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PETITIONER: MULAMCHAND

       Vs.

RESPONDENT: STATE OF MADHYA PRADESH

DATE OF JUDGMENT: 20/02/1968

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. SHAH, J.C. MITTER, G.K.

CITATION:  1968 AIR 1218            1968 SCR  (3) 214  CITATOR INFO :  RF         1970 SC 706  (9)  R          1971 SC2210  (3)  RF         1976 SC1533  (8,12)  F          1977 SC 151  (7)  F          1977 SC2149  (3)  E          1980 SC 680  (20)  E          1980 SC1109  (3)  RF         1980 SC1285  (9)  R          1984 SC1326  (10,11)  RF         1988 SC2149  (14)

ACT: Madhya  Pradesh  Abolition of Proprietary  Rights  (Estates, Mahals, Alienated Lands) Act, 1950 (Act 1 of 1951)-Right  to collect  forest produce-Whether a proprietary  right-Whether vests in State under provisions of Act, Constitution of India, Art. 299-Contract not complying  with Article whether valid. Indian  Contract  Act (9 of 1872), s.  70-Applicability  of- Conditions under which restitution should be made.

HEADNOTE: Before the coming into force on April 1, 1951 of the  Madhya Pradesh  Abolition of Proprietary Rights  (Estates,  Mahals, Alienated  Lands) Act, 1950 (Act 1 of 1951),  the  appellant had purchased from certain proprietors of land the right  to collect  forest produce from the said land during the  years 1951,  1952  and 1953.  The right was to  be  enjoyed  after April  1,  1951 on which date under the aforesaid  Act,  the proprietary  rights  came  to vest in the  State  of  Madhya Pradesh.   The Deputy Commissioner acting under s. 7 of  the Act prevented the appellant from enjoying the rights he  had acquired  from the proprietors, and in April 1951  auctioned the  right  to collect forest produce from  the  land.   The appellant  deposited  Rs.  10,000 to acquire  the  right  of collecting  lac  from the said land during  1951,  1952  and 1953.   He  collected some lac but thereafter filed  a  suit claiming  refund of the deposit of Rs. 10,000 on  the  basis that there was no. valid ,contract between him and the State of  Madhya  Pradesh  as the provisions of Art.  299  of  the Constitution  were  not complied with and the  contract  was

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void.   The  trial court granted him a decree but  the  High Court decreded against him.  With certificate the  appellant came to this Court. HELD  :  (i)  The  right to collect  forest  produce  was  a proprietary right and vested in the State Government by  the operation of s. 4(1) (a) of the Abolition Act.  The contrary view  taken in Chhotabhdi Jethabhai Patel & Co.’s case,  was expressly overruled by this Court in State of Madhya Pradesh v. Yakinuddin.  The present case was directly covered by the latter case. [219 G-220 C] State  of Madhya Pradesh v. Yakinuddin [1963] 3  S.C.R.  13, relied on. Chhotabhai Jethabhai Patel & Co. v. State of Madhya Pradesh, [1953]  S.C.R. 476 and Mahadeo v. State of Bombay, [1959]  2 Supp.  S.C.R. 339, referred to. (ii) The provisions of Art. 299(1) of the Constitution  like the provisions of s. 175(3) of the Government of India  Act, 1935  have  not been enacted for the sake of mete  form  but they  have  been  enacted for  safeguarding  the  Government against  unauthorised contracts.  The formalities which  are embodied therein on grounds of public policy cannot be waved or   dispensed  with.   The  appellant  was  right  in   his contention  that the Contract entered into by him  was  void because Art. 299 had not been complied with. [221 E-F] 215 Seth Bikhraj Jaipuria v. Union of India, [1962] 2 S.C.R. 880 and  State  of  West Bengal v. Mls.  B. K.  Mondal  &  Sons, [1962] 1 Supp.  S.C.R. 876, relied on. (iii)     However  the refund of Rs. 10,000 claimed  by  the appellant  could  not be allowed as he did not  satisfy  the conditions of s. 70 of the Indian Contract Act.  The  person who seeks restitution has a duty to account to the defendant for  what he has received in the transaction from which  his right to restitution arises.  The appellant had not produced sufficient  evidence  to show to what extent he  worked  the contract  and what was the profit made, by him in  the  year 1951  and the succeed in years.  In the absence of  reliable evidence  on  this point the appellant was not  entitled  to restitution  or refund of the deposit he had mad,-.  1  [223 A-C] Fibrosa  v. Fairbairn, [1943] A.C. 32 and Nelson v.  Narholt [1948] 1 K.B. 330 applied.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 393 of 1965. Appeal from the judgment and decree dated March 21, 1961  of the  Madhya  Pradesh High Court in First Appeal  No.  34  of 1958. D.   N. Mukherjee, for the appellant. I.   N. Shroff, for the respondent. The Judgment of the  Court was delivered by Ramaswami,  J.  This  appeal is brought  by  certificate  on behalf of the plaintiff from the judgment of the High  Court of Madhya Pradesh dated March 21, 1961 in First Appeals Nos. 34 and 64 of 1958. The  appellant had purchased a right to pluck,  collect  and remove  the forest produce like lac, tendu leaves etc.  from the  proprietors of the different Malguzari jungles for  the years 1951, 1952 and 1953 as detailed in Sch.  A attached to the   plaint.   This  right  he  had  acquired  before   the proprietary  rights  in those forests came to  vest  in  the State  of Madhya Pradesh under the Madhya Pradesh  Abolition

