K. Abdul Rahiman And Ors. vs Divisional Forest Officer And ... on 15 July, 1988

    K. Abdul Rahiman And Ors. vs Divisional Forest Officer And Anr. on 15/7/1988

JUDGMENT

   Bhaskaran Nambiar, J.

   1. Two confessed defaulters seek redress under Article 226 of the
Constitution in practically identical circumstances in these two writ petitions.
For convenience, therefore, it is sufficient to refer to the petitioner and the
facts in one writ petition. O.P. No. 3799 of 1981.

   2. The Divisional Forest Officer, Palghat, notified on 4th December. 1979
that the right of collection and removal of all timber and firewood except Teak.
Rosewood and other enumerated categories of wood, in specified areas will be
offered for sale in public auction subject to certain conditions. The auction
was held on 26-12-1979 and the petitioner was permitted to bid after he made the
earnest money deposit of Rs. 1,000/- and signed a copy of the sale notice in
token of having accepted all the conditions. He was the highest bidder with a
bid of Rs. 3,31,000.00. He also paid on the sale date Rs. 10,000/- less the
earnest money deposit already paid. Within a week thereafter, on 8-1-1980, he,
however, informed the first respondent, the Divisional Forest Officer, through a
lawyer's notice that he was withdrawing his offer, and requesting for refund of
the amount paid by him. The first respondent declined his request and the sale
was confirmed on 4-2-1980. The petitioner refused to pay the instalments or
execute the agreement as per the conditions of auction. Treating him as a
defaulter, resale was ordered and the fresh sale was conducted on 7-5-1980 and
the highest bid was only Rs. 2,35,000/-, less by Rs. 96,000/- than covered by
the first auction. The loss caused Rs. 96,250.33, was sought to be recovered
from the petitioner. A demand notice was sent directing the petitioner to remit
the amount within fifteen days of the date of receipt of the notice failing
which he was warned that revenue recovery steps would be initiated. Faced with
the threat of action under the Revenue Recovery Act. which even allowed
immediate attachment of movables on mere show of a demand notice, the petitioner
rushed to this Court and filed this writ petition on 9-2-1988.

   3. Shri. Sugunapalan, learned counsel for the petitioner submitted that after
the petitioner withdrew his offer, before the sale was confirmed there was no
contract with the Government and there could be no breach of that contract. It
was also submitted, assuming that there was a contract, the petitioner did not
execute any agreement as contemplated under the auction or in conformity with
Article 299 of the Constitution and thus there was no valid contract to sustain
a claim for its breach. The Government, it is stated, cannot in any case, be the
arbiter regarding the quantum of damages and the claim now made is not
sustainable in law.

   4. The learned Advocate General, appearing for the State contended that the
State was enforcing only a statutory liability and not any contractual
obligation and relied on Section 79 of the Forest Act and Section 68 of the
Revenue Recovery Act for the purpose. The petitioner was bound by the conditions
of auction and he could not be permitted to withdraw after he participated in
the bid and was declared the highest bidder. It was again pointed out that the
claim was only for liquidated damages specified in the auction notice, and there
was no necessity to conduct any enquiry to fix the quantum.

   5. The conditions of auction. Ext. R-1(a) provided that before being
permitted to bid, the intending bidder must make an earnest money deposit E.M.D.
for Rs. 1,000 in cash and also sign a copy of the sale notice in token of having
accepted all the conditions therein. There is no dispute that the petitioner
complied with these conditions. He therefore bound himself to abide by all the
conditions of auction and the questions as to whether he was entitled to
withdraw after making the highest bid, and whether he was required to make good
the loss, if any, sustained by the Government consequent on his default, are
matters referable to those conditions and the relevant statutory provisions.

   6. Under the scheme of auction "no highest bidder will be permitted to
withdraw his offer till a final decision is taken by the department on his
offer". Therefore, the petitioner was not entitled to resile from his offer,
after he was declared as the highest bidder at the close of the auction on
26-12-1979 and the first respondent rightly rejected his request.

