Back
2008(8) Supreme 58
SUPREME COURT OF INDIA
S.B. Sinha and Cyriac Joseph, JJ.
M/s. Karnataka State Forest Industries Corporation — Appellant
versus
M/s. Indian Rocks — Respondent
Civil Appeal No. 6274 of 2008
[Arising out of SLP (Civil) No. 24242 of 2005]
with
M/s. Karnataka State Forest Industries Corporation — Appellant
versus
State of Karnataka and others — Respondents
Civil Appeal No. 6275 of 2008
[Arising out of SLP (Civil) No. 23148 of 2005]
Decided on : 24-10-2008
2008 (8) SCALE 106; (1981) 1 SCC 537 – Relied upon.
(b) Administrative Law – Letter dated 16th January 1996 – The letter dated 16th January, 1996 is to be treated as a communication from a Principal to an Agent – As an agent of the Government of Karnataka, the appellant was bound to act thereupon. (Para 36)
(c) Administrative Law – On cancellation of the agency, the appellant had no locus standi to ask the respondents to perform their part of the contract. (Para 37)
(d) Karnataka Minor Mineral Concession Rules, 1994 – Rule 42 – In absence of grant of transit permit it is idle to contend, on the one hand that the respondents were bound to perform their part of the contract and on the other that although they have asked for supply of permits, as per rules, they did not obtain the same. (Para 38)
(e) Administrative Law – When the authority of the appellant to continue to deal with the granite blocks came to be questioned, it was obligatory on its part to clear its position in this behalf – By not doing so, it became guilty of suppressio veri and suggestio falsi – Such practice on the part of the appellant, which is a state within the meaning of Article 12 of the Constitution, deprecated. (Para 39)
(f) Constitution of India – Article 226 – Ordinarily a superior court would not enforce the terms of a contract qua contract – However, when an action of the State is arbitrary or discriminatory and, thus, violative of Article 14 of the Constitution of India, a writ petition would be maintainable. (Para 40)
(2004) 3 SCC 553; [1967] 3 SCR 636 – Relied upon.
(g) Judicial Review – If a stand was taken and concession was given in the earlier round of litigation there is no reason why it should not be given effect to – If by virtue of the concession a right accrued to the respondents for maintaining a writ the same should not be denied to respondent herein. (Para 44)
(2007) 7 SCC 689 – Relied upon.
Facts of the case :
Civil Appeal arising out of SLP No. 24242 of 2005
1. Appellant is a Government of Karnataka Undertaking engaged in sale of seized and confiscated granite blocks through Tender-cum-Allotment sale on “as is where is basis”.
2. Respondent participated in the tender process. It was successful in purchase of blocks worth Rs. 21,24,574.85 and on or about 11.07.1995 had deposited a sum of Rs. 11,84,447.90. The balance amount due to the appellant from the respondent was Rs. 9,40,126.55.
3. In terms of the said tender, the respondent was required to pay not only 10% of the value of the goods but also taxes and other statutory dues paid by the appellant herein. Appellant has paid an amount of Rs.6,85,642/- being the royalty amount, Forest Development Tax, Karnataka Sales Tax and Surcharge on Karnataka Sales Tax etc.
4. Respondent allegedly refused to pay the amount to which it was said to be otherwise liable in terms of Clause 8 of the terms and conditions of the tender.
5. Appellant contended that the contract was not concluded within the stipulated period of time as the entire payment was not made by June, 1995 or before lifting of the stones whichever is earlier, as envisaged under Clause 9(b) of the terms and conditions of the tender.
6. Respondent filed a writ petition in the High Court which was allowed.
7. A writ appeal preferred thereagainst by the appellant has been dismissed by reason of the impugned judgment.
Civil Appeal arising out of SLP (C) No. 23148 of 2005
1. Respondent No.3, on 6th March, 1995, participated in the tender-cum-auction sale and was a successful bidder in respect of 3 lots of granite containing 75 granite blocks. It again participated in the tender auction on 14th March, 1995 and was declared successful in respect of 41 granite blocks. The total sale value of the granites purchased by respondent No.3, according to the appellant, was Rs.21,91,234.60 ps. Out of said amount, it deposited a sum of Rs.11,47,149.77.
2. Appellant released 31 granite blocks of the value of Rs.5,92,556.57 ps. Vide its letter dated 28th June, 1995 appellant requested the respondent No.3 to lift the remaining granite blocks after remitting 100% of the total purchase value plus taxes on or before 15th July, 1995 failing which the amount already deposited was threatened to be forfeited.
3. Respondent No.3 filed a writ petition before the Karnataka High Court being Writ Petition No.25613 of 1996 praying inter alia for issuance of direction to issue permits for lifting the granite blocks. Appellant did not object to the release of the granite blocks towards which payments had already been made.
4. Pursuant to or in furtherance of High Court’s direction a representation for refund of Rs.1,51,594.05 ps. was made. However, the appellant by its letter dated15th November, 1999 rejected the said request. Aggrieved, the third respondent filed a writ petition before the High Court which was allowed. The writ appeal filed by the appellant was dismissed.
