TaxTMI 
TaxTMI 
2013 (10) TMI 955
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....pellant to be the 'auction purchaser' in terms of Rule 5(8) of the Rules. Being declared as auction purchaser, she deposited 30% of the bid amount i.e. Rs.7,68,600/- on the same date and executed a temporary agreement in terms of Rule 5(10) which was subject to confirmation by the Board of Revenue. Rule 5(19) makes this deposit as security for due performance of the conditions of licence. Kalady is the holy birth place of Adi Sankaracharya and adjoining thereto existed a Christian pilgrim centre associated with St. Thomas. The residents of those areas objected to the running of any abkari shop. A large number of people collected and offered physical resistance to the opening of the abkari shops and the law and order enforcing agency could not assure smooth conduct of business. The aforesaid circumstances led the appellant to believe that it was impossible for her to run the arrack shop in the locality in question. The appellant, therefore, by her letter dated 3.4.1994 addressed to the Board of Revenue, District Collector and Assistant Commissioner of Excise, informed them that because of mass movement it was not possible for her to open and run the shops. Accordingly, she requested....
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....t petitions. The learned Single Judge quashed the notices and all the proceedings initiated against the appellant and further directed the refund of the amount of Rs.7,68,600/- deposited by her along with interest. However, learned Single Judge did not strike down Rule 5(15) and 5(16). While doing so, learned Single Judge observed as follows: "15. The undisputed and uncontroverted facts as appearing above clearly attract the doctrine of frustration and impossibility leading to the conclusion that the contract from its inception becomes void and discharged. Consequently, it is needless to consider and decide other contentions urged as regards excesses of delegated legislation in the forms of the rules, as they are unnecessary altogether in view of the above conclusion. Both these petitions succeed accordingly." The State of Kerala and its functionaries, aggrieved by the aforesaid judgment, preferred separate appeals. Both the appeals were heard together and disposed of by a common judgment. Writ Appeal No.1722 of 1995, filed against the recovery of the balance amount was dismissed. While allowing Writ Appeal No.1734 of 1995 which was against the direction of the learned Single....
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....sible in view of the mass movement and resistance which State could not contain. In this connection, she has drawn our attention to Section 56 of the Contract Act. In support of the submission reliance has also been placed on a decision of this Court in the case of Sushila Devi v. Hari Singh, (1971) 2 SCC 288, and our attention has been drawn to Paragraph 11 of the judgment which reads as follows: "11. In our opinion on this point the conclusion of the appellate court is not sustainable. But in fact, as found by the Trial Court as well as by the appellate court, it was impossible for the plaintiffs to even get into Pakistan. Both the Trial Court as well as the appellate court have found that because of the prevailing circumstances, it was impossible for the plaintiffs to either take possession of the properties intended to be leased or even to collect rent from the cultivators. For that situation the plaintiffs were not responsible in any manner. As observed by this Court in Satyabrata Ghose v. Mugneeram Bangur and Co.,(1954) SCR 310, the doctrine of frustration is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality o....
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....re unable to understand the reasoning of the High Court when it proceeds as though the appellant was trying to enforce the contract. We can see no justification for the lower Court refusing to allow interest for the plaintiff's amount at least from the date of his demand, or the latest from the date of suit." Ms. Chowdhary, however, contends that in the case in hand, the terms and conditions for grant of privilege is governed by the Rules and in view of specific consequences provided for noncompliance of the terms and conditions of the contract i.e. forfeiture of the security money, the Division Bench of the High Court has not committed any error in holding that the State was entitled to forfeit the entire deposit. In view of the rival submission we deem it expedient to go through the relevant rules. Rule 2(a) defines Abkari shop to include an arrack shop with which we are concerned in the present appeal. Chapter IV of the Rules provides for general conditions applicable to sale of Abkari shops. It consists of only one Rule i.e. Rule 5 but it has 22 sub-rules. Sub-rule 15 of Rule 5 reads as follows: 5. xxx xxx xxx (15) In addition to the solvency certificate and cash se....