   7. After confirmation of the sale, the successful bidder has to remit the
balance 1/3rd of the bid amount, pay sales tax for the total sale value, pay
into the Government Treasury Savings Bank Account an amount equal to 10% of the
total sale value as security, execute an agreement in the prescribed form in
stamp paper and remit the balance 2/3rd of the bid amount in two equal
instalments, the first within one month of the execution of the agreement and
the second within two months or within such extended time as may be ordered. It
is also specifically provided :--

     "Failure to remit any of the above instalments even during the extended
period will entail cancellation of the contract and forfeiture of all monies
paid till then and all produce remaining in the coupe. The right thus cancelled
will be resold at the risk and loss of the contractor."

   8. The petitioner did not make any payment after the sale was confirmed. He
was a defaulter on his own showing. Clause 7 of the conditions of auction was
automatically attracted. Clause provides :

     "In case of resale or departmental working on account of default by the
successful bidder/contractor, the loss, if any, will be made good by the
defaulter but he shall not be entitled to the profit the department may derive
thereby."

   9. The conditions of the auction, accepted by the petitioner and binding on
him authorised the Government, on breach by the terms of the auction, to conduct
a fresh auction at the "petitioner's risk and loss" and the petitioner agreed to
make good the loss, if any, sustained on resale. On the terms of the auction
notice, the petitioner, in this case, was liable to pay the loss caused to the
department on account of his own default. The loss was measured by the
difference between the price obtained in the first auction and what was obtained
in the second auction. The expenses incurred for conducting the auction, of
course, were part of the loss.

   10. The petitioner cannot derive any support from the conditions of auction
and cannot deny his liability on the admitted breach of its terms. It is in this
context that he raises two legal contentions which we shall presently deal with.

   11. It is contended that when the State is one of the contracting parties,
and seeks to recover damages for breach of that contract. the State cannot be a
judge in its own cause a Judge in its own cause own cause and cannot be its own
arbiter to determine the (sic) and quantum of damages. This question poses no
problem as the matter is settled by several decisions, and the latest decision
of the Supreme Court in State of Karnataka v. Rameshwar Rice Mills.
Thirthahalli, AIR 1987 SC 1359. concludes the issue against the petitioner. The
Supreme Court held thus : --

     "The terms of Clause 13 do not afford scope for a liberal construction
being made regarding the powers of the Deputy Commissioner to adjudicate upon a
disputed question of breach as well as to assess the damages arising from the
breach. The crucial words in Clause 12 are "and for any breach of conditions set
forth hereinbefore, the first party shall be liable to pay damages to the second
party as may be assessed by the second party". On a plain reading of the words
it is clear that the right of the second party to assess damages would arise
only if the breach of conditions is admitted or if no issue is made of it. If it
was the intention of the parties that the officer acting on behalf of the State
was also entitled to adjudicate upon a dispute regarding the breach of
conditions the wording of Clause 12 would have been entirely different. It
cannot also be argued that a right to adjudicate upon an issue relating to a
breach of conditions of the contract would flow from or is inhered in the right
conferred to assess the damages arising from a breach of conditions. The power
to assess damages, as pointed out by the Full Bench, is a subsidiary and
consequential power and not the primary power. Even assuming for argument's sake
that the terms of Clause 12 afford scope for being construed as empowering the
officer of the State to decide upon the question of breach as well as assess the
quantum of damages, we do not think that adjudication by the Officer regarding
the breach of the contract can be sustained under law because a party to the
agreement cannot be an arbiter in his own cause. Interests of justice and equity
require that where a party to a contract disputes the committing of any breach
of conditions the adjudication should be by an independent person or body and
not by the other party to the contract. The position will, however, be different
where there is no dispute or there is consensus between the contracting parties
regarding the breach of conditions. In such a case the officer of the State,
even though a party to the contract will be well within his rights in assessing
the damages occasioned by the breach in view of the specific terms of Clause 12.

     We are, therefore, in agreement with the view of the Full Bench that the
powers of the State under an agreement entered into by it with a private person
providing for assessment of damages for breach of conditions and recovery of the
damages will stand confined only to those cases where the breach of conditions
is admitted or it is not disputed.

