Ram Chandar vs Jagan Nath and Another

Ramabhadran, J.C.

This second appeal, by a defendant arises out of a suit, for the recovery of a sum of Rs. 280,0/-, as compensation for breach of contract.

The appeal arises under the following circumstances. Ram Chandar, appellant, purchased a lease of certain bamboo forest, from the Forest Department, Sirmur District, for Rs. 2700/-. By means of an agreement dated 15-9-49 (Ex. P2), Ramchandar transferred his rights under the lease to Jagan Nath respondent No. 1. In pursuance of this agreement, Jagan Nath paid a sum of Rs. 250/- as earnest money of Ram Chandar, on the day of agreement (15-9-49), and a further sum of Rs. 1000/-on 13-10-49. Jagan Nath, allegedly, spent a sum of Rs. 1250/- over cutting bamboos in the forest. Ram Chandar however failed to obtain a export permit for the bamboos, from the Forest Department.

He also failed to execute the necessary agreement, with the Forest Department, with the result, that the lease in his favour was cancelled by the Forest Department and Jagan Nath was restrained, from removing the cut bamboos. Jagan Nath, therefore, claimed a sum of Rs. 2800/- from Ram Chandar consisting of the following items:

(a) Rs. 250/- paid by him as earnest money on 19-9-49.

(b) Rs. 1000/- paid on 13-10-49.

(c) Rs. 1250/- spent on cutting bamboos and

(d) Rs. 300/- by way of interest;

Total Rs. 2800/-.

The suit was resisted by Ram Chandar, on various grounds; inter alia Ram Chandar contended, that Jagan Nath had failed to pay the instalments to the Forest Department, as they fell due, and consequently, no export permit was granted and the lease itself was cancelled. Bam Chandar further maintained, that he was entitled, to recover a sum of Rs. 855/-from the plaintiff as damages, being the amount recovered from him by the Forest Department, as loss sustained by the Government following the re-sale of the Bamboo Forest.

The trial Court, (Senior Sub Judge, Nahan) dismissed the suit, holding, that there was no default on the part of Ram Chandar. Jagan Nath, then went up in appeal. The learned District Judge of Sirmur, came to the conclusion, that Jagan Nath had defaulted, in the payment of the 2nd instalment, due to the Forest Department, and this partly resulted in the cancellation of the lease by the Forest Department. At the same time, the learned Judge held, that Ram Chandar also contributed to the cancellation of the lease as he failed to sign the agreement, in favour of the Government. Accordingly, the lower Appellate Court, held that both parties were at fault, and both of them should equally share the loss resulting from the cancellation of the lease. In the result, it granted Jagan Nath, a decree for Rs. 975/-with proportionate costs.

That decision has been challenged by both the parties. Ram Chandar, has come up in 2nd appeal, while cross-objections have been preferred by Jagan Nath. Ram Chandar''s prayer is, that the suit should be dismissed in toto, while Jagan Nath prays, that the suit should be decreed in toto.

Arguments of the learned counsel for the parties were heard at length, at Nahan, on the 4th and 5th instant. For reasons to be stated shortly, I am of the opinion, that the plaintiff must be non-suited.

I shall refer to the arguments advanced by learned counsel seriatim.

In the first place, Mr. L.D. Verma for Ram Chandar, urged vehemently, that the agreement dated 15-9-49 (Ex. F2) between the parties was opposed to the Rules laid down by the Forest Department, which did not permit the transfer of the lessee, rights. It was, therefore, contended, that the agreement was void and could not be enforced in a Court of law. To clarify the point, at issue, the statement of Mr. Gian Chand, Superintendent, Office of the Chief Conservator of Sirmur Circle, Nahan, was recorded under Order 41 Rule 27 read with Order 42 Rule 1.

His, statement, makes it clear, that before the Bamboo Forests were auctioned, the conditions of sale (copy Ex. C. 1) were announced to intending bidders. Copy of the agreement deed to be signed by the successful bidder (Ex. C. 2) was also made available, for inspection. Ram Chandar''s signature was obtained on the back of the conditions of sale. Similarly, Jagan Nath was also aware of the conditions of sale, because, he had executed agreements, in favour of Government, in other cases, including bamboos.

It is, therefore, proved satisfactorily, that both Ram Chandar and Jagan Nath, knew quite well, that the lease could not be transferred, without the sanction of the competent authority. Inspite of it, Ram Chandar did transfer his lessee rights ,to Jagan Nath. What would be the result of that unauthorized transfer? According to learned counsel for Ram Chandar, the agreement dated 15-9-49, (Ex. P. 2) would be deemed void, because, it was forbidden by law, within the meaning of Section 23 of the Contract Act. Mr. Verma relied upon the following authorities:--

(a) Narsingh v. Narayan AIR 1925 Nag. 119 There, Baker J. C. held, that;

"No suit can be brought for the recovery of money paid under an agreement which has as its, object the evasion of the statutory prohibition against the transfer of occupancy land. Such contract is void in toto."

(b) Velu Padayachi Vs. Sivasooriam Pillai, There, with reference to a case, under the Madras Abkari Act, a Full Bench of that High Court observed that:

" A partnership entered into for the purpose of conducting a business in arrack or toddy on" a licence granted or to be granted to only one of the partners is void ab initio whether the contract was entered into before the licence was granted or afterwards, in that it either involves a transfer Of the licence, which is prohibited under Rule 27 and punishable u/s 56, or a breach of Section 15 of the Abkari Act punishable u/s 55, because the un-licensed partner, by himself or through his agent, the other partner, sells without a licence."

