The Government Of Karnataka vs M/S Karnataka Veneering ...
2022 Latest Caselaw 1508 Kant

                                     1




      IN THE HIGH COURT OF KARNATAKA AT BENGALURU

             DATED THIS THE 2ND DAY OF FEBRUARY, 2022

                                 PRESENT

               THE HON'BLE Mr. JUSTICE G. NARENDAR

                                   AND

     THE HON'BLE Mr. JUSTICE SHIVASHANKAR AMARANNAVAR

                          R.F.A. No. 1779/2007

BETWEEN :
--------------

1.        The Government of Karnataka
          Represented by its
          Chief Secretary
          Vidhana Soudha
          Bangalore - 560 001.

2.        The Deputy Conservator
          of Forest, Madikeri Division
          Madikeri - 571 201.              ... APPELLANTS

(By Sri. C.M. Poonacha, AGA)

AND :
-------

M/s. Karnataka Veneering
Industries, Mysore -570 001
Represented by its
Chief Executive
C. Narayana Reddy.                         ... RESPONDENT

(Respondent is served and unrepresented)
                               ---
                                2




     THIS RFA IS FILED UNDER SECTION 96 OF CPC AGAINST
THE JUDGMENT AND DECREE DT. 16.04.2007 PASSED IN
O.S.NO.42/2000 ON THE FILE OF THE CIVIL JUDGE (SR.DN)
MADIKERI, PARTLY DECREEING AND PARTLY DISMISSING THE
SUIT FOR RECOVERY OF MONEY.

     THIS RFA HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT, THIS DAY, SHIVASHANKAR AMARANNAVAR J,
DELIVERED THE FOLLOWING;


                      JUDGMENT

The appellants - plaintiffs being aggrieved by the

judgment and decree dated 16.04.2007 passed in O.S. No.

42/2000 by the Civil Judge (Senior Division), Madikeri,

whereunder part of the claim of the appellants - plaintiffs has

been rejected have preferred this appeal.

2. The parties will be referred as per their trial Court

rankings. The appellants were plaintiffs and respondent was

defendant before the Trial Court.

3. The plaintiffs filed the suit against the defendant for

recovery of a sum of Rs.9,68,947.86 with interest at 18%

annually. Brief facts as averred in the plaint are that the

defendant concern is a wood based industry to which the

Government of Karnataka has supplied raw materials (wood)

on the basis of an agreement executed between the Company

and Chief Conservator of Forests, Bengaluru on behalf of the

Government of Karnataka. The rates of materials supplied is

fixed by the Government of Karnataka from time to time.

a) The Government of Karnataka in Notification No.

LAW/55/KGN/78 dated 20.03.1981 published in

Government Gazette (Extraordinary) dated 23.03.1981

introduced in Section 101-A to Karnataka Forest Act,

1963 (for short hereinafter referred to as `the Act'),

irrespective of any agreement of lease or any other

document providing 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 under this Section.

b) The Government of Karnataka in Notification No. FFD-

100/FDP/80 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 products. However, several

wood based industries including the defendant made

representation to the Government of Karnataka to

reconsider the rate structure. Taking into account such

representation, the Government of Karnataka

constituted an official committee to go into the question

of revision of seigniorage rate and also to advise the

Government thereon. In the meanwhile the industries,

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.

c) After taking into consideration the recommendation of

the committee, the Government of Karnataka has

revised the seigniorage rates of entire kind wood with

effect from 29.06.1982 as per the order No.

A6/IND/76/80-81 dated 29.06.1982 of the Chief

Conservator of Forests. Subsequently by the validation

clause introduced in Karnataka Gazette (Extraordinary)

dated 14.06.1984 and the order of the Chief

Conservator dated 29.06.1982 was deemed to have been

validly made under Section 101-A of the Act with effect

from 23.02.1981.

d) The Wood based industries including the defendant

industry had further represented to the Government of

Karnataka for granting them installment for 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.

e) The defendant industry is one of such wood based

industry to which wood was supplied from Madikeri

division during the above period and total differential

value along with all taxes for the materials supplied

during the above period.

f) The total differential value of the timber so supplied by

the plaintiffs to the defendant was Rs.6,52,267.22 out of

which the defendant had paid a sum of Rs.4,20,655.47

and the balance to be paid was Rs.2,31,611,75. The

defendant was liable to pay a sum of Rs.3,28,008.89

towards interest out of which the defendant paid a sum

of Rs.2,68,166.45. The balance payable was

Rs.59,841.94. The defendant was also liable to pay a

sum of Rs.1,62,297.18 towards forest development

taxes and the defendant was also liable to pay a sum of

Rs.1,74,454.60 towards sales tax and other taxes. The

defendant was also liable to pay a sum of

Rs.3,40,642.39 towards penal interest and in all a sum

of Rs.9,68,947.86.

4. The defendant in response to suit summons appeared

through counsel and filed written statement. The gist of the

written statement filed by the defendant is as under:

The defendant admitted that it is a wood based industry

to which the Government of Karnataka had supplied raw

materials on the basis of the agreement executed between the

company and the Chief Conservator of Forests (GL),

Bengaluru on behalf of the Government of Karnataka. The

rates of the material supplied were fixed by the Government

of Karnataka from time to time. It was also admitted that the

Government of Karnataka in Notification No.