   12. When a contract is broken, the party who suffers by such breach is
entitled to receive from the party who has broken the contract, compensation for
any loss or damage caused to him thereby. This principle of Section 73 of the
Contract Act equally applies where one of the contesting parties is the
Government. It is the breach of the contract that gives rise to the cause for
damages. The primary duty therefore is to fix the liability for the breach.
Assessment of damages is only an incidental or subsidiary function. The
liability to pay damages is thus fastened where there is breach of contract.
However, when a dispute arises as to whether the contract has been broken or
not, that dispute cannot be settled by one of the parties to the contract, for,
he cannot be an arbiter in his own cause. The dispute may have to be referred to
an arbitrator or the matter has to be settled in a Court of law. This principle
applies to the Government also as a party to the contract. Where the breach of
the contract is admitted. i.e., where there is no dispute that the contract has
been broken by one of the parties, the Government as the party entitled to claim
compensation for the breach need not wait for a determination by any outside
agency as to whether there was any breach of contract. In that event, the
question of damages alone remains to be considered. A sum can be named in the
contract as the amount to be paid in case of breach, an amount in liquidation of
the claim for compensation. The contract can thus provide for liquidated damages
in the event of breach and the Government claiming that amount as compensation
for the admitted breach committed by the other party to the contract need not
seek the aid of Court or any outside agency for the fixation of the quantum of
damages. Similarly, if the contract itself provides that that one party shall be
liable to pay damages to the second party as may be assessed by the second
party", the assessment by the second party, in case the breach is admitted, is
binding on the first party and there is no more any necessity for a further
quantification of the damages by any outside agency. The party assessing the
damage can straightway seek to recover the amount and if that party is the
Government, it can have recourse to the remedy available under the Kerala
Revenue Recovery Act.

   13. These principles are now well settled and applying them to the facts of
the case, it is clear that the petitioner admits that he has broken the contract
and that he did hot comply with the terms of the conditions of auction. He was,
therefore, bound to compensate for the loss sustained by the Government. His
loss is mitigated to a large extent by the Government conducting a resale and
the auction conditions stipulate that the Government can only claim the loss, if
any, on account of the resale. The auction notice itself fixes the mode and the
method of calculation of the damages. The ascertainment of the quantum is,
therefore, a simple arithmetical calculation after the resale. The contention
that the Government cannot take steps for recovery of this amount under the
Kerala Revenue Recovery Act cannot be accepted.

   14. But, considerable reliance was placed in a decision of a learned single
Judge of this Court in Chellappan v. Executive Engineer, 1979 Ker LT. 53 and
especially the following observations : --

     " It may be that parties may contemplate in the contract the amount of
liquidated damages in the event of breach. But, there is no subtle distinction
in India between liquidated and unliquidated damages, for, even where parties to
a contract agree in the contract itself as to the quantum of damages payable by
the party in the event of the breach the question as to the amount of damages is
still a matter for determination by Court, for, in spite of such agreement
whether the amount would be reasonably due and therefore for that reason the
covenant for liquidated damages is enforceable is a question which would call
for examination. That is the reason why even the stipulation for liquidated
damages would not render the defaulting party liable ipso facto by reason of the
default to answer for the sum agreed upon as damages. The position, therefore,
would be that on the breach only a right to sue for damages may accrue. But so
long as the sum due remains undetermined it cannot be said that any amount is
due."

   15. This was approved in a Division Bench ruling in Ponnappan v. D.F.O., 1984
Ker LJ 853 thus :--

     ''As pointed out by this Court in the decision in Chellappan v. Executive
Engineer, 1979 Ker LT 53 there is no distinction in this country between
liquidated damages and unliquidated damages and therefore even when the parties
to a contract agree upon and specify the sum of damages in the event of breach
the Court may be called upon to consider the reasonableness of the quantum. If
the parties stipulate as damages what may amount to penalty the statute relieves
the contracting party from the obligation to pay such penalty. We are only
indicating that the determination of quantum of damages is not avoided even in a
case of specification of liquidated damages."

   16. We are afraid, with due respect to the learned Judges that the principle
has been too widely stated. In fact, in the Supreme Court case referred to
above, in State of Karnataka v. Rameshwara Rice Mills, Thirthahalli, AIR 1987 SC
1359, it was also stated thus : --

     "To illustrate the position if the agreement provides for a liquidated sum
being paid as damages for breach of conditions instead of a sum to be assessed
by the Deputy Commissioner, it cannot be said that the specified damages will
not be money due under the contract and hence the damages cannot be recovered
under the Revenue Recovery Act. What applies to specified damages will likewise
apply to damages which are quantified after assessment."

