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TMI Blog2013 (10) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract itself, the parties shall be bound by that and cannot take shelter behind Section 56 of the Contract Act - Rule 5(15) in no uncertain terms provides that “on the failure of the auction purchaser to make such deposit referred to in subrule 10” or “execute such agreement temporary or permanent” “the deposit already made by him towards earnest money and security shall be forfeited to Government” - the appellant had not carried out several obligations as provided in sub-rule (10) of Rule 5 and consequently, by reason of sub-rule (15), the State was entitled to forfeit the security money - In a contract under the Abkari Act and the Rules made thereunder, the licensee undertakes to abide by the terms and conditions of the Act and the Rules made thereunder which are statutory and in such a situation, the licensee cannot invoke the doctrine of fairness or reasonableness – Decided against Assessee. - Civil Appeal No. 9466 of 2003 - - - Dated:- 22-10-2013 - Chandramauli Kr. Prasad And V. Gopala Gowda,JJ. JUDGMENT Chandramauli Kr. Prasad,J. The appellant, aggrieved by the judgment and order dated 13.6.2002 passed by the Division Bench of the Kerala High Court in Writ Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in question. Notwithstanding that, the Excise Inspector of Kalady Range sent a notice dated 8.4.1994 to the appellant, inter alia, stating that the sale has already been confirmed in her favour. The appellant was asked to accept the confirmation notice and enter into a permanent agreement. By the said notice the Excise Inspector also called upon the appellant to show cause as to why further proceedings as contemplated under the Rules should not be initiated against her. The appellant filed her reply to show cause on 17.4.1994 reiterating her inability to run the arrack shops and further requested that all proceedings pursuant to the auction held on 24.3.1994 be cancelled and the amount already deposited by her be refunded to her. It seems that the cause shown by the appellant did not find favour with the authority and the Assistant Excise Commissioner, by notice dated 20.4.1995, called upon the appellant to pay a sum of Rs.33,41,400/- towards the balance amount payable by her, together with interest at the rate of 18% thereon. Revenue recovery notice dated 30.6.1995 was also issued for realisation of the aforesaid amount. The appellant challenged the aforesaid notices issued to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be applied for deciding the disputes between the parties. In this view of the matter, particularly when the contention of invalidity of sub-rule (15) and (16) of Rule 5 was negatived by the learned Single Judge, we are of the view that the rights and liabilities between the parties have to be worked out purely in accordance with the applicable rules. Accordingly, the Division Bench found that the offer of the appellant having been accepted, same could not have been withdrawn. For coming to the aforesaid conclusion, the High Court placed reliance on sub-rules (10) (15) of Rule 5 and observed as follows: 10. It is on the basis of these rules that the rights of the parties have to be determined. These rules really form the substratum of the contract between the parties, though all disputes arising between the parties have to be resolved in accordance with the principles of contract law, taking the rules as forming the basic contract between the parties. That the accepted offer is incapable of being withdrawn, is clear from the provisions under subrule( 10) of Rule 5. The first respondent, therefore, could not have purported to withdraw the offer or rescind the contract by lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties. The impossibility contemplated by Section 56 of the Contract Act is not confined to something which is not humanly possible. If the performance of a contract becomes impracticable or useless having regard to the object and purpose the parties had in view then it must be held that the performance of the contract has become impossible. But the supervening events should take away the basis of the contract and it should be of such a character that it strikes at the root of the contract. Yet another decision on which Ms. Aggarwal has placed reliance is the decision of this Court in Har Prasad Choubey v. Union of India, (1973) 2 SCC 746, in Paragraph 9 whereof it has been held as follows: 9. This elaborate narration would make it clear that the appellant had bid for the coal under the honest and reasonable impression that he would be allowed to transport the coal to Ferozabad, that this was thwarted by the attitude of the Coal Commissioner, that later on the parties proceeded on the basis that the auction sale was to be cancelled and the appellant refunded his money. But apparently because by that time much of the coal had been lost and the Railways would have been in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary licence before installation of the shop or shops. On the failure of the auction purchaser to make such deposit referred to in sub-rule (10) or take out such licence or execute such agreement temporary or permanent or furnish such personal surety or additional cash security as aforesaid, the deposit already made by him towards earnest money and security shall be forfeited to Government and the shop resold or otherwise disposed of by the Assistant Excise Commissioner subject to confirmation by the Board of Revenue. Disposal otherwise includes closure or departmental