Murrah Livestock Corporation vs State Of Tripura And Ors

By means of this writ petition, the petitioner, namely, Murrrah Livestock Corporation, a proprietorship firm has urged this court to quash the letter bearing No.TMU/RKVY(Cat.Ind)/2009 dated 05.11.2011 by which it has been communicated to the petitioner that the amount of Rs.5,47,500/- has been forfeited for breach of contract. It has been further urged to direct the respondent to refund the said sum to the petitioner along with interest from the date of forfeiture.

The petitioner entered into an agreement with the respondent No.2 on 09.01.2010 for supply of 150 or more Cross Breed Milch Cows with their cubs at the rate specified in the tender document. In terms of the said agreement, the petitioner was asked to deposit a sum of Rs.2,73,750/- as security money. Subsequently, the said quantity was increased from 150 to200, and that quantity was duly agreed.

In furtherance of the firm order for the additional quantity, the petitioner delivered 200 cows to the respondent No.2. In acknowledgment of full and satisfactory supply, work completion certificate was issued in favour of the petitioner on 16.11.2010 (Annexure P-2 to the writ petition).

The petitioner thereafter had asked for refund of the security deposit, but the respondent No.2 did not return the said security deposit. Not only that, an outstanding amount was due to the petitioner from the respondent No.2 on account of the EMD and along with the said outstanding payment, the petitioner was entitled to payment of Rs.05,58,400/- in total.

On 13.04.2011 another agreement (Annexure P-3 to the writ petition) was executed between the petitioner and the respondent No.2 for supply of 300 Jersey Cross-Breed Pregnant Heifers. As per the second agreement (Annexure P-3 to the writ petition), firm order was supposed to be placed by he respondent No.2 only after receiving the security deposit @ 5% of the total purchase value.

The petitioner was supposed to deposit Rs.5,32,500/-for the entire quantity of 300 Jersey Cross-Breed Pregnant Heifers. The petitioner sought „no objection‟ from the Deputy Commissioner, Haryana for transport of 300 Jersey Cross-Breed Pregnant Heifers from Ambala, Haryana to Tripura.

The Deputy Commissioner forwarded the requesting letter of the petitioner to the Superintendent of Police, Ambala and the Superintendent of Police, Ambala on 09.08.2011 refused to allow the permission for transport of 300 Jersey Cross-Breed Pregnant Heifers on the ground of law and order problem.

The petitioner has enclosed all such communications with the writ petition as Annexure P-4 (collectively). Thus, the petitioner was not in a position to supply 300 Jersey Cross-Breed Pregnant Heifers as per the second agreement, and hence, the petitioner did not deposit the security deposit to the extent of 5% of the total purchase value i.e. Rs.5,32,500/- as required for execution of the said agreement.

Since the petitioner was unable to get the permission from the Superintendent of Police, Ambala, the said development was brought to the notice of the respondent No.2, by the letters dated 19.08.2011, 26.08.2011 and 08.09.2011 (Annexure P-5 collectively).

The respondent No.2 had sent a selection team to Delhi for selection of cows and the petitioner had taken the team to the office of the Deputy Commissioner. The petitioner had duly apprised the selection team about the fact of not getting permission from the Deputy Commissioner, Ambala.

Thereafter, to the utter astonishment of the petitioner, the respondent No.2 issued the letter dated 05.11.2011 forfeiting the sum of Rs.5,47,500/- for alleged breach of contract.

The petitioner did not make any separate security deposit for the second agreement with the respondent No.2. The security deposit for the first agreement and the outstanding bill amounting to Rs.5,58,400/- was lying with the respondent No.2. That amount did not have any relation with the second agreement. Hence, the petitioner has asserted that the forfeiture of the said amount for alleged breach in execution of the second agreement is grossly untenable. Even the respondent No.2 did not place any purchase order. Thus, the contract cannot be treated binding on the petitioner. The petitioner, thereafter, has averred that the petitioner was visited by impossibility of executing the said agreement and the cause of such impossibility was duly communicated to the respondent No.2.