   Admission of the breach of contract by the defaulting party and assimilation
of a provision for liquidated damages in the event of breach, dispense with a
determination of any dispute by any outside agency and the Government, as the
party claiming compensation can proceed to recover the amount due under the
Revenue Recovery Act without recourse to a Court of law.

   17. It is also necessary to refer to one more decision of a Division Bench
consisting of V. P. Gopalan Nambiyar. C. J. and G. Balagangadharan Nair, J. in
State of Kerala v. Universal M. Agencies. 1980 Ker LT 187 : (AIR 1980 Ker 1581.
In that case, under Clause 16 of the relevant agreement all sums found due to
the lessor could be recovered as arrears of land revenue and Clause 17 provided
thus : --

     "If any dispute or question shall arise between the lessee and the lessor
touching on or relating to any of the matters or things hereinbefore contained
the same will be decided bv the lessor and the decisions of the lessor shall be
final and conclusive and shall be binding on the lessee."

   These provisions were interpreted by this Court as being wide enough to give
the lessor the right to recover all sums found due to the lessor under or by
virtue of the agreement and conferring on the Government "the right of deciding
the amount due to the Government". This Court thus held that the Government had
the power under the terms of the agreement to adjudicate regarding the breach of
the contract and also about the extent of damage suffered by the State
consequent on that breach. We think that this decision can no longer be held as
good law in view of the decision of the Supreme Court in State of Karnataka v.
Rameshwara Rice Mills. Thirthahalli, AIR 1987 SC 1359, A provision enabling one
of the parties to an agreement to be the arbiter to decide whether the contract
has been broken or not is opposed to public policy, equity and justice and that
adjudication regarding the breach of the contract has to be left to an
independent person or body and cannot be made by one of the parties to the
contract, intimately interested in the result of the adjudication.

   18. The last and most important contention urged is that the terms of the
auction, though accepted by the petitioner, are no longer enforceable in the
absence of a written agreement signed by the parties and conforming to the
constitutional requirements under Article 299. It is mainly on this question
that this case has been referred to a Full Bench. We shall extract the order of
reference ; --

     "As these cases involve an important question of law and as we find that
there is apparent conflict between the Division Bench rulings of this court
reported in 1980 Ker LT 850 between the Spl. Dy. Tahsildar v. Kunju Moideen and
1985 Ker LT249 between State of Kerala v. M. E. Aly. we consider it appropriate
to refer these cases to a Full Bench for consideration. The petitioner shall
produce proper paper books for all the three Judges, with copies to the other
side within ten days from this date. The learned. Advocate General has agreed to
produce the relevant papers pertaining to sale notice etc. It is ordered
accordingly."

   Before we attempt to resolve the conflict, if any, between the decisions of
this Court, it is necessary to note that there are three decisions of the
Supreme Court which lay down the law on this aspect and which are sufficient to
settle the controversy in this case. We have been taken through these three
decisions, K. P. Chowdhry v. State of M. P.. AIR 1967 SC 203, A. Damodaran v.
State of Kerala, AIR 1976 SC 1533 and State of Haryana v. Lai Chand. (1984) 3
SCC 634 : (AIR 1984 SC 1326).

   19. Thus. Article 299 of the Constitution applies to all contracts made in
the exercise of the executive power of the Union or a State. The contracts in
such cases have to be executed on behalf of the President or Governor by such
persons and in such manner as he may direct or authorise. A contract not in
compliance with this constitutional requirement is null and void. There can thus
be no implied contract and the contract which is void admits of no ratification
either. The mandate of Article 299, therefore, applies only to contracts made in
exercise of the executive power. It can have no application to contracts which
are statutory in nature: Nor can it have any application for the enforcement of
any statutory liability, for the liability arises not under the contract but
under the statute.

