K.C. Lahoti, J.
1. The defendant/State has come up in second appeal aggrieved by the decree granted by the trial Court issuing permanent preventive injunction restraining the defendant/State from recovering an amount of Rs. 1080/- with interest as arrears of land revenue from the plaintiff/ respondent and confirmed by the lower appellate Court.
2. The plaintiff/respondent had filed a suit seeking a declaration that he was entitled to recover an amount of Rs. 5,000/ - by way of damages for breach of contract from the defendant/State and also for an injunction restraining the recovery of Rs. 2131/- as an arrear of land revenue sought to be made by the defendant/State from the plaintiff.
3. The trial Court held that the plaintiff was not entitled to recover Rs. 5,000/ - by way of damages and hence the suit seeking a declaration in that regard was directed to be dismissed. That part of the decree has not been challenged in appeal by the plaintiff and hence has achieved a finality. As to the permanent preventive injunction sought for by the plaintiff, the trial Court held that the defendant/State was entitled to recover an amount of Rs. 1080/- with interest and not an amount of Rs. 2131/- as was claimed by it but the same was not liable to be recovered as an arrear of land revenue. Hence, the trial Court granted a permanent preventive injunction restraining the defendant/State from recovering the amount from the plaintiff as arrear of land revenue. This part of the decree has been confirmed in appeal and is the subject-matter of this appeal.
4. Out of the several facts in controversy, only so much of them as are relevant for the purpose of adjudicating upon the controversy arising in the appeal need only to be noticed. In an auction held by D.F.O. Shivpuri, the plaintiff purchased a right to cut and take away the grass standing over an area of 370 acres for a consideration of Rs. 5,200/-. A contract was entered into and duty executed by the parties. The amount of Rs. 5,200/- was payable by the plaintiff in four instalments out of which, the third and fourth instalments due and payable on 15th of Oct. and Nov. 1970 were not paid resulting into cancellation of the contract by the D.F.O. The right was put to re-auction and the State recovered an amount of Rs. 1,000/- from the subsequent purchaser. The trial Court held that the plaintiff was entitled to an adjustment of the amount realised by the State from the subsequent transferee as also of the amount paid by the plaintiff by way of deposit. Consequently it held that the amount of Rs. 1080/ - only, out of the amount of the two instalments and the interest payable on the amount in arrears, as per the terms of the contract, could only be realised by the State. Having arrived at that finding, the trial Court further held that what was sought to be realised had ceased to be the amount of instalments in arrears but was really speaking the quantum of damages suffered by the State on account of breach of contract by the plaintiff. The trial Court was of the opinion that such amount could not be recovered as an arrears of land revenue either under the contract or under the law because there was no terms in the contract enabling realisation of such amount as an arrear of land revenue nor was there any law which authorised the State to do so. The lower appellate Court has concurred with the trial Court.
5. The sole question to be determined in this appeal is whether or not the recovery proposed by the State, sought to be made as an arrear of land revenue, is competent.
6. For holding against the State and granting injunction in favour of the plaintiff/ respondent, the courts below have placed reliance on a Division Bench decision of this Court in K.P. Choudhury v. State of M.P. 1971 RN 132. Para 2 of the report show that the amount in dispute which was sought to be recovered as arrears of land revenue and restrained by the High Court consisted of deficiency on resale. There was no contract between the parties as contemplated by Article 299(1) of the Constitution. The petitioner was the highest bidder at an auction and before any contract could come into existence he has resiled back resulting in resale by the State. In spite of opportunity having been given, the State did not place before the Court any rule existing on the date of sale or resale under which the State could justify recovery of the amount of such deficiency as an arrear of land revenue. The Court observed :--
'This amount of deficiency could not be called on account of the price of any forest produce of expenses incurred in the execution of the Act.'
This observation indicates that K. P. Chouduary's case would not apply to a case where the amount sought to be recovered is on account of the price of any forest produce. In fact, K. P. Choudhary's case was cited before another Division Bench of this Court in Gopal Das v. State of M.P. (1976 MPLJ 506), and vide para 10 of the report, K. P. Choudhary's case was distinguished as having no applicabilty to a case where there was a completed contract between the parties.
7. It will be useful to reproduce Clause 6 of the contract (Ex.D-1) admittedly entered into between the parties :--
'6. The forest contract shall be subject to the Forest Contract Rules as amended from time to time (a copy of which has been furnished to the forest contractor, the receipt of which the forest contractor hereby acknowledge and the Rules shall be deemed to be part of this contract in so far as they are applicable thereto :
Provided that the said Rules shall be deemed to be modified to the extent and the manner laid down in the second Schedule thereunder.'