Finding of the Court :
These are not the cases in which this Court should exercise its discretionary jurisdiction under Article 136 of the Constitution of India.
Result : The appeals are dismissed with costs.
The court in this case did not explicitly hold that the completion of work or performance of contractual obligations sanitizes or legitimizes any underlying illegality. Instead, the court emphasized that ordinarily, courts do not enforce the terms of a contract when it involves disputed questions of fact or when the contract itself is tainted by illegality. The court also noted that actions of the State or its agencies that are arbitrary or discriminatory, and thus violate constitutional principles, can be challenged through writ petitions, even if they involve contractual matters.
Furthermore, the court observed that directions or communications from authorities that lack statutory force are not binding and do not have statutory effect, implying that mere completion of work or performance under such directions does not validate or legitimize illegal or irregular acts. The court highlighted the importance of legality and procedural correctness over mere performance of contractual obligations, especially when such performance is based on actions that are arbitrary, unfair, or without statutory backing.
In summary, the court's position suggests that completing work or fulfilling contractual obligations does not automatically sanitize or legitimize illegal acts or irregularities, particularly when those acts are challenged on constitutional or legal grounds.
JUDGMENT
S.B. Sinha, J. —
1. Leave granted.
2. These two appeals involving similar questions of law and fact were taken up for hearing together and are being disposed of by this common judgment. We may, however notice the fact of the matters involving in both the appeals separately.
Civil Appeal arising out of SLP No. 24242 of 2005
3. Appellant is a Government of Karnataka Undertaking engaged in sale of granite of seized and confiscated granite blocks to persons who intend to purchase in the Tender-cum-Allotment sale on “as is where is basis”. The relevant terms of the said tender were:
“6. The tender/bidder should make arrangements to obtain transit permit at his own cost from Forest Department/KSFIC.
9. The successful Tenderer/Bidder should pay 1/10th amount of the sale value plus taxes as follows:-
(a) Un-polished Granite Blocks 10% S.T.
(b) Sur-charge on S.T. 15%
(c) Forest Development Tax 5%
(d) Income Tax 15%
(e) Surcharge on I.Tax 5%
On the same day, the balance amount will be payable as follows:
(a) 50% within 15 days of the intimation of confirmation of tender.
(b) the remaining amount shall be paid by the end of the June, 1995 or before the stones are lifted whichever is earlier. The period of the contract shall be upto April, 30th 1995.
11. In case of breach of any of the conditions mentioned above, the Managing Director, KSFIC Ltd., is at liberty to cancel the Tender/Bid amount and make materials at the risk and cost of the original Tenderer/Bidder and the EMD/Security Deposit furnished by the Tenderer/Bidder be forfeited. If the K.S.F.I.C. incurs any extra expenditure in this regard the same will be recoverable from the original Tenderer/Bidder.
18. The successful Tenderer/Bidder shall make their own arrangements for inspection of seized and confiscated Granite blocks at their own cost located at different places in the Ranges as the offer for sale is on. AS IS WHERE IS BASIS. Rejection due to colour, cracks etc. will not be entertained once the offer is submitted.
19. Sale of granite blocks is agreed upon in good faith and K.S.F.I.C. Ltd. shall not be liable for any damages or otherwise for failure to carryout the obligation which may be occasioned by Act of God, War, Civil Disturbance disorders, strike etc., or regulation of Government authorities or agencies or similar circumstances beyond its control.
20. Breach of any of the conditions specified supra, by the purchaser will entail forfeiture to K.S.F.I.C. of all deposits paid by him. Further, the Granite Blocks already paid for and lying in the field will also be liable to be attached towards the balance due. The Granite Blocks purchased, whether paid or not will also be resold at the risk and cost of the original Tenderer/Bidder who will be liable to make good to Government any loss arising out of such resale but shall not be entitled to profits.
34. No material shall be removed from the contract area unless it is covered by transit pass in accordance with the rules under Section 50 of the Karnataka Forest Act, 1963. If any problems arise while lifting the blocks from site, necessary assistance will be provided if need be under special circumstances.”
4. Respondent participated in the tender process. It was successful in purchase of:
(i) one lot containing 25 blocks (Mulegundi Area),
(ii) one lot containing 37 blocks (Mulegundi Area) and
(iii) one lot containing 43 blocks (Nehrudoddi Area).
5. The total sale value of the granite sold to the respondent herein was Rs. 21,24,574.85. Out of the aforementioned sum, admittedly, the respondent on or about 11.07.1995 had deposited a sum of Rs. 11,84,447.90. The balance amount due to the appellant from the respondent was Rs. 9,40,126.55. In terms of the said tender, the respondent was required to pay not only 10% of the value of the goods but also taxes and other statutory dues paid by the appellant herein. Appellant has paid an amount of Rs.6,85,642/- being the royalty amount, Forest Development Tax, Karnataka Sales Tax and Surcharge on Kar
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