   20. The decision in K. P. Chowdhry v. State of M. P., AIR 1967 SC 203 of a
Bench of five Judges is authority for the proposition that Article 299 does not
countenance implied contracts. There is no implied contract either before the
bidding or after the auction. This was a case of a forest auction. It was held
thus : --

     "The first is that in view of Article 299(1) there can be no implied
contract between the Government and another person, the reason being that if
such implied contracts between the Government and another person were allowed,
they would in effect make Article 299(1) useless, for then a person who had a
contract with Government which was not executed at all in the manner provided in
Article 299(1) could get away by saying that an implied contract may be inferred
on the facts and circumstances of a particular case. This is of course not to
say that if there is a valid contract as envisaged by Article 299(1). there may
not be implications arising out of such a contract. The second consequence which
follows from these decisions is that if the contract between Government and
another person is not in full compliance with Article 299(1) it would be no
contract at all and could not be enforced either by the Government or by the
other person as a contract. In the present case it is not in dispute that there
never was a contract as required by Article 299(1) of the Constitution. Nor can
the fact that the appellant bid at the auction and signed the bid-sheet at the
close thereof or signed the declaration necessary before he could bid at the
auction amount to a contract between him and the Government satisfying all the
conditions of Article 299(1). The position therefore is that there was no
contract between the appellant and the Government before he bid at the auction
nor was there any contract between him and, the Government after the auction was
over as required by Article 299(1) of the Constitution. Further in view of the
mandatory terms of Article 299(1) no implied contract could be spelled out
between the Government and the appellant at the stage of bidding for Article 299
in effect rules out all implied contracts between Government and another person.
The view taken by the High Court that Section 155(b) of the Madhya Pradesh Land
Revenue Code which provides for recovery of money as arrears of land revenue
would therefore ensure (enure?) in favour of the Government and enable it to
recover the deficiency cannot be sustained. That clause provides for recovery of
all moneys falling due to the State Government under any grant, lease or
contract and says that they shall be recoverable in the same manner as arrears
of land revenue. The High Court was of the view that the word "contract" in this
clause includes an implied contract. But if there can be no implied contract
between the Government and another person in view of the mandatory provision of
Article 299(1) of the Constitution there can be no question of recovery of any
money under an implied contract under Clause (b) of Section 155".

   21. The decision in A. Damodaran v. State of Kerala. AIR 1976 SC 1533
illustrates the case of a statutory contract which is outside the pale of the
rigour of Article 299. It was a case arising under the Abkari Act where a
"statutory status" was conferred to a "grantee" of a privilege under the Kerala
Abkari Act, It was held thus : --

     "Section 18A(2) lays down that "no grantee of any privilege under Sub-
section (1) shall exercise the same until he has received a licence in that
behalf from the Commissioner". It will be seen that this provision contemplates
the statutory status of a "grantee" even before he becomes entitled, as of-right
to exercise privileges of a grantee on the receipt of a licence. What is
noticeable is that even before he receives his licence he is described as a
"grantee". The successful bidders, in the case before us. had been permitted by
the excise authorities, in recognition of their rights to receive and in
anticipation of receipt of licences, to exercise the privileges of grantees.
They were thus treated as grantees in anticipation of execution, of contracts
and grants of licenses. Grantees under Section 28 of the Act are those who have
received the privilege and not necessarily only those who have received the
written contracts and licenses. The word "grantee" used there seems to us to
carry this wider connotation with it",

     "The appellants became entitled to get licenses from the Government which
had to perform its duty to execute written agreements and grant licenses as soon
as the appellants fulfilled required conditions by paying up the remainder of
the amounts due. The Government had performed its part of the bargain and even
allowed the appellants to start selling liquor. The appellants also became
liable and bound to perform their corresponding obligations under the conditions
of the auctions imposed in pursuance of statutory provisions. This reciprocity
of obligations, quite apart from its basis in agreement, had thus acquired an
operative force resting on statutory sanction and equity".

