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Frustration of Contract – section 38(v) of the Wildlife (Protection) Act, 1972 as amended in 2006. – not enforceable – Open public auction of mines – permission to transport the iron ore through tiger reserved forest was declined – when the entire transaction become infructuous due to obstructions – High court directed the sail to refund the amount collected from the writ petitioner – Apex court confirmed the orders and dismissed the appeal = Executive Director, Steel Authority of India & Ors. … Appellants vs. Tycoon Traders & Ors. … Respondents = 2014 (March. Part ) judis.nic.in/supremecourt/filename=41342

Frustration of Contract – section  38(v)  of  the  Wildlife  (Protection)

Act, 1972 as amended in 2006. – not enforceable – Open public auction of mines – permission to transport the iron ore through tiger reserved forest was declined – when the entire transaction become infructuous due to obstructions – High court directed the sail to refund the amount collected from the writ petitioner – Apex court confirmed the orders and dismissed the appeal =

 on  February  19,  2007,  Steel

Authority of India (for short ‘SAIL’) had advertised for E-auction  of  1.00

lakh metric tons of iron ore (fines) from Kemmanagundi mines. On  March  13,

2007, auction was held and respondent No.1 was declared  as  the  successful

tenderer.

on November 9,  2009,  SAIL  had  addressed  a  letter  to  the

Principal  Chief  Conservator  of  Forests  (Wildlife)  and  Chief  Wildlife

Warden, Karnataka,  for  renewal  of  permission  granted  for  lifting  and

transporting  iron  ore  fines  through  Bhadra  Wildlife   Sanctuary.   

The

Principal Chief Conservator of Forests  by  letter  dated  March  31,  2010,

declined to grant such permission for the removal of 1.00 lakh tons of  iron

ore fines by plying vehicles. 

In these circumstances, the  High  Court  held

that the contract itself stood frustrated and could not have been  performed

by the respondent even if it desired to do so,  and  

further  held  that  in

case of frustrated contract, parties must  be  restored  to  their  original

position.

the High Court held that  it  is

illegal and unconscionable for SAIL not to refund the entire  sum  of  money

received by it from the respondent. 

The High Court  further  held  that  the

extension was granted at the instance of SAIL and such extension amounts  to

waiver of the delivery conditions in the sale order dated  March  16,  2007.

The High Court further held that the  Bhadra  Wildlife  Sanctuary  has  been

declared as a ‘Tiger Reserve’ and that it is required to  be  maintained  as

‘inviolate’ for tiger population, and the permission which has been  refused

cannot be granted in view of section  38(v)  of  the  Wildlife  (Protection)

Act, 1972 as amended in 2006. 

In this  background,  the  writ  petition  was

allowed and SAIL was directed to refund the entire amount within four  weeks

from the date of the order. =

the  letter  dated  March

31, 2010 whereby the Principal Chief Conservator  of  Forests  (Wildlife)  &

Chief Wildlife Warden, Bangalore, has specifically  stated  to  the  General

Manager (Operations) of the appellant that  Bhadra  Wildlife  Sanctuary  was

declared  as  a  Tiger  Reserve  and  was  required  to  be  maintained   as

‘inviolate’  for   tiger   population,   hence,   refused   to   allow   the

transportation through the said Tiger Reserve under  Section  38(v)  of  the

Wildlife (Protection) Act, 1972 as amended in 2006. By the said letter,  the

request to lift and transport the iron ore fines  was  rejected.  Therefore,

the contract which was  entered  into  between  the  parties,  as  would  be

evident, is in violation of the said  Act  and  is  against  public  policy.

Hence, the contract cannot be given effect to as  the  contract  is  already

frustrated.

 

 the  object  of  the contract is forbidden by law 

In our opinion, the contract is  unenforceable

and further, the contract is also hit  by  Section  38(v)  of  the  Wildlife

(Protection) Act, 1972 as amended in 2006.  

Therefore,  the  object  of  the

contract is forbidden by law. Hence,  the  said  contract  is  unlawful  and

cannot be given effect to. In these circumstances,  we  do  not  accept  the

contention of Dr. Dhawan, appearing on behalf of the appellants.

 

9.    Accordingly, we hold the High Court was correct in allowing  the  writ

petition, and we do not find any reason to interfere with the said order  of

the High Court. Hence, we do not find any merit in the appeal, and the  same

is dismissed.

2014 (March. Part ) judis.nic.in/supremecourt/filename=41342
GYAN SUDHA MISRA, PINAKI CHANDRA GHOSE

Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4026 OF 2014
[Arising out of Special Leave Petition (Civil) No.12463/2012]

 

Executive Director,
Steel Authority of India & Ors. … Appellants

vs.

Tycoon Traders & Ors. … Respondents

 

J U D G M E N T

 

Pinaki Chandra Ghose, J.

1. Leave granted.

2. This appeal has been filed against the order dated February 21, 2012
passed by the High Court of Karnataka in W.P. No.38280/2011.

