2007 Supreme(SC) 1018

2007(5) Supreme 736
Supreme Court of India
(From Karnataka High Court)
A.K. Mathur & P.K. Balasubramanyan, JJ.
State of Karnataka & Anr. — Petitioner
versus
K.K. Mohandas & etc. — respondents
Appeal (civil) 7102-7105 of 2002
Decided on : 01-08-2007

important Points
Parties are bound by the terms of the contract entered into with eyes open.
An instrument or contract may be rectified when through fraud or a mutual mistake of the parties, a contract or other instrument in writing does not express their real intention.
Principle of estoppel does not operate at the level of Government policy.
Having insisted on performance of the contract and having exercised rights under it, a party cannot repudiate its obligations under the contract.

Headnote:Specific Relief Act, 1963 – Section 27 – What appears to be pleaded is the failure of the Government to impose the ban on sale of toddy and the contract being rendered impossible of performance in the matter of payment of Kist by the plaintiff – When plaintiffs entered into a contract on their bid being accepted, they were bound by the terms of the contract and had to perform accordingly – Plaintiffs were aware of the fact of attempts to defy the ban by toddy tappers and they had entered into the contract thereafter with eyes open – Plea not tenable. (Para 6)

       Specific Relief Act,1963 – Section 26 – An instrument or contract may be rectified when through fraud or a mutual mistake of the parties, a contract or other instrument in writing does not express their real intention – The written contracts not incorporating any term regarding enforcement of the ban on trade of toddy to the public – On the other hand plaintiffs obliged to pay the bid amount in monthly installments – In the absence of any pleading establishing a ground for the grant of the relief of rectification, mere adding of a prayer by way of an amendment could not be considered sufficient to grant the relief – Plaintiffs have not shown suffering any detriment due to the contracts in question, based on the promise held out to them though not reflected in the written instrument. (Para 9 and 10)

       Promissory Estoppel – State Government never holding out to plaintiffs that in case of its failure to enforce the ban on sale of toddy to the public, the plaintiffs need pay only the Kist amounts of the year 1989-90 – There was no such agreement or contract during any negotiation preceding the bids by the plaintiffs – High Court in earlier writ petitions clearly held that no question of promissory estoppel would arise – Supreme Court also, while dismissing the SLP reserved liberty in the plaintiffs to approach the civil court, apparently for suing for damages on establishing that they had suffered loss because of the expectations raised by the speech in the Assembly and the failure of the State to enforce the prohibition it had envisaged as a policy, although it would not act as an promissory estoppel – Plea of promissory estoppel was not available, having already been negatived. (Paras 13 and 14)

       Promissory Estoppel – Principle of estoppel does not operate at the level of Government policy – A speech made in Parliament by a Minister cannot be treated as a promise or representation made to a person attracting the principle of promissory estoppel – Plaintiffs are not entitled to plead any case of promissory estoppel merely on the basis of the speech made by the Minister in the Assembly of a proposal to ban sale of toddy in the State. (Paras 15 and 16)

       (1986) 1 S.C.C. 133; JT 1998 (9) SC 51; (1992) 2 SCC 683 – Relied upon.

       Government contract – Plaintiffs not raising grievance of sale of toddy being permitted – Their case being that Government could not fully implement its policy of preventing sale of toddy to public – This, at best, could give right to plaintiffs to claim damages on establishing to have suffered loses on this account. (Para 17)

       Specific Relief Act, 1963 – Section 30 – Having insisted on performance of the contract and having exercised their rights under it, plaintiffs are not entitled to repudiate their obligations under the contract. (Para 19)

       Facts of the case :

       The State of Karnataka every year auctions the right to vend liquor in various taluks of the State. Among them is included trade in arrack. The plaintiffs in the suits, Excise Contractors on their own showing, had bid the right to vend liquor from the concerned taluks earlier and even for the Excise Year 1989-90. For the Excise Year 1990-91 plaintiffs were the highest bidders in the respective auctions and the respective bids were knocked down in their favour. On 29.6.1990, formal contracts were entered into by the plaintiffs with the defendants. Meanwhile, the toddy tappers took up cudgels and even defied the attempted ban. This resistance had started even before the plaintiffs entered their highest bids.

       In view of the agitation, the Government considered the relevant aspects and issued an order by which while the ban on sale of toddy to the public was continued, it was decided to arrange for sale of toddy tapped by the toddy tappers of Dakshina Kannada District, through a centralised society to the fenny units and permitting the fenny units of Dakshina Kannada to buy the toddy from tappers of allotted trees at the price to be fixed by the Excise Commissioner till finalising the purchase by a centralised society as envisaged.

       It is the case of the plaintiffs that the above order was violated by the toddy tappers with impunity by selling toddy openly in the District. The State did not take steps to check this. So, some of the plaintiffs approached the High Court of Karnataka. A learned single judge of the High Court dismissed the Writ Petitions.

       Findings of the Court :

       Plaintiffs are bound by the terms of the contract entered into with eyes open. They are not entitled to rectification of the same. Their plea of promissory estoppel is also not tenable.

       Result : Appeals allowed with cost.