P.C. Anand vs State of Himachal Pradesh

Kuldip Singh, J.—The Plaintiff has filed the appeal against judgment, decree dated 23.8.1999 passed by Hon''ble Single Judge in Civil Suit No. 16 of 1986 dismissing the suit.

The facts, in brief, are that the Appellant had filed a suit for rendition of accounts against Respondent. On 17.8.1987 Hon''ble Single Judge directed the Appellant to amend the plaint suitably praying for recovery of specific amount. The Appellant amended the plaint and prayed a decree of Rs. 23, 67,539.92 with future interest from 16.9.1984 till payment.

The brief facts are that a contract for working of lot No. 17 of 1980-82 for Rs. 33,50,000/- and lot No. 21 of 1980-82 for Rs. 22,50,000/- of Bharmour Forest Division earlier known as upper Ravi Division was awarded to Appellant and the agreements of both the lots were executed on 14.2.1980 between the parties. The Appellant could not complete the work as per the time fixed in the agreements, he could not pay the royalty etc. in time of both the lots, time for payment was extended but Appellant could not pay the amount even in the extended period, he requested for further extension of time till 28.2.1984 which was refused by Respondent.

The Appellant on 18.5.1984 made a representation to the Forest Minister, Himachal Pradesh narrating therein that timber to the extent of 63,270.11 cft. of two lots was lying at the road head in possession of the Forest Department. He further submitted that due to the circumstances prevailing in Northern India he could not sell the timber, he requested for taking necessary steps by the Respondent for recovery of amount of royalty. The Appellant requested for extension of time till 31.3.1985 for clearing the dues of royalty.

The Appellant has also raised the grievance that on 4.6.1985 a false case under Sections 420, 120B IPC and Section 5(2) of the Prevention of Corruption Act, Sections 41, 42 of the Indian Forest Act was registered vide FIR No. 7 of 1985. The police during investigation took into possession 63, 270.11 cft. timber belonging to Appellant of the two lots but the investigating agency had wrongly shown the volume of timber which was taken into possession as 53,801.38 cft. The timber taken into possession by the police was later on put to auction vide order dated 28.9.1985 of Chief Judicial Magistrate, Chamba. The Appellant in amended plaint has put up a claim for recovery of Rs. 23,67,539.92 along with interest.

The suit was contested by Respondent by filing written statement. It was admitted that Appellant had purchased lot No. 17 of 1980-82 and lot No. 21 of 1980-82 of Bharmaur Forest Division. The Appellant had to clear royalty and other dues before 31.3.1982 as per the agreements but he failed to clear the dues within stipulated period, extension was granted to Appellant for clearing the dues upto 15.3.1983, but Appellant could not clear the dues even on 31.3.1983. The Appellant prayed further extension of payment upto 28.2.1984 which was rejected by the Government on 21.7.1983. The Appellant lateron vide application dated 18.5.1984 requested for extension of time for clearing payment upto 31.3.1985.

The Secretary (Forest) to the Government of Himachal Pradesh referred the case to Inspector General of Police (Enforcement) on 21.3.1985 for taking immediate action to seize the timber and in getting the whole affairs enquired. Thereafter, FIR No. 7/1985 dated 6.4.1985 was registered at Police Station, Enforcement North Zone, Dharamshala and Enforcement Department seized the timber of the lots. The learned Chief Judicial Magistrate, Chamba on 25.9.1985 ordered disposal of the timber of both the lots. It was denied that Forest Department took into possession 63,270.11 cft. timber.

The auction of timber of both the lots was done by Forest Corporation as per order of learned Chief Judicial Magistrate, Chamba. The auction fetched only Rs. 11,81,123.16 including price of Farras. It has been stated that an amount of Rs. 53,16,982.38 was recoverable from the Appellant after taking into account the amount of timber auctioned through Himachal Pradesh State Forest Corporation (for short Forest Corporation) and adjustment of securities. The notice issued by the Appellant u/s 80 CPC was not denied, rather it was pleaded that reply to notice was not necessary in view of clear position of the case. The Respondent denied the claim of the Appellant and prayed for dismissal of the suit.

The Appellant filed replication and reiterated his stand while denying the case set up by the Respondent. On the pleadings of the parties, the following issues were framed:

Whether the Defendant took 63,270.11 cft. of timber belonging to the Plaintiff in possession and auctioned the same?

What was the market value of 63,270.11 cft. of timber or such timber which was seized?

Whether the timber in question was auctioned against the instructions and consent of the Plaintiff? If so its effect?