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of  Proprietary  Rights (Estates, Mahals,  Alienated  Lands) Act,  1950  (Act  No. 1 of  1951),  hereinafter  called  the ’Abolition  Act’,  and the right was to be  enjoyed  by  the appellant after April 1, 1951 on which date the  proprietary rights came to vest in the State of Madhya Pradesh.  It  was alleged  by  the appellant that the Deputy  Commissioner  of Balaghat acting under s. 7 of the Abolition Act took  charge of  the  entire  Malguzari  jungles on  April  1,  1951  and prevented  the  appellant from enjoying the; rights  he  had already acquired.  In the month of April 1, 1951 the  Deputy Commissioner  auctioned  the  forest  produce  of   villages covered.  under the purchases of the appellant.  Out of  the forest produce only the tendu leaves crop for the year 1951 was allowed to be enjoyed by the appellant on his depositing a  sum  of Rs. 3,000 in the  Government  Treasury,  Balaghat under 216 a written permit dated April 30, 1951.  The deposit was made by the appellant to save the tendu leaves crop of 1951  from being  sold  to  others  by  the  Deputy  Commissioner-   of Balaghat.   The  case  of  the appellant  was  that  he  was entitled  to  the  refund of the. amount  as  the  right  to collect  tendu  leaves for the year 1951  had  already  been purchased by him.  Similarly,. the appellant claimed  refund of the amount of Rs. 10,000 which he was required to deposit towards the right to collect lac from those forests for  the years  1951, 1952 and 1953.  The refund was claimed  on  the basis that there was no valid contract between the appellant and  the State of Madhya Pradesh as the provisions  of  Art. 299 of the Constitution were not complied with and the  con- tract was void.  The respondent contested the suit mainly on the  ground  that  the  Deputy  Commissioner,  Balaghat  had validity  taken  charge of the Malguzari jungles  under  the provisions  of  the Abolition Act and the  appellant  having removed  lac from the jungles on the basis of the  contract, was  not entitled to any refund.  The trial Judge held  that the  appellant was not entitled to claim the refund  of  the sum of Rs. 10,000, firstly, on the ground that the  contract was good even though not in conformity with Art. 299 of  the Constitution,  and  secondly,  because  the  appellant   was allowed  to  enjoy  the right of’  collecting  lac  and  the appellant  actually  availed  himself  of  that  right.   As regards  the  appellant’s claim for damages  for  breach  of contract, the trial court was of the view that the contracts were  mere  licences and enforceable against  the  State  of Madhya  Pradesh  even  after  vesting  of  the   proprietary interests  under  the Abolition Act.  Acting  in  accordance with  the  view  expressed  by  this  Court  in   Chhotabhai Jethaabhai Patel & Co.,v. The State of Madhya Pradesh(1) the trial court held that the appellant was entitled to  enforce the  contracts against the State of Madhya Pradesh  and  was consequently   entitled  to  damages  for  breach   of   the contracts.   The  trial court accordingly gave a  decree  in favour  of  the appellant to the extent of  Rs.  57,281  and dismissed the rest of the claim of the appellant.  The State of  Madhya  Pradesh took the matter in appeal  to  the  High Court  of Madhya Pradesh.  The appellant also  preferred  an appeal to the High Court with regard to the claim which  was disallowed by the trial court.  By its judgment dated  March 21,  1961,  the High Court allowed the first appeal  of  the respondent and set aside the decree of the District Judge in Civil  Suit No. 24-B of 1954 and dismissed the entire  suit. The  appeal preferred by the appellant was  also  dismissed. The High Court took the view that the decision of this Court in  Chotabhai Jethabhai Patel & Co. v. The State  of  Madhya