(c) Hussain Kasam Dada v. Vijayanagram Commercial Association. (Regd) AIR 1954 Mad 528 There a Division Bench of that High Court, held, that certain contracts were void, because, they offended, the Forward Con tract Prohibition Order, 1943.

As Mr. Paras Ram, for Jagan Nath respondent, rightly pointed out, the above decisions relate to cases where transfer was prohibited, by some law. In the present case, it is true, that Under the conditions of the auction, the lessee rights could not be transferred, without a due sanction but there is nothing in the Forest Act to prohibit such transfer. Mr. Paras Ram cited inter alia:

(i) Nazaralli Sayad Imam Vs. Babamiya Dureyatimsha, where a Division Bench of that High Court indicated that:

"As there is nothing in the Forest Act which makes it obligatory upon a licensee from a Forest Officer to observe the conditions of his license, an agreement to share profits with the licensee is not void."

(ii) Bhagwant Genuji Girme Vs. Gangabisan Ramgopal, a Division Bench of that High Court, pointed out that :

"Where the terms of a lease of tolls from Government prohibit an assignment except with the previous permission of the Collector and empower the Collector to revoke the lease or impose penalty against breach of the terms of the lease, an agreement to assign the lease without aforesaid permission would offend against the covenant in the lease and not against the provisions of the law as contemplated by Section 23 :"

The law will always encourage freedom to contract. As ordinarily understood, ''public policy'' is that principle under which freedom of contract or private dealings is restricted by law for the good of the community. Undoubtedly it is a variable thing and must fluctuate with the circumstances of the time. But it is still ah untrustworthy ground for legal decision and must be resorted to within the prescribed limits. The Court cannot invent a new head of public policy :"

(iii) In Mukala Venkatanandam and Others Vs. Immidisetty Dhanaraju and Others, There a Division Bench of that High Court was of the opinion that:

"Where under the Forest Act a person obtains from the Government contract in his own name and forms a partnership to carry out the terms of the contract, the partnership is not illegal u/s 23."

Under these circumstances, I am unable to hold, that the agreement dated 15-9-49, Ex. P2, was forbidden by law or opposed to public policy and hence void.

This, however, does not relieve the plaintiff respondent of his duty of establishing, that Ram Chandar defendant had committed the default of the agreement between the parties. The following passages in the agreement Ex. P 2 are significant :--

"Sharait Thekajat jo Mehkma junglat Ki taraf se hongi men uska har tariq se paband rahunga--.

Iqsat Mehkma Junglat ainda tarikh mukarrah par bazaria Lala Sahiban ada karta rahunga aur agar meri waja se jungle men koi nuqsan waqai hoga aur uska bar Lala Sahiban Mausuf par Mehkma Junglat ki taraf se parega uska men khud zimawar hunga."

Both the Courts below, have found, that Jagan Nath plaintiff failed to pay the second instalment in time. They have disbelieved Jagan Nath''s contention, that Ram Chandar did not call upon him to pay the second instalment. I agree with the concurrent finding of the Courts below, that it was Jagan Nath, who failed to pay the second instalment in time.

Under the terms of the agreement Ex. P. 2, it was obligatory, on the part of Jagan Nath, to pay the instalments in time through Ram Chandar. The failure, to pay the second instalment led to the cancellation of the lease. The mere fact, that Ram Chandar failed to sign the agreement, makes no material difference, because unless, the instalments were paid, as they fell due, the mere execution of the agreement (if the Forest Department at all permitted the agreement to be signed otherwise) could not save the lease.

Mr L.D. Verma, argued that, it was incumbent upon Ram Chandar, to keep the lease alive, by paying the instalments himself as they fell due even if Jagan Nath defaulted in paying them. I do not, however, agree. There is no such stipulation, in the agreement Ex. P. 2. In case, Jagan Nath had paid the instalments in good time and Ram Chandar failed to perform his part of the contract, i.e., in signing the agreement, then it would have been open to Jagan Nath to allege breach of contract and claim com- pensation from Ram Chandar. It was, Jagan Nath, who failed to perform his part of the contract i.e., he failed to pay the 2nd instalment in time, consequently, it is not open to him to turn round and accuse Ram Chandar of breach of contract.

Unless, the instalments were paid by Jagan Nath, the agreement could not be signed by Ram Chandar. The provisions of Section 54 of the Contract Act are attracted, This aspect of the case appears to have been overlooked by the learned District Judge. His view, that both the parties were at fault and, therefore, they should equally share the losses, has not been supported by any Section of the law or reported authorities. I, further, notice, that in the decree sheet, signed by the District Judge, the sum of Rs. 330/- realized from Jagan Nath, as duty and penalty on Ex P.2, has been taxed towards plaintiff''s costs, although, there is no specific order of the Judge regarding it.

In my opinion, for reasons stated above, the plaintiff must be non-suited.

There remains the question of costs. Although, the suit fails, the fact remains, that the plaintiff has lost heavily in this transaction. He has paid Rs. 1250/- in cash to Ram Chandar and must have spent a considerable sum, over the cutting of bamboos. It seems to me, that subsequent, to the execution of the agreement; (Ex. P. 2,) differences arose between the parties, and the plaintiff lost interest in the business. Under these circumstances, I would leave the parties to bear their respective costs here and in the Courts below.

ORDER

I allow this second appeal (R.S.A. 13/54), set aside the decision of the learned District Judge, Sirmur, dated 31-12-53, in Civil Appeal No. 8 S./13 of 1953 and dismiss the suit. Parties will bear their respective costs here and in the Courts below. The cross-objections, filed by Jagan Nath, in this Court fail accordingly and are dismissed.