M/s. Karnataka Plywoods Sullia vs The Government of Karnataka and Others

N. Kumar, J.—As in all these appeals question involved is the same, though the parties are different and figures are different, they are taken up for consideration together and disposed of by this common judgment.

These appeals are preferred both by the plaintiffs as well as by the defendants challenging that portion of the decree which is hurting their interest. For the purpose of clarity, we set out the case of plaintiff in one case as it is identical in all suits except for the amount claimed in each plaint.

The plaintiff is the Government of Karnataka and the Deputy Conservator of Forests, Madikeri. Their case is that the defendant is the wood based industry to which the Government has supplied raw materials (wood) on the basis of agreement executed between the company and the Chief Conservator of Forests (GL), Bangalore, on behalf of the Government of Karnataka. The rates of the material supplied is fixed by Government of Karnataka from time to time. The Government of Karnataka issued a notification dated 20.03.1981 published in the Government Gazette (Extraordinary) dated 23.03.1981 introducing Section 101-A to Karnataka Forest Act, 1963. By the said provision, irrespective of any agreement of lease or any other document providing for supply of timber and other forest produce, the holder of such lease or agreement or any other document shall pay for such supply of timber and other forest produce at the seigniorage value specified in the rules made or orders passed under this section. The Government of Karnataka by way of notification dated 19.02.1981 published under the Karnataka Gazette (Extraordinary) dated 19.02.1981 has revised the seigniorage rate of the several categories of timber and other forest produces. However, several wood based industrial including the defendant made representation to the Government of Karnataka to consider the rate structure. Taking into account of such representation, the Government of Karnataka constituted an official committees to go into the question of revision of seigniorage rate and also to advise the Government thereon. In the meanwhile, the industry including the defendant industry were allowed to remove the forest produce at the previous 23.02.1981 rates. An undertaking was given by the defendant industry and other industries to the effect that they will pay the value of materials removed after 23.02.1981 at the rates finally fixed by the Government After taking into consideration the recommendation of the committee, the Government of Karnataka has revised the seigniorage rate of different types of wood with affect from 29.06.1982. As per the order dated 29.06.1982 of the chief Conservator of Forests, subsequently by the validation clause in Karnataka Gazette (Extraordinary) dated 14.06.1984 and tire order of the Chief Conservator of Forests, dated 29.06.1982 was deemed to have been validly made u/s 101-A of the Karnataka Forest Act, 1963 and with effect from 23.02.1981. The wood based industries including the defendant industry have further represented to the Government of Karnataka for granting them installment for the payment of the differential value for the materials removed between 23.02.1981 and 28.06.1982. The Government of Karnataka considered this also and ordered that the differential value shall be recovered in five equal installments commencing from the financial year 1985-86 with interest at 5% p.a. from 23.02.1981 to 13.01.1984 and to 10% thereafter.

The defendant industry is one of such wood based industry to which wood was supplied from Madikeri Division during the above period. The total differential value of the timber so supplied by the plaintiffs to the defendant was Rs.12,10,011.85/-, out of which the defendant paid a sum of Rs.2,73,919.86/-and the balance to be paid is Rs.9,36,091.99/-. The interest payable by the defendant to the plaintiff was Rs.6,26,751,65/-, out of which the defendant paid a sum of Rs.4,27,895.89/-. The remaining balance is Rs. 1,98,855.76/-. The defendant was also liable to pay a sum of Rs.2,94,827.31/- towards Forest Development Taxes, Rs. 1,90,321.35/- towards sales tax and other charges and Rs. 15,08,808.80/- towards penal interest, Then in para 9 they have set out the total amount claimed inasmuch as Rs.31,28,905.21/-. Inspite of repeated demands and notices, the defendant failed to pay the installments payable to the plaintiffs. The cause of action accrued to the plaintiffs against the defendant on 02.08.1978 and 02.05.1979 when the agreement was entered into between the plaintiffs and defendant for the supply of timber, on 27.09.1979, on 29.01.1981, on 19.12.1984 onwards at Madikeri within the jurisdiction of the Court, therefore, a suit was filed for recovery of a sum of Rs.31,28,905.21/- with, interest at 18% p.a.