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Pradesh(-)  was overruled in a later decision of this  Court in  Mahadeo  v.  The State of Bombay(1),  and  in  contracts similar to those of the present case it (1) [1953] S.C.R. 476. (2) [1959] 2 Supp.  S.C.R. 339. 217 was held that there was a transfer of proprietary rights  in the estates to the grantees and the effect of the  Abolition Act was that all such proprietary rights vested in the State with  effect from April 1, 1951 free from  all  encumbrances and the State could therefore lawfully exclude the  grantees from  enjoying  any such rights secured to  them  under  the contracts.               Section 3 of the Abolition Act states :               "3.  Vesting  of  proprietary  rights  in  the               State.-(1) Save as otherwise provided in  this               Act,  on and from a date to be specified by  a               notification  by the State Government in  this               behalf,  all proprietary rights in an  estate,               mahal, alienated village or alienated land, as               the case may be, in the area specified in  the               notification, vesting in a proprietor of  such               estate,  mahal, alienated  village,  alienated               land,  or in a person having interest in  such               proprietary  right  through  the   proprietor,               shall pass from such proprietor or such  other               person  to  and  vest in  the  State  for  the               purposes  of  the  State free  of  all  encum-               brances.               (2)   After the issue of a notification  under               subsection (1), no right shall be acquired  in               or   over   the  land  to   which   the   said               notification relates, except by succession  or               under  a grant or contract in writing made  or               entered into by or on behalf of the State  and               no  fresh clearing for cultivation or for  any               other  purpose  shall  be made  in  such  land               except in accordance with such rules as may be               made by the State Government in this behalf.               Section 4 (1 (a) provides               "4. Consequences of the vesting.-               (1)   When  the notification under sec.  3  in               respect of any area has been published in  the               Gazette,   then,   notwithstanding    anything               contained  in any contract, grant or  document               or  in  any other law for the  time  being  in               force  and save as otherwise provided in  this               Act, the consequences as hereinafter  setforth               shall,   from  the  beginning  of   the   date               specified  in such  notification  (hereinafter               referred  to  as the date of  vesting)  ensue,               namely               (a)   all  rights, title and interest  vesting               in the proprietor    or   any  person   having               interest in such proprietary right through the               proprietor in such area including               218               land (cultivable or barren), grass land, serub               jungle,   forest,  trees,  fisheries,   wells,               tanks,   ponds,   water   channels,   ferries,               pathways,  village  sites,  hats,  bazars  and               melas;  and in all subsoil, including  rights,               if  any, in mines and minerals, whether  being               worked  or not, shall cease and be  vested  in               the  State for purposes of the State  free  of