   22. The decision in State of Haryana v. Lal Chand, (1984) 3 SCC 634 : (AIR
1984 SC 1326) was again an "Excise case" regarding the enforcement of a
statutory liability. It was held thus : --

     "We are clearly of the opinion that in the case of a statutory contract
like the one under the Excise Act. the requirements of Article 299(1) cannot be
invoked. In A. Damodaran v. State of Kerala. (AIR 1976 SC 1533). the Court
interpreting Section 28 of the Kerala Abkari Act. 1967 which was in pari materia
with Section 60 of the Punjab Excise Act. 1914 held that even if no formal deed
had been executed as required under Article 299(1). still the liability for
payment of the balance of the licence amount due could be enforced by taking
recourse to Section 28 of the Act. The Kerala High Court rejected the contention
of the appellants by holding that the liability to satisfy the dues arising out
of a bid was enforceable under Section 28 quite apart from any 'contractual
liability and this view was upheld by this Court on the ground that the word
'grantee' in Section 28 has a wide connotation to mean a person who had been
granted the privilege by acceptance of his bid. It was further held that the
statutory duties and liabilities arising on acceptance of the bid at a public
auction of a liquor contract may be enforced in accordance with the statutory
provisions and that it was not a condition precedent for the recovery of an
amount due under Section 28 of the Act. that the amount due and recoverable
should be under a formally drawn up and executed contract. This is in
recognition of the principle that the provisions of Article 299(1) of the
Constitution are not attracted to the grant of such a privilege to vend liquor
under the Act".

   23. In the present case, no contractual liability can be enforced as there
was no contract complying with Article 299 of the Constitution. There was no
statutory contract as the provisions of the Kerala Forest Act and the rules made
thereunder do not provide for the creation of any such contract. However, a
statutory liability, distinct from a contractual obligation is fastened on the
parties under Section 79 of the Forest Act which reads thus : --

     79. Recovery of money due to Government : --

     All money, other than fines, payable to the Government under this Act or
any rule made thereunder, or on account of timber or forest produce or of
expenses incurred in the execution of this Act in respect of timber or forest
produce, or under any contract relating to timber or forest produce including
any sum recoverable thereunder for the breach thereof or in consequences of its
cancellation or under the terms of a notice relating to the sale of timber or
forest produce by auction or by invitation of tenders, issued by or under the
authority of a Divisional Forest Officer, and all compensation awarded to the
Government under this Act may, if not paid when due be recovered under the law
for the time being in force, as if it were an arrear of land revenue".

   24. There is corresponding provision in the Revenue Recovery Act in Section
68 providing that all sums declared by any other law for the time being in
force, to be recoverable as arrear of public revenue due on land, may be
recovered under the provisions of the Revenue Recovery Act.

   25. Thus under Section 79, all money payable to the Government under the
terms of a notice relating to the sale, of timber or forest produce by auction
or invitation of tenders issued by or under the authority of a Divisional Forest
Officer, if not paid, when due could be recovered under the law for the time
being in force as if it were an arrear of land revenue. In the present case, the
Government was only claiming an amount under this statutory provision, thus
enforcing a statutory liability. There is no constitutional embargo under
Article 299 to enforce this statutory obligation.

   26. Now to the decisions of this Court. In Bhaskaran Nair v. State of Kerala,
1980 Ker LT 462, a Division Bench of this Court (Balakrishna Eradi and George
Vadakkel, JJ.) held thus:--

     "Section 79 of the Kerala Forest Act, 1961 specifically provides that all
money payable to the Government on account of timber or forest produce inclusive
of any sum recoverable under the terms of a notice relating to sale of timber or
forest produce by auction may if not paid when due, be recovered under the law
for the time being in force, as if it were an arrear of land revenue. What
sought to be recovered from the appellant under Ext. P6 is an amount said to be
recoverable from him under the terms of the notice relating to the sale of
forest produce by auction and hence" it falls directly within the scope of
Section 79. It cannot therefore be said that the respondents have acted without
jurisdiction in initiating proceedings against the appellant under the Revenue
Recovery Act for recovery of the said sum".

