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PETITIONER: K. SREEDHARA REDDY

       Vs.

RESPONDENT: THE CONSERVATOR OF FORESTS AND ORS

DATE OF JUDGMENT12/09/1975

BENCH: KRISHNAIYER, V.R. BENCH: KRISHNAIYER, V.R. GUPTA, A.C. FAZALALI, SYED MURTAZA

CITATION:  1976 AIR  782            1976 SCR  (1) 770  1976 SCC  (1) 106

ACT:      Hyderabad Forest  Act-Forest Contract rules-Rule 29-30- 31-whether termination  of contract to precede imposition of penalty-Natural Justice.

HEADNOTE:      The appellant  &  Forest  Contractor  felled  trees  in excess of  the permitted  number authorised  by the contract entered into by him with the State of Andhra Pradesh Certain penalty was  imposed on  the appellant  under rule  29 of he Forest Contract  Rules framed  in  exercise  of  the  powers conferred by  Hyderabad Forest  Act The Forest Officer found that the  appellant felled  more trees and therefore, gave a show cause  notice to the appellant The appellant prayed for re-enumeration of  the trees  given from  the forest. He was given an  opportunity which  was not availed by him to check the stumps  in the  coupe as  desired by him Consequently, a penalty was  levied. Thereafter, the contract was terminated After the  termination  of  the  contract  the  process  for recovery of the penalty was started Rule 29 reads as under:      (1) Penalty  on termination of a contract for breach of      conditions:-           Every forest  contract shall  be in writing in the      form annexed  hereto  and  shall  contain  a  provision      whereby the  forest contractor binds him self to do all      the duties and acts required to be done by or under the      contract, and  convenants that  he and his servants and      agents shall  abstain from all the acts forbidden by or      under such contract      (2) The  sums to  be mentioned  in a forest contract as      payable in  case of  a breach  of any  such stipulation      shall not exceed one-quarter of the total consideration      to be  paid by the contractor, and shall be recoverable      in accordance  with the  provisions  of  the  Hyderabad      Forest Act 1355 and of this rule           Provided that  where such  consideration is not an      ascertained amount  the forest  officer  executing  the      contract shall  make an  estimate of  the total  amount      that would  be  payable  if  the  contract  were  fully      complied with,  and such estimate shall be deemed to be      for  the   purpose   of   this   sub-rule   the   total

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    consideration to be paid by the contractor.           (3) This sum shall be realized from the contractor      if the  contract has been duly terminated in accordance      with the provisions of rule 30, and then only under the      written order  or  the  forest  officer  executing  the      contract"      The appellant  filed a  Writ Petition in the High Court challenging the  validity of  the imposition of the penalty. The learned  Single Judge  allowed the Writ Petition but the Division  Bench allowed‘ the appeal filed by the State      In an  appeal by  certificate, it  was contended by the appellant before  this Court  that the  termination  of  the contract for  breach of  conditions  mentioned  in  rule  29 should  precede  the  impost  of  penalty.  It  was  further contended that   the  principles  of  natural  justice  were violated The  respondent  contended  that  ascertaining  the amount which  is to  be levied  as a  penalty. need  not  be preceded by the termination of the contract.      Dismissing the appeal, ^      HELD: 1  It is clear that in the absence of a statutory exclusion  of   natural  justice   any  exercise   of  power prejudicially affecting  another must  be in conformity with the rules  of natural  justice. In  the present case. we are satisfied 771 that there  is  no  foundation  for  the  grievance  of  the appellant  on   the  score   of  natural  justice  since  an opportunity was  afforded to  the appellant  before  finally quantifying the  penalty to  be levied but the appellant did not avail himself of the opportunity. [773-E-F]      2. On  a true  construction of  rule 29  once a  Forest Authority detects  a breach  it must  investigate the extent and estimate,  the nature and degree of damage caused by the breach, If it is serious they must proceed to ascertain  the sum to  be fixed  as penalty.  In doing  this, a  reasonable opportunity must  be given  to   the affected  party.  After that, the  penalty shall  be quantified   and  the  contract shall be terminated in the event the authorities come to the conclusion that  the breach is grave enough for that drastic step. Once the contract is; terminated the last procedure is realisation which  can in  no case be before the termination of the contract. [774H, 775 A-B.]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeals Nos. 814- 815  of 1968.      From the  Judgment and  Order dated 7th September. 1966 of the  Andhra Pradesh High Court in Writ Appeal Nos. 71 and 72 of 1964 respectively.      R. V. Pillai,  for the appellant.      P Ram Reddy and C. N. Rao, for the respondents.      The Judgment of the Court was delivered by      KRISHNA IYER  J. A  forest contractor-the appellant-who had allegedly  excess  felled  trees  beyond  the  permitted number under  two contracts  entered into  by him  with  the State of Andhra Pradesh, was  directed by the Conservator of Forests-the firs, respondent-to suffer two. levies. One item represented the  loss sustained  by the  State on account of the illicit  cutting and  the other  was a  penalty  imposed under r.  29 of  the Forest  Contract Rules  (for short, the Rules) issued  in exercise of the powers conferred under ss. 44 and 79 of the Hyderabad Forest Act, 1355F (for short, the