The Director of Animal Resource Development Department, Government of Tripura on 16.04.2011 issued a certificate to the effect that the cows may be transported from Ambala [within Haryana] to Tripura on priority basis. Even after such certificate was issued by the Director of Animal Resource Development Department, the Deputy Commissioner, Ambala did not give the permission to the petitioner to transport the cows from Ambala to Tripura.

The petitioner did never authorize that the outstanding payment against the first agreement might be converted in the security deposit for the second agreement and as such, the respondent No.2 was under obligation to make refund or payment of the said amount.

Hence, the petitioner has contended that the impugned letter dated 05.11.2011 (Annexure P-6 to the writ petition) is not sustainable and be interfered by this Court, directing the respondent to refund the outstanding amount, as stated above, to the petitioner, with interest.

The respondents have filed their reply. The respondents have categorically stated that the forfeiture has been made for breach of the contract by the petitioner and they have referred to the contract which was executed on 13.04.2015 (Annexure P-3 to the writ petition). For purpose of reference, clause 2 of the agreement/contract dated 13.04.2011 is reproduced:

"2. The first party shall place the confirmed order to the second party only after receiving the security deposit @ 5% on the offered/negotiated rate of Rs.35,500/-(Rupees thirty five thousand five hundred) only, per pregnant heifer for the total number of 300 heiferes. Thus, the second party shall deposit the security money of Rs.5,32,500/- for the total number of 300 numbers Jersey Cross-Bred Pregnant Heifers in the name of the Managing Director, The Tripura Cooperative Milk Producer's Union L.td. The second party shall also submit the agreement papers duty signed by the second party along with the security money."

The petitioner has categorically stated that the security deposit was not made nor the petitioner had given any consent of converting the amount that was lying outstanding be paid, by the respondent No.2 as the security deposit for purpose of the said agreement dated 13.04.2011 (Annexure P- 3 to the writ petition).

The petitioner has further asserted that since the petitioner did not deposit the said security money, no firm order was issued for supply. Thus, there cannot be any breach of contract. Unless firm order is issued, the petitioner, in terms of clause 2 of the said agreement, cannot be obligated to give any compensation either in the form of forfeiture or by any other means.

On scrutiny of the said agreement, no express provision is found there postulating that any outstanding can be forfeited by the respondent No.2. However, the respondents have asserted that by the communication dated 08.08.2011 (Annexure R-6 to the writ petition), the petitioner was apprised that a sum of Rs.5,47,500/- was realized as security money for the year 2010-2011 meaning, for the second agreement/contract. According to them, the petitioner had accepted the said position.

So far the petitioner‟s complaint is concerned, it hinges on the plea that no show cause was issued prior to issuance of the order dated 05.11.2011. The respondents have however, stated that it is not correct. This court does not find any positive assertion how the show cause was issued to the petitioner asking why the outstanding amount, which had been converted into security deposit, would not be forfeited.

There is no dispute as regards the agreed price per unit Jersey Cross-Breed Pregnant Heifer. The petitioner‟s case, simple and straight, is that for impossibility which has surfaced from denial of permission by the Superintendant of Police, Ambala to transport 300 Jersey Cross-Breed Pregnant Heifers, the contract is bound to be frustrated. The petitioner has informed the frustration of the contract for the said impossibility.

In their reply, the respondents have categorically stated that the petitioner had defaulted in depositing the total amount of security with the respondent No.2. The security money to the extent of Rs.2,73,750/- and the outstanding payment against the bill No. 0306/2011 was lying after payment of Rs.6,63,850/-.

As the petitioner defaulted in depositing the security, according to the respondent No.2, the said amount of Rs.5,47,500/- was realized and the balance sum of Rs.3,90,100/- was released in favour of the petitioner. Even the money receipt of the sum of Rs.5,47,500/- under No.3834 was sent to the petitioner under the communication No. TMU/RKVY(Cat.Ind)/2009 dated 08.08.2011 (Annexure R-6 to the reply).