Second Schedule is irrelevant in so far as the present case is concerned.
8. Here itself, the provisions contained in Section 82 of Forest Act, 1927, (hereinafter Act for short) and Rule 29 of the Forest Contract Rules (hereinafter Rules, for short) framed by the State Government in exercise of the powers conferred by Sections 41, 76(d) and 85 of the Act may also be noticed.
'Sec. 82 Recovery of money due to Government. All money payable to the Government under this Act, or under any rules made under this Act, or on account of the price of any forest produce, or of expenses incurred in the execution of this Act in respect of such produce, 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.
'R. 29. Termination of a contract for breach of conditions.-- (1) A forest contract may be terminated by the officer empowered to execute it on behalf of the Government if the forest contractor makes default in the payment of the consideration for his contract or of any instalment thereof, or commits a breach of any of the other conditions of his contract. (2) Such termination shall be notified to the forest contractor by a written notice delivered to him personally or sent to him by registered post, and thereupon all the contractors' rights under the contract including all accessory licences shall cease and all the forest produce remaining within the contract area or at depots specified under Rule 13 shall become the absolute property of Government. (3) On such termination Government shall be entitled --
(a) to keep all sums already paid by the contractor as consideration or part consideration of the forest contract;
(b) to recover as arrears of land revenue any part of the consideration which has fallen due but is still unpaid on the date of the termination of the contract;
(c) to recover as arrears of land revenue any penalty which may be recoverable under Rule 28;
(d) to recover any damage which may be assessed under Rule 15, and
(e) to recover as arrears of land revenue any part of the consideration which would have subsequently fallen due but for such termination or to resell the contract and to recover in the manner the amount by which the price secured as such resale falls short of that part of the consideration which would have so fallen due.'
9. Let us now examine the applicability of the abovesaid provisions to the facts of the case. The amount sought to be recovered from the plaintiff/respondent is admittedly the amount of the third and fourth instalments forming part of the price payable by the plaintiff for the forest produce which he had purchased from the State. The instalments had fallen due before the contract was cancelled and in fact it is the non-payment of the instalments which had entailed the cancellation of the contract by the D.F.O. Though the Court has granted adjustment to the plaintiff of the amount realised by the State on resale as against the amount of the instalments, it was not because the claim was for damages which required to be mitigated but it was on equitable considerations so that the State did not unjustly enrich itself by realising the price of the same produce twice over from two purchasers. Any finding to the contrary cannot be sustained. This, in substance, the nature of the amount sought to be recovered by the State/appellant from the plaintiff/ respondent was part of the consideration for the sale of the forest produce which had fallen due but had remained unpaid on the date of the termination of the contract, squearely attracting the applicability of Clause (b) of Sub-rule (3) of Rule 29 of the Rules. The following extract from Gopaldas's case'(supra) clinches the issue :--
'Here, the contract deed executed between the parties provides, inter alia by Clause 6, that the contract shall be subject to the Forest Contract Rules, which shall be deemed to be part of the contract, in so far as they are applicable thereto. That being so, the mutual rights and obligations of the parties have to be worked out with reference to the Forest Contract Rules, Under. Rule 29, the Government was entitled upon termination of the contract to recover the arrears of instalments as arrear of land revenue. Apart from the Rule, that was also its statutory right Under Section 82 of the Forest Act.'
10. For the foregoing reasons, the judgments and decrees of the Courts below are unsustainable and liable to be set aside as based on a totally erroneous view of law. The State was well within its rights in proceeding to recover the impugned amount as arrears of land revenue which should not have been restrained. This applies to the amount of Rs. 1081/- adjudged due and payable by the trial Court on account of third and fourth instalments and also to the amount of interest payable at the rate of 7 1/2 per annum as per Clause 4 (a)(ii) of the Contract (Ex. D-1), as against the amount of Rs. 2131/- initially sought to be recovered by the State.
11. The appeal is allowed. The judgments and decrees of the Courts below are set aside, Instead, the decree in favour of plaintiff is sustained only to the extent of restraining the defendant/appellant from recovering from the plaintiff any amount in excess of Rs. 1080/- and interest thereon as per Clause 4(a)(ii) of the contract (Ex.D-1). Rest of the plaintiff's suit is dismissed. The State is held entitled to recover the amount of Rs. 1080/-and interest as above, as arrears of land revenue. In the peculiar facts and circumstances of the case, because the plaintiff has substantially failed, it is directed that the plaintiff/respondent shall bear his own costs and shall also pay the costs of defendant State throughout. Counsel's fee in second appeal shall be taxed at Rs. 125/-, if certified.