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Act).      The factual  story out  of which  the legal controversy springs may  be narrated  in simple  terms. Admittedly,  the appellant was  granted two  forest  contracts  to  fell  and remove a specific number of trees from government forest, in accordance with  the Act  and the Rules. The  Contracts were of two  years’ duration  ending with  31st December 1960. It was  found   by  the  Forest  officers  that  the  appellant contractor had  felled more  trees and  so he  was  given  a notice calling  for  his  explanation  about  this  detected breach of condition.      In C.A.  814 of 1968 such notice was issued on June 25, 1960 but  no explanation was forthcoming. So the Conservator determined the  amount representing  the loss  caused by the unauthorised cutting of trees. On July 22, 1960 the District Forest officer  informed the  appellant that the Conservator of Forest, who is the appropriate authority under the Rules, had fixed Rs. 11,426/- as representing the loss sustained by Government and  Rs.11,250/- as  penalty  under  r.  29.  The contractor. thereupon, prayed for re-enumeration of the 772 trees cut from the forest by his application, dated July 30, 1960. He    was  informed  by  the  forest  authorities,  by communication dated  August ’24, 1960 to check the stumps in the coupe  as desired by the petitioner before September 15, 1960. This  opportunity was  also  not  availed  of  by  the appellant. Consequently,  the Conservator  levied a penalty, as earlier  proposed. Thus there were two items (1) the loss caused by  illicit cutting;  (ii) the  penalty imposed under the rules  for breach  of conditions  of the contract. There were  three   small  amounts  of  fine  also,  all  together resulting  in  a  sum  of  Rs.  23,088.00.  Eventually,  the contract was  terminated on December 28, 1960 under r. 30 of the Rules.  Long later,  in January  1962, the amount stated above was  sought to be realised by revenue recovery process by the Tahsildar, ‘by his attachment order, dated January 8, 1962. Thereupon  a writ  petition was filed by the appellant challenging the  demand. He  succeeded  before  the  learned Single Judge  but a Division Bench, in appeal carried by the State, reversed this order and the appellant has invoked the jurisdiction of  this Court under Art. 133(1) (a) and (b) of the Constitution.      In C.A.  815 of  1968 a  similar excess  felling by the same contractor  was detected by the concerned officials and notice was  issued to  the appellant  to explain  how he had felled 255  trees in  excess of  the contractual figure. The appellant denied  the illicit  felling whereupon  a date was fixed for  checking the  coupe in his presence, as requested by him.  The contractor however did not avail himself of the opportunity so afforded despite a second date for inspection being  fixed   to  suit   his  convenience.  Eventually  the Conservator  of   Forests  fixed   the  loss   sustained  by government on  account of  the illicit  felling of trees and also the  penalty  for  breach  of  the  conditions  of  the contract.  This  was  done  on  October  16,  1960  and  the appellant was  asked to pay the sum by notice. dated October 28, 1960. On the same date, the lease was also terminated.      Long  later,   on  January   9,  1962  proceedings  for realisation of  the amounts were initiated by the Tahsildar. This step  drove the  contractor to  move a  writ  petition, which shared  the fate,  at the  single Judge’s level and in appeal, of  the sister writ petition already adverted to. In the same  manner he  has moved  this  Court  in  appeal,  by certificate.      Two points  were urged  by Mr.  R  V.  Pillai,  learned