The petitioner did not raise any objection in respect of the said conversion. However, on 01.08.2011, the petitioner apprised that there were certain bottlenecks and they were waiting for clearance for transporting the cows by rail. Accordingly, a team visited New Delhi on 19.08.2011 for selection of Jersey Cross-Breed Pregnant Heifers under RKVY scheme. Even though the petitioner was asked to keep the arrangement ready but he did not cooperate with such inspection by the said team. In that event, as the petitioner had failed to effect the supply, the said security deposit was forfeited. The petitioner was persuaded to complete the supply but the petitioner failed to do so.

Surprisingly, the respondents in their reply, did not make any statement in respect to the impossibility that has been pleaded by the petitioner. According to them, this writ petition is unsustainable and it requires to be dismissed in limine.

Mr. A Bhowmik, learned counsel appearing for the petitioner has quite succinctly submitted that the action of the respondents in respect of the forfeiture of the said amount of Rs.5,47,500/- as communicated by the letter dated 05.11.2011 is grossly arbitrary and anathema to Article 14 of the Constitution of India. Hence, the writ petition is maintainable. He has further stated that in absence of firm order placed to the petitioner and formation of the security deposit with consent, there cannot be any breach of contract in view of clause 2 of the said contract/agreement dated 13.04.2011.

Mr. S Deb, learned senior counsel appearing for the respondent No.2 has submitted that the petitioner has alleged conversion by reflecting on the bottleneck faced by them in causing supply of 300 Jersey Cross-Breed Pregnant Heifers. Now, he cannot take resort to clause 2 of the contract/agreement.

Counsel for the respondent has quite succinctly submitted that breach of contract is apparent on the face of records, as the petitioner has accepted that he has totally failed to cause any supply in terms of the contract agreement dated 13.04.2011. Hence, there is no arbitrariness in the action of forfeiture when the breach is admitted.

Mr. Deb, learned senior counsel thereafter, contended that this writ petition is not maintainable as the claim emerges completely out of a contract. If any action, arising from such contract, is disputed by any of the contracting parties, to adjudicate such dispute filing of the writ petition cannot be accepted as remedial action, particularly when, it has been provided in the contract that all disputes, questions or difference or any interpretation thereof arising out of this agreement, shall be at first instance, mutually discussed and resolved by mutual agreement, failing which the dispute will be settled by the Board of Tripura Cooperative Milk Producers Union Ltd. (TCMPUL). Decision of the Board of TCMPUL shall be final and binding on both the parties.

The question therefore falls for consideration of this court is whether a writ petition can be maintained on the face of the existence of a clause in the contract of the nature as stated above.

Mr. Deb, learned senior counsel has relied on a decision of the APEX court in Kerala State Electricity Board and Anr. vs. Kurien E. Kalathil & Ors. reported in (2000) 6 SCC 293 to impress upon this court that in presence of an efficacious and alternative remedy, the writ petition will not be maintainable. Unless the remedy is exhausted, the court should not entertain such writ petition. In Kurien E. Kalathil (supra) the plea that was raised was that the dispute relating to interpretation of a clause in a contract and implementation of such clause cannot be made subject matter of a writ petition and the remedy of the aggrieved person lies in approaching the civil court or to the other forum, as provided in the contract.

The apex court has observed that interpretation and implementation of a clause in a contract cannot be subject matter of a writ petition. Whether the contract has envisaged actual payment or not, is a question of construction of contract. If a term of a contract is violated, ordinarily the remedy is not under Article 226 of the Constitution. It has been further observed that the dispute relating to interpretation of terms and condition of such a contract could not have been agitated in a petition under Article 226 of the Constitution. Such dispute is required to be adjudicated by a civil court or in arbitration or conciliation, if provided in the contract.