After service of summons the defendant entered appearance and filed a detailed written statement contesting the claim of the plaint. The defendant company had rights to extract and remove the trees of conceded species and certain specifications marked and identified for the purpose after converting them into timber, lops and tops from annual coupe laid out by the Deputy Conservator of Forests on the basis of sustained yield. Extraction was done under the supervision of Forest Department as per the terms and conditions of this agreements between defendant company and Chief Conservator of Forests. They contended that the notification issued are not in accordance with law. However, they admit in the notification, dated 19.03.1981 the seigniorage rates of several categories of timber and other forest produce were revised. The direction of the Chief Conservator of Forests if enforced would have made it impossible for the defendant company to extract timber as increase in the rates under Rule 83 was of the extent of 600-800% and hence beyond the capacity of defendant company. Therefore, the defendant company and their association represented to the Government their defence. Upon their representation the Government was pleased to appoint an Official Committed to go into the question of revisions of rates of timber and other forest produce to wood based industries on the basis of which the Chief Conservator of Forests was to fee the rates under Section. 101-A of the Forest Act. On receipt of the recommendations of Official Committee, the Chief Conservator of Forests issued notification under amendment Act dated 29.06.1982 fixing the value of timber and various produce with immediate effect to he in force till 19.02.1984. The rates were effective prospectively. They disputed that the seigniorage value should be worked out by applying the rates prevalent on the date of sale. According to them the rate has to be worked out on the data of issue of felling permission. They contend there is dispute with regard to quantity of material lifted, held arid covered by the aforesaid notification. The plaint do not contain the correct differential value along with taxes for the material supplied during the relevant period. They have denial the clauses mentioned in para 8 of the plaint and they deny the liability to pay said amount. They deny liability to pay interest. They contend that the claim is very vague inasmuch as it does not give details of the claims or how the above amount of Rs.31,28,905.21/- is arrived at. It does not even show when the materials were lifted and what quantity of materials was lifted. In the absence of these details, the claim made is arbitrary. In fact, an attempt was made on the part of the defendants to seek better particulars with regard to the above details, which has not been responded by the plaintiffs. Since no details are given by the plaintiffs as to how the above figures are arrived at, the claim is not sustainable, and the plaint is liable to be rejected. The defendant specifically adverted to the notice dated 15.04.1991 sent to the second plaintiff seedling details as sought in para 3 of the above notice. Surprisingly plaintiffs did not supply the above details and did not send any reply. In the absence of particular therefore, the plaintiffs have no locus to file the above suit.

Then having regard to the order passed in this Court in W.P.No. 15778/789/1988 and contended that the plaintiffs were bound to ascertain their quantity of the trees cut prior to 23.02.1981, ascertain the quantity of trees which were felled, cut and removed and notify the same to the defendants and raise bills for the same to the amount payable on that count by submitting bills, Till date no such particulars are given, but no bills have been submitted, nor any demands have been made either. In view of the above fact, the present plaint as framed demanding payment of the above sum without necessary particulars ignoring the orders of this Court in the aforesaid writ petition is liable to be dismissed with costs. Even otherwise since there was no quantification of the trees felled, out and removed before the above specified date, non-submission of the bills, no demand having been made, the plaintiffs cannot claim any interest at all from this defendant or penal rate of interest also. According to them in view of the judgment of the Karnataka high Court they are not entitled to seigniogriorary right in respect to the trees which have been earmarked for felling, permit issued and not transported or transported for the period prior to 23.02.1981. Therefore, they sought for dismissal of the suit.

On the aforesaid pleadings, the Trial Court framed the following issues:

1) Whether plaintiffs prove that the defendant industry given undertaking that it will pay the value of materials removed after 23.02.1981 at the rates finally fixed by the Government?

2) Whether plaintiffs prove that the defendants requested for granting installments for payment of the differential value for the materials removed between 23.02.1981 and 26.06.1982, as alleged in para No. 6 of the plaint?

3) Whether plaintiffs prove that the defendant is due sum of Rs.31,28,905.21/- on the date of suit?

4) To what Order or decree?

In support of their claim, the plaintiffs examined its Official G.A. Sudarshan as PW.1 and produced 26 documents which are marked as Exs.P1 to P26. On behalf of the defendants one K. Krishna Kamath was examine as DW.1 and they marked copy of the order passed in W.P.No. 15778-789/1988 as Ex.D1.