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counsel for the appellant, one relating to the loss assessed and sought  to be  realised  by  the  State  under  the  two contracts on  account of  excess felling, the other relating to the  imposition of  penalty under r. 29 and its validity. The first  point does  not survive  because in both the writ petitions which  were  disposed  of  together  by  a  common judgment the  learned Single  Judge rejected  the contention with the  observation ’I  find no substance in the arguments advanced in  this behalf ... No provision was brought to any notice which  disentitles the  government to  collect  those items’. If  the appellant had been aggrieved by the negation of his  plea under this head he should have challenged it in appeal which  he did  not. Thus  the matter has become final and he‘  cannot, in  this Court,  revive it at all. There is only  a   single  question   that  therefore   deserves  our consideration. 773      Was the  penalty in the two cases imposed validly ? The learned Single  Judge held, on a study of rr. 29 and 31 that the impost  was illegal  for reasons which we find difficult to accept. The Division Bench, in appeal, disagreed with the learned Single  Judge for reasons which are unclear although our conclusion concurs with theirs. The rules regulating the consequence  of   a  breach  of  the  conditions  of  forest contracts  were   originally  promulgated  in  Urdu  in  the Hyderabad State  but we  have been  handed up  the Manual of Civil Laws,  Andhra Pradesh,  which contains  those rules in English. Rule  29(3) reads  slightly obscurely  but, in  the absence of  the original Urdu rules, we have to make-do with the English version.      There  are   two  types   of  penalties  which  we  may conveniently  designate  as  ’major’  and  ’minor’,  in  the contemplation of  the Forest  Rules Rule  29 deals  with the major penalties  while r.  31 relates  to  minor  penalties. Where the breach of the conditions of the contract committed by the  forest contractor is serious, the contract itself is to be  terminated and a substantial penalty is to be imposed which  ’shall   not  exceed   one  quarter   of  the   total consideration paid  by the  contractor’. If the branch is of lesser significance,  then the  authority may not propose to terminate the  contract on account thereof but may recover a portion of  the ’whole  penalty provided  for in  r. 29’ not exceeding Rs.  100/-. In  short,  if  the  contravention  is grave, the contract is cancelled and a heavy penalty imposed but if  the breach is inconsequential the contract continues but a  lighter penalty is imposed. In the present case it is apparent that the authorities terminated the contract and it is equally  clear that the breach was serious. Rule 31 which deals  with   trivial  breaches  and  lighter  penalties  is inapplicable. The only question then is whether the exercise of the power to impose a penalty under r. 29 has been (a) in compliance with  natural justice;  and. (b) in fulfilment of the conditions  precedent for the exercise of the power. The facts we  have  set  out  earlier  make  it  clear  that  an opportunity had  been afforded  in  the  case  of  both  the contracts before  finally  quantifying  the  penalty  to  be levied but,  the contractor  did not  avail himself  of  the opportunity. While  it is  clear that  in the  absence of  a statutory exclusion of natural justice any exercise of power prejudicially affecting  another must  be in conformity with the rules  of natural  justice, we are satisfied that in the present case there is no foundation for the grievance of the petitioner on this score.      The substantial  issue is as to whether the termination of the  contract for breach of conditions should precede the