management. In the case of death of an auction purchaser before the execution of the permanent agreement, the same shall be obtained from the heirs of the deceased unless the Assistant Excise Commissioner subject to the confirmation by the Board of Revenue cancels the contract. In the case of death of an auction purchaser after confirmation of the sale of the shop or shops, his heirs, if any, shall be required to produce the necessary legal evidence in support of their claim and on production of the same the shop shall be transferred to them and pending such transfer the shop shall be run on departmental management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l or re-dispose of the arrack shops. In view of second paragraph of Section 56 of the Contract Act, a contract to do an act which after the contract is made, by reason of some event which the promissory could not prevent becomes impossible, is rendered void. Hence, the forfeiture of the security amount may be illegal. But what would be the position in a case in which the consequence for non-performance of contract is provided in the statutory contract itself? The case in hand is one of such cases. The doctrine of frustration excludes ordinarily further performance where the contract is silent as to the position of the parties in the event of performance becoming literally impossible. However, in our opinion, a statutory contract in which party takes absolute responsibility cannot escape liability whatever may be the reason. In such a situation, events will not discharge the party from the consequence of non-performance of a contractual obligation. Further, in a case in which the consequences of non-performance of contract is provided in the statutory contract itself, the parties shall be bound by that and cannot take shelter behind Section 56 of the Contract Act. Rule 5(15) in no u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither side was under challenge. Taking into account unequal bargaining power between the employer and the employee, the term in contract and the rules were held to be unconscionable, unfair, unreasonable and against the public policy. On these grounds, this Court struck down the termination as void. The relevant portion of the judgment reads as follows: 100 The said Rules form part of the contract of employment between the Corporation and its employees who are not workmen. These employees had no powerful workmen s Union to support them. They had no voice in the framing of the said Rules. They had no choice but to accept the said Rules as part of their contract of employment. There is gross disparity between the Corporation and its employees, whether they be workmen or officers. The Corporation can afford to dispense with the services of an officer. It will find hundreds of others to take his place but an officer cannot afford to lose his job because if he does so, there are not hundreds of jobs waiting for him. A clause such as clause (i) of Rule 9 is against right and reason. It is wholly unconscionable. It has been entered into between parties between whom there is gross in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and Others v. Issac Peter and Others (1994) 4 SCC 104, and our attention has been drawn to the following passage. 26 We are, therefore, of the opinion that in case of contracts freely entered into with the State, like the present ones, there is no room for invoking the doctrine of fairness and reasonableness against one party to the contract(State), for the purpose of altering or adding to the terms and conditions of the contract, merely because it happens to be the State. In such cases, the mutual rights and liabilities of the parties are governed by the terms of the contracts (which may be statutory in some cases) and the laws relating to contracts. It must be remembered that these contracts are entered into pursuant to public auction, floating of tenders or by negotiation. There is no compulsion on anyone to enter into these contracts. It is voluntary on both sides. There can be no question of the State power being involved in such contracts. We have given our most anxious consideration to the submission advanced and we do not find any substance in the submission of the learned counsel for the appellant and the decision relied on by her, in fact, carves out an exceptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties. This is so, even if the contract is governed by statutory provisions, i.e., where it is a statutory contract or rather more so. It is one thing to say that a contract every contract must be construed reasonably having regard to its language Now, referring to the decision of this Court in the case of Brojo Nath Ganguly (supra), the same related to terms and conditions of service and the decision in the said case has been approved by this Court in the case of D.T.C. Mazdoor Congress (supra). But while doing so, the Constitution Bench explicitly observed in unequivocal terms that doctrine of reasonableness or fairness cannot apply in a commercial transaction. It is not possible for us to equate a contract of employment with a contract to vend arrack. A contract of employment and a mercantile transaction stand on a different footing. It makes no difference when the contract to vend arrack is between an individual and the State. This would be evident from the following text from the judgment: 286. This principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal or where both parties are businessmen and the con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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