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             all  encumbrances;  and the mortgage  debt  or               charge  on  any proprietary right shall  be  a               charge  on the amount of compensation  payable               for  such proprietary right to the  proprietor               under the provisions of this Act;"               Section 5 is to the following effect:               "5.   Certain   properties  to   continue   in               possession  of  proprietor or  other  person.-               Subject to the provisions in Sees. 47 and 63-               (a)   all    open    enclosures    used    for               agricultural  or  domestic  purposes  and   in                             continuous   possessions   for   twelv e   years               immediately  before 1948-49; all  open  house-               sites   purchased   for   consideration;   all               buildings places of worship; wells situated in               and  trees standing on lands included in  such               enclosures or house-sites or land appertaining               to  such  buildings or  places  of  ownership;               within the limits of a village-site  belonging               to  or held by the outgoing proprietor or  any               other person shall continue to belong to or be               held  by such proprietor or other  person,  as               the case may be; and the land thereof with the               areas  appurtenant  thereto shall  be  settled               with him by the State Government on such terms               and conditions as it may determine;               (b)   all  private  wells  and  buildings   on               occupied  land  belonging to or  held  by  the               outgoing proprietor or any other person  shall               continue  to  belong  to or be  held  by  such               proprietor or other person;               (c)   all trees standing on land comprised  in               a  home farm or homestead and belonging to  or               held by the out-going proprietor or any  other               person shall continue to belong to or be  held               by such proprietor or other person;                (d) all trees standing on occupied land other               than land comprised in home-farm or  homestead               and  belonging  to or held by a  person  other               than the outgoing proprietor shall continue to               belong to or be held by such person;               (e)   all  tanks situate on occupied land  and               belonging   to   or  held  by   the   outgoing               proprieter or any other               219               person shall continue to belong to or be  held               by such proprietor or other person;               (f)   all tanks, belonging to or held ’by  the               outgoing proprietor which are situate on  land               other  than village site or occupied land  and               in which no person other than such  proprietor               has any rights of irrigation, shall belong  to               or be held by such proprietor;               (g)   all  tanks  and  embankments  (bandhans)               belonging   to   or  held  by   the   outgoing               proprietor  or  any  other  person  which  are               situate  on  land other than village  site  or               occupied land and the beds of which are  under               cultivation  of such proprietor or such  other               person   shall  belong to or be held  by  such               proprietor  or such other person and the  land               under  such  tanks and  embankments  shall  be               settled  with  such proprietor or  such  other               person  on  such terms and conditions  as  the

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             State Government may determine;               (h)   all groves wherever situate and recorded               in village papers in the name of the  outgoing               proprietor or any other person shall  continue               to belong to or be held by such proprietor  or               such  other  person and the  land  under  such               groves shall be settled with such  proprietor’               or  such other person by the State  Government               on  such  terms  and  conditions  as  it   may               determine."               Section 6(1) states               "6.  Certain transfers to be void.-(1)  Except               as  provided in sub-section (2), the  transfer               of  any right in the property which is  liable               to  vest in the State under this Act  made  by               the  proprietor  at any time  after  the  16th               March,  1950  shall,  as  from  the  date   of               vesting, be void." It  was  contended,  in the first place, on  behalf  of  the appellant  that the contracts did not confer  settlement  of any interest in immovable property and as such the appellant could  not be equated with a person having interest  in  the proprietary   right  falling  within  the  purview  of   the Abolition  Act.   It is not possible for us to  accept  this argument.   The question has already been the  subjectmatter of consideration by this Court in State of Madhya Pradesh v. Yakinuddin(1).   In  that  case also,  the  respondents.  by grants  from and agreements with the  proprietors,  acquired the right to propagate lac, collect tendu leaves and  gather fruits  and flowers of Mahua leaves in certain estates.   It was held by this Court that whatever rights the  respondents had  acquired from the proprietors ceased to have effect  by the operation of s, 4(1) (a) of the Aboli- (1)  [1963] 3 S.C.R. 13. 220 tion  Act.  It was further held that the rights  claimed  by the respondents were in the nature of to proprietary  rights falling  within s. 4 (1) (a) of the Abolition Act  and  upon the  issue of a notification under ’S.. 3 of  the  Abolition Act  the  rights of the respondents had  passed  and  became vested  in  the  State of Madhya Pradesh.   It  was  further pointed  out  that the rights created  by  the  transactions between the respondents and the grantors did not come  under s.  5 of the Abolition Act.  In the course of this  judgment the previous judgment of this Court in Chhotabhai  Jethabhai Patel & Co’ V. The State of Madhya Pradesh(1) was  expressly overruled.   In our opinion the present case falls  directly within the ratio of the, decision of this Court in State  of Madhya  Pradesh  v.  Yakinuddin  (2)  It  follows  that  the argument of the appellant on this aspect of the case must be rejected. We  proceed to consider the. next question raised on  behalf of the appellant, viz., whether he was entitled to a  refund of  the deposit of Rs. 10,000 which he had made towards  the right  to collect lac from the forests for the  years  1951, 1952 and 1953.  The contention Out forward on behalf of  the appellant is that the contracts Were not in conformity  with Art. 299 of the Constitution and were consequently void  and had  no  effect.   It was claimed  that  the  appellant  was entitled to compensation under s. 70 of the Indian  Contract Act which is applicable to the case.  It is not disputed  on behalf of the respondent that there was no formal compliance of  the provisions of, Art. 299 of the Constitution  but  it was  said  that  the  bids  were  accepted  by  the   Deputy Commissioner Balagbat and were communicated to the appellant