The Trial Court on appreciation of the aforesaid oral and documentary evidence on record held that the plaintiffs have proved that the defendant industry has given undertaking that they will pay the value of the materials removed alter 23.02.1981 at the rates finally listed by the Government. It also held that the plaintiffs proved that the defendants requested for granting installments for payment of the differential value for the material removed from 23.02.1981 to 28.06.1982 as alleged in para 6 of the plaint. It further held that the plaintiff has proved that the defendant is due a sum of Rs.12,84,989/- as against the claim of Rs.31,28,905.21/- and accordingly it decreed the suit of the plaintiff partially. Aggrieved the said judgment and decree of the Trial Court, the defendants have preferred these appeals.

The Trial Court has awarded interest at the rate of 6% p.s. from the date of the suit till its realisation. It has net awarded penal interest, it has not awarded interest at 18%, Aggrieved by the said order, the State has preferred the appeals in all these cases.

That is how the appeal and the cross appeals are Noted before us.

The learned counsel appearing for the defendants/appellants submits that in view of the judgment of this Court as affirmed by the Supreme Court the law on the point is well settled. They have agreed to pay the seigniorage changes in accordance with law. They also undertook to pay in installments regarding the ammount found to be due. But the question is if the trees are out and removed in pursuance of a permit granted prior to 22.02.1981 use amount payable is in terms of the contract. It is only thereafter not with standing the contract the amount is payable as per the seigniorage rates fired by the Chief Conservator of Forests. According to them they have not cut and removed any tree after the aforesaid date and therefore, question of payment of seigniorage rate would not arise. In the entire plaint there is no mention of the date of issue of permit, the date on which the trees are cut, the date on which the trees are removed from the land and also the quantum of wood which is removed. In the absence of all these particulars, the amount claimed is without any basis. Inspite of their request to furnish these particulars and inspite of an order passed by this Court in an earlier proceedings to furnish these particulars and raise bill, the plaintiffs have not so far given the particulars and therefore, they contend the claim is without any basis and ignoring this aspect the Trial Court proceeded to degree the suit of the plaintiff, which also has no basis and therefore, they want judgment and decree to be set aside.

Per contra, learned Government Advocate submits that the agreement entered into between the parties is not in dispute. After the insertion of Section 101-A to the Forest Act, another agreement is entered into between the parties whereunder the defendants have agreed to pay the seigniorage charges, After the committee made its recommendations, the Chief Conservator of Forests has fixed the seigniorage rate. When the parties found difficulty in paying the said amount, the defendants and the association made representation and on the said representation they are permitted to pay the amount in 5 installments. In fact they have executed undertakings. It is after all these it is not open to the defendants to contend that they are not liable to pay any amount. It the cross-examination they have categorically stated that they have all the particulars of the permit, the date on which the trees are cut and the quantum of wood removed from the land. They having not furnished these particulars, they cannot be heard to contend that the plaint does not contain the particulars and therefore, he submits there is no merit in this case. In the light of the materials on record the plaintiff is entitled to 18% interest at well as penalty which is a term of the contract and the Trial Court committed an error in denying the contractual rate of interest as well as penalty. Therefore, he submits that the appeal filed by the State is to be allowed.

In the light of the facts and rival contentions, the points that arise for our combination is as under:

11 Whether the judgment and decree of the Trial Court is vitiated for not giving the particulars of the claim, though the amount is quantified?

2) Whether the Trial Court was justified in denying interest at 18% as well as penal interest?