Whether the Plaintiff is entitled to recover Rs. 23,67,539.92 or any other amount from the Defendant?

Relief.

The Hon''ble Single Judge under issue No. 1 has held that 58,823.11 cft. timber belonging to Appellant was taken into possession and only 50,537.389 cft. timber was sold in public auction. The Hon''ble Single Judge under issue No. 2 has held that Rs. 53,85,290/-appears to be reasonably the market value of 63,270.11 cft. The issue No. 3 was answered in negative, under issue No. 4, Hon''ble Judge has held that liability of Appellant for payment was much more the amount he was entitled to receive, the amount payable to him stand rightly adjusted by Respondent towards amounts due from him and answered issue No. 4 against the Appellant and dismissed the suit.

We have heard the learned Counsel for the parties and we have also gone through the record. Mr. Shrawan Dogra, Advocate, learned Counsel for the Appellant has submitted that Hon''ble Single Judge has not properly appreciated the material on record. The Respondent has denied the claim of the Appellant but has not claimed any adjustment, set off or counter claim. The Hon''ble Single Judge under issue No. 4 has recorded a finding that the entitlement of Appellant comes to Rs. 59,45,290/- and has erred in returning the finding that liability of Appellant comes to Rs. 78,67,650/- in addition to sales tax. The finding that the amount due from Appellant is Rs. 78,67,650/- is not correct and it does not emerge from the evidence on record. The learned Additional Advocate General has supported the impugned judgment and decree but has submitted that the Respondent by way of cross-objections is entitled to recover Rs. 53,34,000/- from the Appellant on account of balance outstanding recoverable amount from Appellant and has prayed for decree of Rs. 53,34,000/- against the Appellant. In rejoinder, the learned Counsel for the Appellant has submitted that the cross-objections filed by the Respondent are not maintainable inasmuch as the Respondent has not pleaded any set off, counter claim, therefore, Respondent is not entitled to any relief in the appeal filed by the Appellant.

PW-1 Jabbar Singh, Section Officer, office of the Divisional Manager, Himachal Pradesh State Forest Corporation has proved letter Ex.P-1 dated 25.10.1985 of Director North, H.P. State Forest Corporation addressed to the Managing Director, H.P. State Forest Corporation regarding the auction of seized timber. He has also proved export permit Ex.P-2 dated 13.12.1985 of 53,801.32 cft. timber as per timber list Ex.P-3. He has stated that timber was sold through public auction held on various dates from 10.2.1986 to 28.1.1987. PW-2 R.P. Jaiswan, Forest Utilisation Officer has proved price bulletin Ex. PW-2/A for the quarter ending on 31st March, 1984 issued by the Forest Department and rate list Ex.PW-2/B as on 1.2.1984 of Deodar, Kail and Fur for supply to DGS and D. PW-5 P.C. Anand has stated that work was completed within the stipulated period. Part of the timber was exported out of the State before 31.3.1982. The remaining was lying stacked at Kurswin and Bagga. Farras were lying at Machhetar (Chanauta). He was unable to pay royalty by due date, he asked for extension. The timber to the tune of 63.270 cft. in respect of both the lots was lying stacked at the above referred to two places. In the meanwhile, criminal case was registered against him and the timber lying at the above two places was seized and same was put to auction under the orders of the Court. The timber which was lying stacked at the above mentioned two places was worth Rs. 53,85,000/-. He was to pay royalty to the tune of Rs. 53,34,000/-After adjusting the amount of royalty, he was entitled to recover a sum of Rs. 23,67,000/-. As per the terms of the agreement, the entire amount of royalty and sales tax was to be paid by him. He has denied that after adjustment of the amount, a sum of Rs. 53,16,982.38 in the year 1987 was due from him to the State.