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impost of  penalty. According  to Shri  Pillai, that  is the meaning of  r. 29  read in  the light  of r. 30(3). There is seeming varbal  support for  this contention  but  n  closer scrutiny pricks the bubble. Rule 29 may well be read at this stage      ’29. (1)  Penalty on  termination  of  a  contract  for breach of conditions.-           Every forest  contract shall  be in writing in the      form annexed  hereto  and  shall  contain  a  provision      whereby the 774      forest contractor  binds himself  to do  all the duties      and acts  A  required  to  be  done  by  or  under  the      contract, and  covenants that  he and  his servants and      agents shall  abstain from all the acts forbidden by or      under such contract.           (2) The  sums to be mentioned in a forest contract      as payable  in case of a breach of any such stipulation      shall not exceed one-quarter of the total consideration      to be  paid by the contractor, and shall be recoverable      in accordance  with the  provisions  of  the  Hyderabad      Forest Act 1355 F and of this rule:           Provided that  where such  consideration is not an      ascertained amount  the forest  officer  executing  the      contract shall  make an  estimate of  the total  amount      that would  be  payable  if  the  contract  were  fully      complied with,  and such  estimate shall  be deemed  to      be., for  the  purpose  of  this  sub-rule,  the  total      consideration to be paid by the contractor.           (3) This sum shall be realized from the contractor      if the  contract has been duly terminated in accordance      with the provisions of rule 30, and then only under the      written order  of  the  forest  officer  executing  the      contract." Shri Ram  Reddy, for the respondent, urges that ascertaining the amount  which is  to be  levied as a penalty need not be preceded  by   the  termination  of  the  contract.  Indeed, according to  him, it  is only‘ if there is an investigation of the  nature of  the breach, the quantum of loss inflicted on the  State and  other circumstances that a decision as to whether the  contract should  be terminated  or not  can  be taken. If  it is  found that  the  breach  of  condition  be willful and  the damage  substantial, the  penalty  will  be imposed under  r. 29  and  a  decision  will  be  taken  for termination of  the contract.  However,  the  sum  fixed  as penalty shall  not be realised from the contractor until the contract has  been duly  terminated in  accordance with  the provisions of  r. 30.  This is  because you  cannot  keep  a contract alive  and claim  that a grave breach of conditions has been  committed. That would be too inconsistent a stance for the  State to  adopt. It is true that the termination of the contract  under  r.  30  is  a  condition  precedent  to realisation  of   the  penalty   from  the   contractor  but realisation  is   different  from   imposition.  The  forest authorities quantify  and impose  the penalty.  The  revenue authorities as  well as  the forest  authorities  adopt  the various steps  prescribed in r. 30(3) for realisation of the sum In  the present  case it was the Tehsildar who sought to realise the  penalty and  he did this after the contract was terminated. Indeed,  r. 30(3)  uses the expression ’recover’ which is in consonance with ’realise’ in r. 29(3) .      We think  that the  true meaning of rr. 29 and 30, read together, is  that the  forest authorities  must  move  from stage to  stage in  the following manner. Once they detect a breach, they  must investigate  to understand  and estimate,

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the nature  and degree of damage caused by the breach. If it is serious, they must proceed to ascertain the 775 sum to  be fixed  as penalty.  In doing  this, a  reasonable opportunity must  be given to the affected party. After that the penalty  shall be  quantified and  the contract shall be terminated, in  the event  of the  authorities coming to the decision that  the breach  is grave  enough for that drastic step. Once the contract is terminated, the last procedure is realisation which  can in  no case be before the termination of the  contract. The  realisation of  the penalty may be in one or other of the was set out for recovery under r. 30. Of course, if  the breach  is of  a venial  nature,  r.  31  is attracted, the  contract  is  continued  and  only  a  small portion of the penalty envisaged in r. 29 is collected.      The view  we have  taken of  the scheme  of  the  rules leaves us in no doubt that the order of penalty is right and the judgment  of  the  Division  Bench  is  correct  in  the conclusion and  the appeals,  in the  result, must fail. The circumstances are such that the litigation is purely induced by the  obscure official  translation of  r. 29 from Urdu to English with  an obvious  omission of  ’not’. This  and  the other attendant  features of  the case persuade us to direct that the parties shall bear their costs throughout. V.M.K.                                    Appeals dismissed. 776