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Friday, March 28, 2014

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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