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who  worked the contracts and actually collected lac in  the forests  in  question.  The trial court refused to  grant  a decree  to the. appellant in this case with regard  to  this claim  on  the  ground that the contract was  not  void  and although there was no conformity with the provisions of Art. 299  of  the Constitution there was nothing to  prevent  the ratification  of such contracts if therefore the benefit  of the Government.  The trial, court further observed that  the appellant had performed his ’art of the contract and  worked and  collected  lac  from the jungles in  pursuance  of  the agreement  and was therefore not entitled to refund  of  the amount  in  deposit.The finding of the trial court  on  this point has been I affirmed by the High Court which also  came to  the. conclusion that the, appellant bad worked for  some time  on the basis of the contracts granted to him but,  the appellant abandoned the contracts of his own accord and  the State cannot therefore be held liable for, the refund of the amount of deposit. In  our. opinion,, the reasoning adopted by the trial  court and  by  the  High  Court for rejecting  the  claim  of  the appellant is not  correct.  It is now well-established  that here a contract between (1) [1953] S.C.R. 476. (2) [1963] 3 S.C.R. 13. 221 the Dominion of India and a private individual is not in the form required by s. 175 (3) of the Government of India  Act, 1935,  it was void and could not be enforced  and  therefore the  opinion f India cannot be sued by.a private  individual breach  of such contract (See the decision in  Seth  Bikhrai Jaipuria  v. Union of India(1).  It was stated in that  case that under.s. 175(3) of the Government. of India Act,  1935, the  contracts  had (a) to be expressed to be  made  by  the Governor-General,  (b)  to  be executed  on  behalf  of  the Governor-General  and  (c) to be executed  by  offcers  duly appointed in that behalf and in such manner as the Governor- General  directed or authorised.  The evidence in  the  case showed  that the contracts were not expressed to be made  by the  Governor-General add were not executed on  his  behalf. It was held by this Court that the provisions of s. 175  (3) were mandatory and the contracts were therefore void and not binding  on  the  Union of India which was  not  liable  for damages for breach of the contracts.  The same principle was reiterated  by  this  Court in a later  case-State  of  West Bengal v. Mls.  B. K. Mondal and ,Sons(2).  The principle is that the provisions of s. 175(3) of the Government of  India Act, 1935 or the corresponding provisions if Art. 299 (1) of the Constitution of India are mandatory in character and the contravention  of these provisions nullifies  the  contracts and  makes them void.  There is no question of  estoppel  Or ratification  in  such  a  case.  The  reason  is  that  the provisions of section 175(3) of the Government of India  Act and  the corresponding ’provisions of Art. 299 ( 1 ) of  the Constitution have not been enacted for the sake of mere form but,  they have been enacted or safeguarding the  Government against unauthorised contracts.  ’he provisions are embodied in s.’175(3) of the Government of India Act and Art.  299(1) of  the Constitution on the ground of public  policy-on  the ground of protection of general public and these formalities cannot  be  waived- or dispensed with.  If the plea  of  the respondent  regarding estoppel or ratification  is  admitted that  would  mean  in  effect the  repeal  of  an  important constitutional provision intended for the protection of  the general  public.  that  is  why  the  plea  of  estoppel  or ratification  cannot  be permitted in such a case.   But  if