   27. This decision has been followed by a Division Bench consisting of Justice
Bhaskaran (as his Lordship then was) and one of us (Sukumaran, J.) in
Kunjukrishnan v. State, AIR 1983 Ker 73). The same view has been expressed in a
later decision of a Division Bench in State of Kerala v. Aly, 1985 Ker LT 249,
consisting of M. P. Menon and Radhakrishna Menon, JJ. Their Lordships construing
the effect of Section 79 of the Forest Act stated thus : --

     "Confining attention to only two of the heads under which money payable to
Government is made recoverable under the Section, the first to be noticed is
liability arising under a contract relating to timber or forest produce. The
second is money payable under the terms of a notice relating to timber or forest
produce by auction, when such notice is issued by a Divisional Forest Officer,
The term 'contract' under the first head can possibly include only formal
contracts executed under Article 299(1), in exercise of the State's executive
power. But the second head is obviously designed to cover something different
from such contracts, for otherwise, there was no need to separately provide for
it. And what is covered by it is a liability arising from sale notice issued by
the D.F.O. The mere issuance of a sale notice may not create liability, but when
money becomes "payable under the terms" of such a notice, that becomes
recoverable. That is, when a person participates in the auction and becomes
answerable for money payable under the terms of the auction notice, something
recoverable under Section 79 comes into being".

   28. In yet another decision of a Division Bench of this Court in State of
Kerala v. Joy, 1985 Ker LT 1030, Justice Balakrishna Menon and one of us
(Sukumaran, J.) observed thus:--

     "A Division Bench of this Court in State of Kerala v. Aly, 1985 Ker LT 249
: 1985 Ker LJ 1 has held that money payable under the terms of a notice for sale
of timber or forest produce by auction issued by a Divisional Forest Officer is
recoverable under Section 79 of the Kerala Forest Act. Even though the mere
issue of a sale notice may not create any liability, but when money becomes
payable under the terms of such a notice, it is held the amount is recoverable
under Section 79. Such occasions arise when a person participates in the auction
and becomes answerable for money payable under the terms of the auction notice.
The liability may not be contractual when tested in the light of Article 299(1)
of the Constitution. But the liability is nevertheless fixed and may be
enforceable by the statutory provision contained in Section 79 of the Kerala
Forest Act. Whether the plaintiffs are entitled to any reliefs in these suits
will depend upon the question whether they are liable for any amounts to the
State enforceable under Section 79 of the Forest Act".

   The other decision that is required to be referred by the reference order, is
the decision in Spl. Dy. Tahsildar v. Kunju Moideen, 1980 Ker LT 850. disposed
of by Balakrishna Eradi, CJ. andBalagangadharan Nair, J. Their Lordships were
considering the question as to whether the loss sustained by the forest
department on account of resale of the right to raise Punam cultivation on
certain lands could be recovered under the Revenue Recovery Act. relying on
Section 79 of the Forest Act. The learned Judges held that it was not an amount
due on account of or in respect of timber or forest produce under any contract
relating to timber or forest produce and therefore Section 79 could not be
invoked. On the facts of the case, therefore, this case is distinguishable in
that it was a case to which Section 79 of the Forest Act did not apply and the
question as to whether Section 79 created a statutory liability which could be
enforced under the Revenue Recovery Act did not arise. There is thus no conflict
between the decision in Special Deputy Tahsildar v. Kunju Moideen. 1980 Ker LT
850 and State of Kerala v. M. E. Aly. 1985 Ker LT 249.

   29. The decision in State of Kerala v. Kerala Flour Mills, 1980 Ker LT 966 by
Gopalan Nambiyar C. J. and G. Batagangadharan Nair, J. is also not helpful to
the petitioner as revenue recovery proceedings were taken in respect of a
liability arising under a void contract not conforming to Article 299 and there
was no enforcement of any statutory liability or statutory contract.

   30. We are, therefore, of the view that in this case, the Government was
competent and perfectly justified in taking steps under the Revenue Recovery
Act, to recover "the amount due under the terms of a notice relating to the sale
of timber by auction", in enforcement of a statutory liability created under
Section 79 of the Forest Act. No writ of prohibition or mandamus can issue
prohibiting or forbearing the respondents from taking proceedings under the
Revenue Recovery Act for recovery of the loss sustained by the Government
consequent on the default committed by the petitioner. The demand notice is also
not liable to be quashed as it was issued by a competent authority and with
jurisdiction. The parties have been able to retain with them the amount payable
to the Government all these seven years. They cannot expect anything more. There
are no merits in both the Original Petitions and they are dismissed; but, in the
circumstances of the case, no costs.