We have set cut in detail the allegations in the plaint above. Though a specific amount is claimed after giving calculations, the bask for calculation is conspicuously missing in the plaint. The law on the point is now well settled by the judgment of this Court in the case of M/s. South Indian Plywood Manufacturer Association, Mysore and Other vs. State of Karnataka and Another reported in 1999 (4) KLJ 236 A(DD). The said judgment has been affirmed by the Apex Court in the case of State of Karnataka and others Vs. M/s. Southern India Plywood Co., Peramanoor, The said proceedings have attained finality. In order to apply the said law the facts must be clear. Prior to 23.02.1981, what the plaintiff is entitled to is only contractual rate of value of the wood. Subsequent to 23.02.1981, by virtue of amendment by introduction of Section 101-A to the Forest Act, the value to be paid is not the contractual rate but the seigniorage value to be fixed by the Chief Conservator of Forest. On this mere is no dispute. The dispute is when the permit was issued, when the trees were cut, when the logs were removed from the land and what is the quantum of logs which were removed, what is the contractual rate payable and what is the seigniorage value payable and what is the difference. These particulars are conspicuously missing in the plaint. Though in the plaint a specific amount is mentioned and deductions are given for the payment made by the defendants, how that basic figure was arrived at, is not forthooming. It is in that context the defendants are contending that unless these particulars are furnished it is not possible to collect the amount due. Their attempt to secure particulars has become futile. It is in that context they contend they have not cut and removed any trees subsequent o 23.02.1981 and therefore, they are not liable to pay seigniorage value. Though they have sought for installments and given undertaking that by itself would not foist any liability on the defendant to pay the amount in the claim. If the plaintiff proves what is the amount due by the defendant, then by virtue of the undertaking they are bound to pay the said amount and they will have the benefit of installments. When there is no liability to pay the amount, the question of installments and the undertaking is of no assistance. We find full force in this submission.

We have gone through the plaint, we have gone through the written statement, we have gone through the judgment of the Trial Count and we have gone through the documents on which the plaintiffs have relied. We are unable to make out form the material on record what is the date of the permit, what is the date on which trees were cut, when the logs were transported front the land and what is the quantum of wood transported, what is the contractual rate, what is the seigniorage value. Unless these particulars are furnished in support of the claim made in the plaint, it is not possible to hold that the plaintiff has established its claim. In fact unfortunately there is no issue on this aspect at all in the suit. On the contrary the issue which has been raised deals with question whether the defendant have agreed to pay amount in installments, whether the defendant has given undertaking and that question has been answered in favour of the plaintiff and against the defendant. That issue will not substantiate the claim of the plaintiff. If the plaintiffs claim is upheld then the question of granting installments, reinforcing undertaking given would arise. They have denied the basic liability. In these circumstances, the judgment and decree of the Trial Court cannot be sustained. At the same time in view of the aforesaid undertaking given and the request for installments being made and granted by the Government, it cannot be said that the claim made by the plaintiff is frivolous one. The forest produce has been out and removed and if amount due in law is not paid to the plaintiff it is public at large who will be the losers.

In these circumstances, we are of the view that justice to the case would be met by setting aside the judgment and decree of the Trial Court and remanding the matter back to the Trial Courts permit the plaintiff to amend the plaint, furnish the particulars of the claim as referred to above and thereafter give an opportunity to the defendant to have its say by way of an additional written statement, then frame issues, permit both the parties to adduce evidence and write judgment keeping in mind the law declared by this Court as well as the Apex Court as referred, to in the aforesaid judgment and observations made by this Court. That would meet the ends of justice.

Insofar as denial of 18% interest and penal interest is concerned, as we have set aside the judgment and decree, the finding regarding that also is set aside and the matter is remanded back to the Trial Court for fresh consideration. As the judgment and decree of the Trial Court is set aside and the matter is remanded for fresh decision by the lower Court, the appellants/defendants would be entitled to refund of the full amount of fee paid on the memorandum of appeal.

In that view of the matter we pass the- following order:

ORDER

i) Appeal is allowed.

ii) The judgment and decree of the Trial Court is hereby set aside.

iii) The entire matter is remanded back to the Trial Court and the Trial Court to,-

a) permit the plaintiff to amend the plaint furnishing the full particulars,

b) permit the defendant to file additional written statement,

c) frame appropriate issues on the basis of the amended pleadings in addition to issues which are already framed.

d) Permit both parties to adduce oral and documentary evidence, if they choose to do so.

e) Consider entire evidence on record, the arguments of the parties keeping in mind the aforesaid judgments and pass a judgment and decree on merits and in accordance with law.

iv) This exercise shall be dorm within six months from the date of receipt of this file before Trial Court.

v) Both the parties are directed to appear before the Trial Court on 03.01.2012 without waiting for any fresh summons from the Court below.

vi) Office is directed to transmit the entire records forthwith to the Trial Court.

vii) Office to refund the full amount of fee paid on the memorandum of appeal to the appellants/defendants.

viii) Parties to bear their own costs.