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....on purchaser to execute the agreement whether temporary or permanent, the deposit already made by auction purchaser towards earnest money and security money shall be forfeited. Undisputedly, the appellant was declared as auction purchaser and, in fact, she had deposited 30% of the bid amount, that is, 7,68,600/- in terms of Rule 5(10) of the Rules. It is further an admitted position that the appellant did not execute a permanent agreement or for that matter, did not execute the privilege. Hence, in terms of sub-rule (15) of Rule 5, the money deposited by her is liable to be forfeited. However, as stated above, the appellant's plea is that it was due to the facts beyond her control that she could not derive benefit from the privilege granted to her and hence did not run the shop. Therefore, the security amount deposited by her is not fit to be forfeited. In view of the aforesaid, what falls for our determination is as to whether the appellant could invoke the doctrine of frustration or impossibility or whether she will be bound by the terms of the statutory contract. In other words, in case of a statutory contract, will it necessarily destroy all the incidents of an ordinary contrac....
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....t itself did not provide for the consequences for its non-performance. On the face of the same, relying on the doctrine of frustration, this Court came to the conclusion that the parties shall not be liable. As stated earlier, in the face of the specific consequences having been provided, the appellant shall be bound by it and could not take benefit of Section 56 of the Contract Act to resist forfeiture of the security money. Confronted with this, Ms. Aggarwal raises the issue of validity of Rule 5(15). The learned Single Judge had allowed the writ petition filed by the appellant but negatived her challenge to the validity of Rule 5(15) and 5(16) of the Rules. In an appeal preferred by the State, it does not seem that the appellant had raised the plea of invalidity of the Rules but before us it is the contention of the appellant that Rule 5(15) does not meet the requirement of the doctrine of reasonableness or fairness and on this ground alone the rule is invalid. As a corollary, the forfeiture made is illegal. It is pointed out that in a contract of the present nature, the relative bargaining power of the contracting parties cannot be overlooked. Viewed from this angle, the rul....
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....ment and its agencies and instrumentalities constitute the largest employer in the country. A clause such as Rule 9(i) in a contract of employment affecting large sections of the public is harmful and injurious to the public interest for it tends to create a sense of insecurity in the minds of those to whom it applies and consequently it is against public good. Such a clause, therefore, is opposed to public policy and being opposed to public policy, it is void under Section 23 of the Indian Contract Act." Reference has also been made to a Constitution Bench judgment of this Court in the case of Delhi Transport Corporation v. D.T.C.Mazdoor Congress and Another 1991 Supp (1) SCC 600. In this case, Brojo Nath Ganguly (supra) has elaborately been discussed and while endorsing the view by majority this Court held as follows: "338. Accordingly I hold that the ratio in Brojo Nath Ganguly case, (1986) 3 SCC 156 was correctly laid and requires no reconsideration and the cases are to be decided in the light of the law laid above. From the light shed by the path I tread, I express my deep regrets for my inability to agree with my learned brother, the Hon'ble Chief Justice on the applica....
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.... it is a statutory contract. It is one thing to say that a statutory contract or for that matter, every contract must be construed reasonably, having regard to its language. But to strike down the terms of a statutory contract on the ground of unfairness is entirely different. Viewed from this angle, we are of the opinion that Rule 5(15) of the Rules cannot be struck down on the ground urged by the appellant and a statutory contract cannot be varied, added or altered by importing the doctrine of fairness. In a contract of the present nature, the licensee takes a calculated risk. Maybe the appellant was not wise enough but in law, she can not be relieved of the obligations undertaken by her under the contract. Issac Peter (supra) supports this view and says so eloquently in the following words: "26............In short, the duty to act fairly is sought to be imported into the contract to modify and alter its terms and to create an obligation upon the State which is not there in the contract. We must confess, we are not aware of any such doctrine of fairness or reasonableness. Nor could the learned counsel bring to our notice any decision laying down such a proposition. Doctrine of....