Mr. Deb, learned senior counsel has also placed his reliance on Rajasthan State Industrial Development and Investment Corporation and Anr. Vs. Diamond and Gem Development Corporation Ltd. and Anr, reported in (2013) 5 SCC 470 where having approved Kurien E. Kalathil (Supra) the apex court has restated the law, that generally the court should not exercise its writ jurisdiction to enforce the contractual obligation. There cannot be any confusion that the primary purpose of a writ of mandamus is to protect and establish rights and to impose a corresponding imperative duty existing in law. It is designed to promote justice [ex debito justicia] the grant or refusal of the writ is at the discretion of the court. The writ cannot be granted unless it is established that there is an existing legal right of the applicant or an existing duty of the respondent. Thus, the writ does not lie to create or establish a legal right but to enforce one that is already established. While dealing with the writ petition, the court may exercise discretion, taking into consideration a wide variety of circumstances, inter alia, the facts of the case, the exigency that warrant such exercise of discretion, the consequence of grant or refusal of the writ and the nature and extent of injury that is likely to ensue for grant or refusal.

It has been quite unequivocally stated in stated in Rajasthan State Industrial Development and Investment Corporation (supra) that such discretion must be exercised by the court on the grounds of public policy, public interest and public good. Writ is equitable in nature and thus its issuance is governed by equitable principle. Refusal of writ must be for reasons which would shun injustice. The prime consideration for issuance of the writ is whether or not, substantial justice will be promoted. Furthermore, while granting such a writ, the court shall make every effort to ensure from the averments of the writ petition, whether there exists proper pleadings. In order to maintain the writ of mandamus, the first and foremost requirement is that the petition must not be frivolous and must be filed in good faith. Additionally, the petitioner shall make demand which is clear, plain, and unambiguous. It shall be made to an officer having the requisite authority to perform the act demanded. Furthermore, the authority against whom the mandamus is issued should have rejected the demand earlier. Therefore, a demand and its subsequent refusal, either by words or by conduct are necessary to satisfy the court that the opposite party is determined to ignore the demand of the petitioner with respect to enforcement of the legal right. However, a demand may not be necessary when the same is manifest from the facts of the case, i.e. when it is an empty formality and when it is obvious that the respondent would not consider the demand.

Having appreciated the submission of the learned counsel in the perspective as surfaced from averments & documents, this court is of the view that there is no dispute in respect of the fundamental facts related to the controversy as raised in the writ petition. Moreover, the demand as made by the petitioner is very clear that the amount, which was in no way related to the second contract agreement, cannot be forfeited as it appears from the reply filed by the respondent No.2 that they had unilaterally converted the amount of Rs.5,47,500 as the security deposit without any consent from the petitioner. However, they had communicated such adjustment.

Even if it is considered that they had communicated the conversion, the action will not be free from the vice of arbitrariness. That apart, it is admitted that no firm order was placed to the petitioner at any point of the time. There is no averment in the reply how the respondents have suffered damage or any loss for impossibility assigned by the petitioner. The respondents in their entire reply, did not state anything in respect of the factual assertion on impossibility. The petitioner has demonstrated an unsumountable bottleneck, in executing the contract. They have not stated anything whether the so called bottleneck or impossibility is real or just projected without any basis. Non-traverse, even though not admitted, has its ramifications. The petitioner has narrated the kind of "bottlenecks" they had been suffering. It appears that the respondents have acceded to the claim of impossibility. When the respondents could not show that they suffered loss or damage, the forfeiture is clearly an unjust enrichment. Moreover, this court on the face of the record, is inclined to accept the fact of impossibility leading to frustration of the contract and hence, no compensation can be be imposed on the petitioner.

In such circumstances, on the principle of equity, this court is of the view that it can exercise its jurisdiction for issuance of mandamus, directing the respondents to refund the said amount of Rs.5,47,500/, forfeiture of which has been communicated by the letter bearing No. TMU/RKVY(Cat. Ind)/2009 dated 05.11.2011, within a period of 3(three) months. However, this court is not inclined to direct the respondents to pay interest.

Accordingly, it is ordered. As consequence thereof, the letter dated 05.11.2011 (Annexure P-6 to the writ petition) stands quashed.

In the result, the writ petition is allowed. There shall be no order as to cost.