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money is deposited and goods are supplied r if services  are rendered in terms of the void contract, the provisions of s. 70  of the Indian Contract Act may be applicable.  In  other words,  if  the conditions imposed by s. 70 of  the  Indian- Con-act  Act  are  satisfied then  the  provisions  of  that section  can be invoked by the aggrieved party ,to the  void contract.   The  first  condition is that  a  person  should lawfully   do  something  for  another  person  or   deliver something  to him; the second condition is that i doing  the said thing or delivering the said thing Ike must, not intend to  act  gratuitously; and the third condition is  that  the other (1)  [1962] 2 S.C.R. 880.                     (2)  [1962]  1 Supp.  S.C.R. 876. 222 person  for whom something is done or to whom  something  is delivered   must  enjoy  the  benefit  thereof.   If   these conditions  are  satisfied, s. 70 imposes  upon  the  latter person the liability to make con sensation to the former  in respect of, or to restore, the thing done or delivered.  The important point to notice is that in a case falling under s. 70  the  person  doing  something  for  another   delivering something to another cannot sue for the specific performance of  the  contract, nor ask for damages for  the  breach  the contract,  for the simple reason that there is  no  contract between him and the other person for whom he does  something to  whom  he  delivers  something.  So  where  a  claim  for compensation is made by one person against another under  s. 70,  it  is  not on the basis  of  any  subsisting  contract between the parties but a different kind of obligation.  The juristic  basis  of  the obligation in such a  case  is  not founded upon any contract or tort but upon a third  category of  law, namely, quasi contract or restitution.  1’  Fibrosa v. Fairbairn(1) Lord Wright has stated the legal position as follows               "............  any civilised system of law  is               bound  to provide remedies for cases  of  that               has  been called unjust enrichment  or  unjust               benefit,  that  is,  to  prevent  a  man  from               retaining  the  money  of,  or  some   benefit               derived  from,  another which  it  is  against               conscience that he should keep.  Such remedies               in  English Law are generally  different  from               remedies  in contract or in tort, and are  now               recognised to fall within a third category  of               the  common law which has been  called  quasi-               contract or restitution."               In  Nelson  v.  Larholt(2)  Lord  Denning  has               observed as follows               "It  is  no  longer  appropriate  to  draw   a               distinction    between   law    and    equity.               Principles have. now to be stated in the light               of their combined effect.  Nor is it necessary               to  canvass the niceties of the old  forms  of               action.  Remedies now depend on the  substance               of  the  right,  not on whether  they  can  be               fitted into a particular framework.  The right               here is not peculiar to equity or contract  or               tort, but falls naturally within the important               category  of  cases  where  the  court  orders               restitution  if  the justice of  the  case  so               requires." Applying  the principle to the present case, it is  manifest the  the appellant would have been entitled to  compensation under  s.  70 of the Indian Contract Act if he  had  adduced

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evidence  :  support of his claim, but the trial  court  has examined  the  evident.  on  this  point  and  reached   the conclusion that the appellant. (1) [1943] A.C. 32,61. (2) [1948] 1 K.13. 330,14’ 223 collect  lac  in the jungles in the year 1951 but  later  on abandoned  the  working  of his own  accord.   It  is  well- established  that a person who seeks restitution has a  duty to account to the defendant for what he has received in  the transaction from which his right to restitution arises.   In other  words, an accounting by the plaintiff is a  condition of  restitution from the defendant (See ’Restatement of  the Law  of Restitution’, American Law Institute, 1937 Edn.,  p. 634).  The appellant did not produce sufficient evidence  to show to what extent he worked the contract and what was  the profit made by him in the year 1951 and the succeeding year. In  the  absence  of reliable  evidence  on.this  point  the appellant  was not entitled to restitution or refund of  the deposit he had made.  The case of the appellant with  regard to  this part of his claim was therefore rightly  disallowed both  by  the  trial  court  and  the  High  Court  and  the respondent  is therefore not liable to refund the amount  of deposit. For  these  reasons we hold that there is no merit  in  this appeal which is accordingly dismissed with costs. G,C.                                                  Appeal dismissed. 224