DW-2 Atma Ram, Asstt. Conservator of Forests has stated that the work of both lots was completed during his posting in the said forest range. It is mandatory for the Department to prepare a statement showing the stock in hand, the quantity in respect of export permit is to be issued and balance stock after deducting the quantity in respect of which export permit is issued. He had prepared the statement in respect of both the lots showing detail number of scants with volume launched, total number of scants with volume collected at the boom as well as export permit issued from time to time in respect of Plaintiff which are Ex.DW-2/A and Ex.DW-2/B. DW-3 R.A. Singh remained posted as Divisional Forest Officer in the Upper Ravi Forest Division from September 1978 to September,1982. He has proved agreements Ex.DW-3/A and Ex.DW-3/B of the two lots. He has stated that during his posting there was no complaint against the Appellant for having removed any timber in an unauthorized manner from the boom point. The supervisory staff of the Forest Department remained at the site day and night to ensure that the timber stacked remained intact and there is no unauthorized removal. DW-4 C.D. Katoch has stated that timber after having been extracted and stacked at the boom remains in the custody of the forest lessee. DW-5 Tej Singh Jasrotia was Range Officer in Upper Chamba Range from May 1975 to March 1984. He has stated that it was not the duty of ghall officials to guard the timber belonging to the forest lessees. The timber used to remain in the custody and control of the forest lessees. DW-6 Bhawani Singh (Retd. Inspector) has stated that during investigation of the case he had seized timber at Rakh, he has proved list Ex.DW-6/A of the seized timber. The timber was seized on 22.7.1985. DW-7 Bal Krishan and DW-8 Sham Lal Datta are also the witnesses with respect to seizure of timber vide list Ex.DW-6/A.

Ex.DW-3/A is the agreement of lot No. 21/80-82, Ex.DW3/B is the agreement of lot No. 17/80-82. It is not the case of the Respondent in the written statement that agreements Ex.DW-3/A and Ex.DW-3/B were cancelled and the security amounts of the agreements were forfeited. The perusal of agreement Ex.DW-3/A indicates that lot No. 21/80-82 was for consideration of Rs. 22,50,000/-and deposit of Rs. 5,62,500/- as security for due performance, the right was given to Appellant to convert and remove timber from the trees marked for felling of lot No. 21/80-82. The perusal of agreement Ex.DW-3/B indicates that lot No. 17/80-82 was for consideration of Rs. 33,50,000/- and deposit of Rs. 5,02,500/- as security for due performance, the right was given to Appellant to convert and remove timber from the trees marked for felling of lot No. 17/80-82. The terms and conditions in both the agreements are identical. The work was to be completed upto 31.3.1982 in both the agreements. The payment schedule was provided in Clause 18 of the agreements. On default of payment interest as per Clause 19 was payable. The cancellation of the lease is provided in Clause 25, Clause 14 provides take over of the work by the Forest Officer, Clause 14(b) authorizes the State a right of resale of the lot and to recover the loss if any occasioned by the resale, which shall be recovered as damages by due process of law. The Clause 29 provides that all levies/taxes shall be paid by the contractor.

Ex.DW-4/H dated 30.6.1983 is the letter of Chief Conservator of Forests, addressed to the Secretary (Forests) indicating that Rs. 40,00,000/- on account of royalty and other dues were realizable from Appellant against the two lots. This letter further indicates that 63,271.11 cft. timber valuing Rs. 40,00,000/- of the two lots was in stock. It has come on record that FIR No. 7 of 1985 dated 6.4.1985 was registered at Police Station, Enforcement North Zone, Dharamshala and during investigation timber was seized by DW-6 Bhawani Singh on 22.7.1985. The dispute is with respect to actual timber seized. According to Appellant entire timber 63,270.11 cft. lying stacked at road side at two places was seized, but as per Ex.DW-6/A (Ex.P-3) 53,801.32 cft. timber was seized. The seized timber was ultimately sold by Forest Corporation and as per PW-1 Jabbar Singh timber was sold in public auctions held on various dates from 10.2.1986 to 28.1.1987.

The Appellant in the suit has laid a claim of Rs. 23,67,539.92 alongwith interest against Respondent. On the contrary, the Respondent has taken the stand that after adjusting the payments made by the Appellant, the Respondent is yet to recover Rs. 53,16,982.38 from the Appellant. Ex.DW-2/D indicates that after issuing letter dated 30.6.1983 Ex.DW-4/H no permit for export out of lot No. 17/80-82 and lot No. 21/80-82 was issued except permit No. 2947 dated 21.1.1984 for exporting 4448 cft. timber.

The stand of the Appellant is that timber stacked at the two places on road side was under the control of Respondent. In other words, the Appellant intends to convey that it is for the Respondent to account for the timber. The Appellant has relied on Ex.DW-4/H letter dated 30.6.1983 wherein it has been clearly mentioned that 63,271.11 cft. timber is in stocks. It has been submitted that after excluding timber of export permit No. 2947 dated 21.1.1984 of 4448 cft. mentioned in Ex.DW-2/D, 58,823.11 (63,271.11 - 4448) remains in stock. It has also been submitted that Respondent has taken the wrong stand that 53,801.32 cft. was seized by police during investigation. There is no explanation of the deficit of about 5018.79 cft. timber.

