estimate of the total amount
that would be payable if the contract were fully
complied with, and such estimate shall be deemed to be
for the purpose of this sub-rule the total
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consideration to be paid by the contractor.
(3) This sum shall be realized from the contractor
if the contract has been duly terminated in accordance
with the provisions of rule 30, and then only under the
written order or the forest officer executing the
contract"
The appellant filed a Writ Petition in the High Court
challenging the validity of the imposition of the penalty.
The learned Single Judge allowed the Writ Petition but the
Division Bench allowed‘ the appeal filed by the State
In an appeal by certificate, it was contended by the
appellant before this Court that the termination of the
contract for breach of conditions mentioned in rule 29
should precede the impost of penalty. It was further
contended that the principles of natural justice were
violated The respondent contended that ascertaining the
amount which is to be levied as a penalty. need not be
preceded by the termination of the contract.
Dismissing the appeal,
^
HELD: 1 It is clear that in the absence of a statutory
exclusion of natural justice any exercise of power
prejudicially affecting another must be in conformity with
the rules of natural justice. In the present case. we are
satisfied
771
that there is no foundation for the grievance of the
appellant on the score of natural justice since an
opportunity was afforded to the appellant before finally
quantifying the penalty to be levied but the appellant did
not avail himself of the opportunity. [773-E-F]
2. On a true construction of rule 29 once a Forest
Authority detects a breach it must investigate the extent
and estimate, the nature and degree of damage caused by the
breach, If it is serious they must proceed to ascertain the
sum to be fixed as penalty. In doing this, a reasonable
opportunity must be given to the affected party. After
that, the penalty shall be quantified and the contract
shall be terminated in the event the authorities come to the
conclusion that the breach is grave enough for that drastic
step. Once the contract is; terminated the last procedure is
realisation which can in no case be before the termination
of the contract. [774H, 775 A-B.]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 814-
815 of 1968.
From the Judgment and Order dated 7th September. 1966
of the Andhra Pradesh High Court in Writ Appeal Nos. 71 and
72 of 1964 respectively.
R. V. Pillai, for the appellant.
P Ram Reddy and C. N. Rao, for the respondents.
The Judgment of the Court was delivered by
KRISHNA IYER J. A forest contractor-the appellant-who
had allegedly excess felled trees beyond the permitted
number under two contracts entered into by him with the
State of Andhra Pradesh, was directed by the Conservator of
Forests-the firs, respondent-to suffer two. levies. One item
represented the loss sustained by the State on account of
the illicit cutting and the other was a penalty imposed
under r. 29 of the Forest Contract Rules (for short, the
Rules) issued in exercise of the powers conferred under ss.
44 and 79 of the Hyderabad Forest Act, 1355F (for short, the
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Act).
The factual story out of which the legal controversy
springs may be narrated in simple terms. Admittedly, the
appellant was granted two forest contracts to fell and
remove a specific number of trees from government forest, in
accordance with the Act and the Rules. The Contracts were
of two years’ duration ending with 31st December 1960. It
was found by the Forest officers that the appellant
contractor had felled more trees and so he was given a
notice calling for his explanation about this detected
breach of condition.
In C.A. 814 of 1968 such notice was issued on June 25,
1960 but no explanation was forthcoming. So the Conservator
determined the amount representing the loss caused by the
unauthorised cutting of trees. On July 22, 1960 the District
Forest officer informed the appellant that the Conservator
of Forest, who is the appropriate authority under the Rules,
had fixed Rs. 11,426/- as representing the loss sustained by
Government and Rs.11,250/- as penalty under r. 29. The
contractor. thereupon, prayed for re-enumeration of the
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trees cut from the forest by his application, dated July 30,
1960. He was informed by the forest authorities, by
communication dated August ’24, 1960 to check the stumps in
the coupe as desired by the petitioner before September 15,
1960. This opportunity was also not availed of by the
appellant. Consequently, the Conservator levied a penalty,
as earlier proposed. Thus there were two items (1) the loss
caused by illicit cutting; (ii) the penalty imposed under
the rules for breach of conditions of the contract. There
were three small amounts of fine also, all together
resulting in a sum of Rs. 23,088.00. Eventually, the
contract was terminated on December 28, 1960 under r. 30 of
the Rules. Long later, in January 1962, the amount stated
above was sought to be realised by revenue recovery process
by the Tahsildar, ‘by his attachment order, dated January 8,
1962. Thereupon a writ petition was filed by the appellant
challenging the demand. He succeeded before the learned
Single Judge but a Division Bench, in appeal carried by the
State, reversed this order and the appellant has invoked the
jurisdiction of this Court under Art. 133(1) (a) and (b) of
the Constitution.