3. The facts of the case reveal that on February 19, 2007, Steel
Authority of India (for short ‘SAIL’) had advertised for E-auction of 1.00
lakh metric tons of iron ore (fines) from Kemmanagundi mines. On March 13,
2007, auction was held and respondent No.1 was declared as the successful
tenderer. It would be evident from the sale order dated March 16, 2007 that
the price was agreed upon at [pic]1,132/- per metric ton plus VAT of 4%
aggregating to [pic]11,32,00,000/- plus VAT of 4%. The
appellant duly paid [pic]176 lakhs being 15% of the total sale value on
March 15, 2007. Out of the said amount, [pic]58.86 lakhs being 5% of the
total sale value was retained as Security Deposit and a sum of [pic]117.74
lakhs was kept for adjustment along with the final instalment. The balance
payment was to be made in two monthly instalments with the grace period of
30 days with interest at the rate of 6% per annum. The entire material was
to be lifted within four months from the date of the sale order.

4. On May 26, 2010, SAIL informed the respondent that the contract was
revalidated by letter dated July 27, 2009 till November 26, 2009 for a
period of four months commencing from July 27, 2009 and that the said
contract had expired on the lapse of the said period. It is also not in
dispute that on November 9, 2009, SAIL had addressed a letter to the
Principal Chief Conservator of Forests (Wildlife) and Chief Wildlife
Warden, Karnataka, for renewal of permission granted for lifting and
transporting iron ore fines through Bhadra Wildlife Sanctuary. The
Principal Chief Conservator of Forests by letter dated March 31, 2010,
declined to grant such permission for the removal of 1.00 lakh tons of iron
ore fines by plying vehicles. In these circumstances, the High Court held
that the contract itself stood frustrated and could not have been performed
by the respondent even if it desired to do so, and further held that in
case of frustrated contract, parties must be restored to their original
position.

5. On the basis of the aforesaid reason, the High Court held that it is
illegal and unconscionable for SAIL not to refund the entire sum of money
received by it from the respondent. The High Court further held that the
extension was granted at the instance of SAIL and such extension amounts to
waiver of the delivery conditions in the sale order dated March 16, 2007.
The High Court further held that the Bhadra Wildlife Sanctuary has been
declared as a ‘Tiger Reserve’ and that it is required to be maintained as
‘inviolate’ for tiger population, and the permission which has been refused
cannot be granted in view of section 38(v) of the Wildlife (Protection)
Act, 1972 as amended in 2006. In this background, the writ petition was
allowed and SAIL was directed to refund the entire amount within four weeks
from the date of the order.

6. Being aggrieved, the appellant filed the present appeal before this
Court. It was contended before us that this is a case where there was a
breach of contract which was committed by the respondent and thereby SAIL
has a right to forfeit the earnest money and security deposit on the basis
of such breach. It is also stated whether it would come within the purview
of a case of frustration of the contract. Dr. Rajiv Dhawan, learned senior
counsel appearing in support of the appellants, has drawn our attention to
the original agreement and contended that there was a breach of the
original agreement since no clearances were obtained, payments were not
made and further contract was not completed. It has been further submitted
that the respondent could not lift the iron ore fines although SAIL could
manage to get permission from the State Government. Furthermore, it is the
case of the appellant that in the light of the respondent’s request, the
contract was revalidated on July 27, 2009 on the same terms and conditions
and, in fact, there was no waiver of any conditions stipulated in the sale
order dated March 16 2007; therefore, on this question the High Court is
not correct since, according to him, there was no question of any waiver.
He further submitted that there was no frustration due to impossibility
because the Principal Chief Conservator of Forests had granted clearance.

7. Per contra, Mr. Sushil Kumar Jain, learned senior counsel appearing
on behalf of the respondent, drew our attention to the letter dated March
31, 2010 whereby the Principal Chief Conservator of Forests (Wildlife) &
Chief Wildlife Warden, Bangalore, has specifically stated to the General
Manager (Operations) of the appellant that Bhadra Wildlife Sanctuary was
declared as a Tiger Reserve and was required to be maintained as
‘inviolate’ for tiger population, hence, refused to allow the
transportation through the said Tiger Reserve under Section 38(v) of the
Wildlife (Protection) Act, 1972 as amended in 2006. By the said letter, the
request to lift and transport the iron ore fines was rejected. Therefore,
the contract which was entered into between the parties, as would be
evident, is in violation of the said Act and is against public policy.
Hence, the contract cannot be given effect to as the contract is already
frustrated. He also drew our attention to the fact that the appellant by a
fax message dated July 6, 2007 duly relaxed condition Nos.8, 9 and 10 as
stipulated in the G.O. dated 2nd May, 2007. Learned senior counsel further
contended that by relaxing the said conditions, there was no need for the
respondent to obtain permission. On the contrary it was the duty of the
appellant to take permission from the authority for implementation of such
contract.

8. After considering the submissions made on behalf of the parties, we
find that there is substance to accept the contentions of Mr. Jain, learned
senior counsel in the matter. In our opinion, the contract is unenforceable
and further, the contract is also hit by Section 38(v) of the Wildlife
(Protection) Act, 1972 as amended in 2006. Therefore, the object of the
contract is forbidden by law. Hence, the said contract is unlawful and
cannot be given effect to. In these circumstances, we do not accept the
contention of Dr. Dhawan, appearing on behalf of the appellants.

9. Accordingly, we hold the High Court was correct in allowing the writ
petition, and we do not find any reason to interfere with the said order of
the High Court. Hence, we do not find any merit in the appeal, and the same
is dismissed.

 

…….……………………..J.
(Gyan Sudha Misra)

 
New Delhi;
…………………………….J.
March 26, 2014. (Pinaki Chandra
Ghose)

 

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