The contention raised by the learned Counsel for the Appellant in first blush appears to be well founded but looking deep into the matter it lacks legal force. No doubt, as per letter dated 30.6.1983 Ex.DW-4/H, the volume of timber is 63,271.11 cft. in stocks. After letter dated 30.6.1983 on 21.1.1984 vide Ex.DW-2/D, a permit for exporting 4448 cft. was issued to the Appellant. Therefore, even as per Appellant after adjusting the volume of permit No. 2947, the balance timber remains 58,823.11 cft. as on 21.1.1984. The timber was seized after about one and half years on 22.7.1985. It is not the case of the Appellant that Respondent cancelled the agreements and had taken over the timber under the agreements which was lying at the two places on road side. It has not been pointed out from the agreements that Respondent was bound to look after, protect timber of Appellant and ultimately account for the timber. The supervision of the Respondent over the timber cannot be extended to the extent that Respondent was to account for the timber which was lying at two places on road side. The supervision was only to check illicit removal of timber either mixing with the legal timber or unauthorisedly exporting legal timber. In these circumstances, it is not for the Respondent to explain under what circumstances only 53,801.32 cft. timber was seized during investigation. The fact remains that only 53,801.32 cft. timber was seized during investigation.

The Respondent has taken the stand that seized timber was sold in public auction in view of order dated 25.9.1985 of the learned Chief Judicial Magistrate, Chamba and Appellant had not objected the sale of timber by public auction. It has been submitted that sale amount received from public auction has been adjusted against the dues of the Appellant but still huge amount was payable by Appellant to the Respondent. I.S. Kang, Principal Chief Conservator of Forests, has stated in his statement under Order 10 Rule 1 CPC that total timber sold measured 50,537.389 cft. It has not been explained by Respondent what happened to the balance timber seized during investigation. At the time of hearing of the appeal nobody has pointed out what happened to the case which was registered vide FIR No. 7 of 1985 dated 6.4.1985. The Respondent cannot take benefit of consent given by Appellant for selling the seized timber by way of public auction. The consent of the Appellant does not mean that the timber was to be sold in routine in public auction without taking into consideration the interest of the Appellant. The consent in the facts and circumstances of the case means that timber would be sold on competitive rates and at least on rates which were prevalent in the market. The Respondent has not explained under what circumstances the timber has fetched so low price in public auction. It is common knowledge that court auctions are some times nothing but distress sales where invariably prices are not fetched as per market rate. The Appellant has placed on record timber price prevalent in February/March 1984 vide Ex.PW-2/A and Ex.PW-2/B. The amount fetched in public auction of timber was not near to the price mentioned in Ex.PW-2/A and Ex.PW-2/B. Therefore, Respondent cannot take benefit of sale of timber by public auction.

The question still remains regarding the claim of Appellant and the stand of Respondent that the Appellant is liable to pay more amount to the Respondent after adjusting whatever amounts he has paid. The Appellant has appeared as PW-5 and in his statement he has stated that timber which was lying stacked at two places was worth Rs. 53,85,000/-. In his statement on oath, he has nowhere stated on what basis he has worked out the value of timber which was lying stacked at two places was worth Rs. 53,85,000/-. He has not stated that this value is on the basis of rates mentioned in Ex.PW-2/A or Ex.PW-2/B. In these circumstances, it is not possible to hold that value of timber which was lying stacked at two places was Rs. 53,85,000/-. On behalf of the Respondent, it has been submitted that Appellant himself has stated in his statement that he was to pay royalty to the tune of Rs. 53,34,000/-. In view of this admission alone the Appellant is to be non-suited inasmuch as according to Respondent after adjusting the payments made by Appellant, he is to pay Rs. 53,16,982.38 more to the Respondent. It has been submitted that in these circumstances, the Appellant is not entitled to any amount.