In C.A. 815 of 1968 a similar excess felling by the
same contractor was detected by the concerned officials and
notice was issued to the appellant to explain how he had
felled 255 trees in excess of the contractual figure. The
appellant denied the illicit felling whereupon a date was
fixed for checking the coupe in his presence, as requested
by him. The contractor however did not avail himself of the
opportunity so afforded despite a second date for inspection
being fixed to suit his convenience. Eventually the
Conservator of Forests fixed the loss sustained by
government on account of the illicit felling of trees and
also the penalty for breach of the conditions of the
contract. This was done on October 16, 1960 and the
appellant was asked to pay the sum by notice. dated October
28, 1960. On the same date, the lease was also terminated.
Long later, on January 9, 1962 proceedings for
realisation of the amounts were initiated by the Tahsildar.
This step drove the contractor to move a writ petition,
which shared the fate, at the single Judge’s level and in
appeal, of the sister writ petition already adverted to. In
the same manner he has moved this Court in appeal, by
certificate.
Two points were urged by Mr. R V. Pillai, learned
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counsel for the appellant, one relating to the loss assessed
and sought to be realised by the State under the two
contracts on account of excess felling, the other relating
to the imposition of penalty under r. 29 and its validity.
The first point does not survive because in both the writ
petitions which were disposed of together by a common
judgment the learned Single Judge rejected the contention
with the observation ’I find no substance in the arguments
advanced in this behalf ... No provision was brought to any
notice which disentitles the government to collect those
items’. If the appellant had been aggrieved by the negation
of his plea under this head he should have challenged it in
appeal which he did not. Thus the matter has become final
and he‘ cannot, in this Court, revive it at all. There is
only a single question that therefore deserves our
consideration.
773
Was the penalty in the two cases imposed validly ? The
learned Single Judge held, on a study of rr. 29 and 31 that
the impost was illegal for reasons which we find difficult
to accept. The Division Bench, in appeal, disagreed with the
learned Single Judge for reasons which are unclear although
our conclusion concurs with theirs. The rules regulating the
consequence of a breach of the conditions of forest
contracts were originally promulgated in Urdu in the
Hyderabad State but we have been handed up the Manual of
Civil Laws, Andhra Pradesh, which contains those rules in
English. Rule 29(3) reads slightly obscurely but, in the
absence of the original Urdu rules, we have to make-do with
the English version.
There are two types of penalties which we may
conveniently designate as ’major’ and ’minor’, in the
contemplation of the Forest Rules Rule 29 deals with the
major penalties while r. 31 relates to minor penalties.
Where the breach of the conditions of the contract committed
by the forest contractor is serious, the contract itself is
to be terminated and a substantial penalty is to be imposed
which ’shall not exceed one quarter of the total
consideration paid by the contractor’. If the branch is of
lesser significance, then the authority may not propose to
terminate the contract on account thereof but may recover a
portion of the ’whole penalty provided for in r. 29’ not
exceeding Rs. 100/-. In short, if the contravention is
grave, the contract is cancelled and a heavy penalty imposed
but if the breach is inconsequential the contract continues
but a lighter penalty is imposed. In the present case it is
apparent that the authorities terminated the contract and it
is equally clear that the breach was serious. Rule 31 which
deals with trivial breaches and lighter penalties is
inapplicable. The only question then is whether the exercise
of the power to impose a penalty under r. 29 has been (a) in
compliance with natural justice; and. (b) in fulfilment of
the conditions precedent for the exercise of the power. The
facts we have set out earlier make it clear that an
opportunity had been afforded in the case of both the
contracts before finally quantifying the penalty to be
levied but, the contractor did not avail himself of the
opportunity. While it is clear that in the absence of a
statutory exclusion of natural justice any exercise of power
prejudicially affecting another must be in conformity with
the rules of natural justice, we are satisfied that in the
present case there is no foundation for the grievance of the
petitioner on this score.