There is no denial of the fact that Appellant in his statement has stated that he was to pay royalty to the tune of Rs. 53,34,000/-. This statement is not to be considered in isolation. The Respondent in para 11 of the written statement has pleaded that lessee had made some payments against the dues of both the lots. The account position of both the above lots has been worked out upto 31.3.1987, a detailed account position is shown in Annexure D-XVIII. The account statement filed and relied by Respondent is an admission of Respondent and can be used against Respondent but not against Appellant. The statement of account relied by Respondent is now part of written statement which indicates that royalty amount of lot No. 17/80-82 was Rs. 33,50,000/- and royalty amount of lot No. 21/80-82 was Rs. 22,50,000/-. The total amount of royalty of two lots comes to Rs. 56,00,000/-. The account statement further indicates that out of Rs. 56,00,000/- amount of royalty an amount of Rs. 28,14,834/-balance royalty amount of two lots was recoverable. In other words, the remaining royalty amount of two lots was already paid by the Appellant. The Respondent did not clarify the statement of PW-5 in cross-examination whether the amount of Rs. 53,34,000/- stated by him was the original royalty amount or the balance royalty amount. In view of statement of account filed by the Respondent alongwith the written statement, Rs. 53,34,000/- cannot be the balance royalty amount payable by Appellant. At the most, the Appellant by referring Rs. 53,34,000/- loosely intended to say that originally he was liable to pay royalty amount of Rs. 53,34,000/- to Respondent. Therefore, the Respondent cannot take benefit of statement of Appellant that an amount of Rs. 53,34,000/- royalty amount was payable by him.

On 22.7.1985, 53,801.32 cft. timber of Appellant was seized. The question is regarding the market value of this timber. The Appellant in his statement on oath has not stated on what basis he has worked out the value of timber. Therefore, timber price bulletin Ex.PW-2/A and rate list on 1.2.1984 Ex.PW-2/B cannot be relied to assess the market value of the seized timber. The Respondent in letter dated 30.6.1983 Ex.DW-4/H has given the estimated value Rs. 40,00,000/- of 63,271.11 cft. Therefore, as per Ex.DW-4/H, per cft. rate comes to Rs. 63.22. The timber was sold in public auction on various dates from 10.2.1986 to 28.1.1987. The Respondent has not proved that quality of timber had deteriorated when it was seized. In these circumstances, it is reasonable to infer that price of the timber at the time of seizure cannot be less than the price shown in Ex.DW-4/H in view of continuous price hike in general of which judicial notice can be taken. Thus, the market value of 53,801.32 cft. at the rate of Rs. 63.22 per cft. comes to Rs. 34,01,319.45.

The Respondent in the written statement has pleaded that after adjusting various amounts paid by the Appellant he is still liable to pay an amount of Rs. 53,16,982.38 to the Respondent. But Respondent has not proved that the Appellant is liable to pay this amount to the Respondent. In the statement of accounts filed by the Respondent with the written statement and relied various amounts mentioned therein can be divided into two main parts: (i) royalty amount and (ii) other amounts. There is no dispute with respect to royalty amount, therefore, royalty amount mentioned in the statement of account and the payments made by Appellant of the royalty amount and balance amount due can be safely relied. But the other amounts mentioned in the statement of accounts have not been proved, therefore, these amounts cannot be relied either in favour of the Appellant or in favour of the Respondent. It is thus clear from the statement of account filed with written statement and relied by Respondent that Appellant has paid royalty amount of Rs. 27,85,266/- of the two lots and balance recoverable amount against the royalty comes to Rs. 28,14,734/-. The market value of 53,801.32 cft. comes to Rs. 34,01,319.45. In other words, the Appellant has proved that he is entitled to recover Rs. 5,86,585.45 (Rs.34,01,319.45 + Rs. 27,85,266 - Rs. 56,00,000/-). The Respondent in the written statement has admitted that security of lot No. 17/80-82 was Rs. 4,26,648.16 and security of lot No. 21/80-82 was Rs. 2,68,492.95 totaling Rs. 6,95,141.11. The Appellant is entitled to refund of security amount in absence of the stand of the Respondent that agreements were cancelled and security amounts were forfeited under the agreements. Thus, Appellant is entitled to recover Rs. 5,86,585.45 + Rs. 6,95,141.11 total Rs. 12,81,726.56. The Appellant is also entitled to 6% interest on Rs. 12,81,726.56 from the date of filing of the suit till realization.

The Respondent has not raised any set off, counter claim nor the adjustments of various claims raised in the written statement have been proved by the Respondent by leading legal evidence, therefore, Respondent is not entitled to adjustment of amount from the Appellant as claimed by Respondent. There was no set off, counter claim in the suit, therefore, Respondent by way of counter claim is not entitled to recover Rs. 53,34,000/- by way of Cross-Objections.

No other point was urged.

The result of the above discussion, the impugned judgment, decree dated 23.8.1999 passed by Hon''ble Single Judge in Civil Suit No. 16 of 1986 are set-aside, the appeal is partly allowed. A decree of Rs. 12,81,726.56 is passed in favour of the Appellant and against the Respondent with 6% per annum interest on the decretal amount from the date of institution of the suit till realization along with proportionate costs. The cross-objections are dismissed.