The substantial issue is as to whether the termination
of the contract for breach of conditions should precede the
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impost of penalty. According to Shri Pillai, that is the
meaning of r. 29 read in the light of r. 30(3). There is
seeming varbal support for this contention but n closer
scrutiny pricks the bubble. Rule 29 may well be read at this
stage
’29. (1) Penalty on termination of a contract for
breach of conditions.-
Every forest contract shall be in writing in the
form annexed hereto and shall contain a provision
whereby the
774
forest contractor binds himself to do all the duties
and acts A required to be done by or under the
contract, and covenants that he and his servants and
agents shall abstain from all the acts forbidden by or
under such contract.
(2) The sums to be mentioned in a forest contract
as payable in case of a breach of any such stipulation
shall not exceed one-quarter of the total consideration
to be paid by the contractor, and shall be recoverable
in accordance with the provisions of the Hyderabad
Forest Act 1355 F and of this rule:
Provided that where such consideration is not an
ascertained amount the forest officer executing the
contract shall make an estimate of the total amount
that would be payable if the contract were fully
complied with, and such estimate shall be deemed to
be., for the purpose of this sub-rule, the total
consideration to be paid by the contractor.
(3) This sum shall be realized from the contractor
if the contract has been duly terminated in accordance
with the provisions of rule 30, and then only under the
written order of the forest officer executing the
contract."
Shri Ram Reddy, for the respondent, urges that ascertaining
the amount which is to be levied as a penalty need not be
preceded by the termination of the contract. Indeed,
according to him, it is only‘ if there is an investigation
of the nature of the breach, the quantum of loss inflicted
on the State and other circumstances that a decision as to
whether the contract should be terminated or not can be
taken. If it is found that the breach of condition be
willful and the damage substantial, the penalty will be
imposed under r. 29 and a decision will be taken for
termination of the contract. However, the sum fixed as
penalty shall not be realised from the contractor until the
contract has been duly terminated in accordance with the
provisions of r. 30. This is because you cannot keep a
contract alive and claim that a grave breach of conditions
has been committed. That would be too inconsistent a stance
for the State to adopt. It is true that the termination of
the contract under r. 30 is a condition precedent to
realisation of the penalty from the contractor but
realisation is different from imposition. The forest
authorities quantify and impose the penalty. The revenue
authorities as well as the forest authorities adopt the
various steps prescribed in r. 30(3) for realisation of the
sum In the present case it was the Tehsildar who sought to
realise the penalty and he did this after the contract was
terminated. Indeed, r. 30(3) uses the expression ’recover’
which is in consonance with ’realise’ in r. 29(3) .
We think that the true meaning of rr. 29 and 30, read
together, is that the forest authorities must move from
stage to stage in the following manner. Once they detect a
breach, they must investigate to understand and estimate,
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the nature and degree of damage caused by the breach. If it
is serious, they must proceed to ascertain the
775
sum to be fixed as penalty. In doing this, a reasonable
opportunity must be given to the affected party. After that
the penalty shall be quantified and the contract shall be
terminated, in the event of the authorities coming to the
decision that the breach is grave enough for that drastic
step. Once the contract is terminated, the last procedure is
realisation which can in no case be before the termination
of the contract. The realisation of the penalty may be in
one or other of the was set out for recovery under r. 30. Of
course, if the breach is of a venial nature, r. 31 is
attracted, the contract is continued and only a small
portion of the penalty envisaged in r. 29 is collected.
The view we have taken of the scheme of the rules
leaves us in no doubt that the order of penalty is right and
the judgment of the Division Bench is correct in the
conclusion and the appeals, in the result, must fail. The
circumstances are such that the litigation is purely induced
by the obscure official translation of r. 29 from Urdu to
English with an obvious omission of ’not’. This and the
other attendant features of the case persuade us to direct
that the parties shall bear their costs throughout.
V.M.K. Appeals dismissed.
776