LAW/55/KGN/78 dated 20.03.1981 published in

Government Gazette (Extraordinary) dated 23.03.1981

introduces in Section 101-A of the Act irrespective of any

agreement of lease or any other document providing 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 defendant company and the South Indian

Plywood Manufacturers Association represented to the

Government their difficulties and upon their representations

the Government was pleased to appoint an official Committee

to go into the question of revision of rates of timber and other

forest produce to wood based industries on the basis of which

the Chief Conservator of Forests was to fix the rates under

Section 101-A of the Act. It was also contended that the State

Government, on receipt of the recommendations of the official

Committee appointed, issued order bearing No. FFD.161.FDP

81 dated 29.06.1982 fixing the rates of various varieties of

timber and forest produce which was to come into effect

immediately and prospectively. On the basis of this

Government Order the Chief Conservator of Forests issued

Notification under the Amendment Act on 29.06.1982 fixing

the value of timber and forest produce with immediate effect

to be in force till 19.02.1984. The Government Order and the

Notification of the Chief Conservator of Forests made these

rates effective prospectively. It was further contended by the

defendant company that supply of raw materials under the

agreements for sale of goods and that the calculation of

differential seigniorage value should be worked out by

applying the rates prevailing on the date of sale and the date

of sale is the date on which the title passes when specific

goods are identified for sale and hence, the date of issuing

felling permission or order of trees identified for felling by the

defendant company in the area is the material date which

becomes the date of sale for the trees which are identified for

sale i.e, permitted for felling. It was also contended that after

taking into consideration the recommendation of the

Committee, the Government of Karnataka has revised the

seigniorage rates of entire kinds of wood with effect from

29.06.1982. As per the order No. A6/IND/76/80-81 dated

29.06.1982 of the Chief Conservator of Forests, subsequently

by the validation clause introduced in Karnataka Act No. 11

of 1984 published in Karnataka Gazette (Extraordinary) dated

14.06.1984 and the order of the Chief Conservator of Forests

dated 29.06.1982 was deemed to have been validly made

under Section 101-A of the Act and with effect from

23.02.1981. It was also admitted that the wood based

industries including the defendant industry had further

represented to the Government of Karnataka for granting

them installment for the payment of differential value for the

materials removed between 23.02.1981 and 28.06.1982. The

Government 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

the rate of 5% p.a. from 23.02.1981 to 13.01.1984 and 10%

thereafter. It was also contended that the Government of

Karnataka promised to consider the representation of this

defendant as well as other similar industries in view of the

fact that the Notification dated 23.12.1981 was challenged by

this defendant as well as others before the High Court of

Karnataka in W.P. No.37964/1982 and on account of the

representation made, assuming that the plaintiff would keep

up the promise made, writ petition was withdrawn. But it was

not admitted that the defendant industry is one of such wood

based industries to which wood was supplied from Madikeri

division during the above period and total differential value

along with all taxes for the materials supplied during the

above period was valued at Rs.6,52,267.22 as claimed in

plaint para 8. It was contended that while it was agreed that

revision on seigniorage rate would be paid only in respect of

produces covered by Notification dated 23.02.1981 there is a

dispute with regard to quantity of the materials lifted, held

and covered by the above Notification. It was also denied that

the materials worth Rs.6,52,267.22 was supplied by the

plaintiffs to the defendant after 23.02.1981. In respect of the

materials so supplied before 23.02.1981, Rs.4,20,655.47 was

paid, claims that it was made in respect of materials supplied

after 23.02.1981 is not correct. Payments made being in

respect of materials supplied prior to 23.02.1981, there is no

question of making balance payment by the defendant at

Rs.2,31,611.75. It was also denied that any interest is

payable by the defendant in a sum of Rs.3,28,008.89.

Further, it was denied that out of it the defendant has paid

Rs.2,68,166.45 and kept due a sum of Rs.59,841.94. Further

it was denied that the defendant is required to pay a sum of

Rs.1,62,297.18 towards Forest Development Taxes and

Rs.1,74,454.60 towards Sales Tax and Rs.3,40,642.39

towards penal interest, in all Rs.9,68,947.86. It was

contended that the defendant and others had filed a writ

petition in W.P. No. 15778-189/1988 wherein the petitioners

therein had challenged approprity of the action of the plaintiff

to act according to the assurance already committed on

17.01.1984. The plaintiff being party thereto, the High Court

while disposing of the above writ petition on 11.09.1996 had

specifically ordered as under:

Under the circumstances, Writ Petitions are partly allowed by directing the respondents (plaintiffs herein) to charge, from Petitioners the value of trees cut by them prior to 23.02.1981 at the agreed rate and not seigniorage rates in terms

of the amended Act and Rules. The Respondents (plaintiffs herein) shall ascertain the quantity of such trees, which were felled and cut and removed prior to 23.02.1981 and notify to the Petitioners the amount payable on that account. On receipt of bills, the petitioner shall be liable to make payment of the determined amount within the time as may be specified by the government.

5. In view of the aforesaid order, the plaintiffs were

bound to ascertain the quantity of the trees cut prior to

23.02.1981, ascertain the quantity of such trees which were

felled, cut and removed before that date, notify the same to

the defendants and raise bills for the same to the amount

payable on that count by submitting bills. That not only no

such particulars are given but no bills have been submitted

nor any demands have been made either. The plaintiffs are

not entitled for such claims.

6. On the basis of the above pleadings, the trial Court

framed the following issues.

i. 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?

ii. Whether plaintiffs prove that the defendant

requested for granting installment for payment of

the differential value for the materials removed

between 23.02.1981 and 28.06.1982 as alleged in

para No. 6 of the plaint?

iii. Whether plaintiffs prove that the defendant is due

sum of Rs.9,68,947.86 Ps on the date of suit?

iv. To what order or decree?

7. The plaintiffs in order to establish their case got

examined its official as P.W.1 and got marked 18 documents.

The Managing Partner of the defendant company has been

examined as D.W.1 and got marked one document. After

appreciating the evidence on record and taking into

consideration the contentions of the parties the trial Court

has answered issue Nos. i and ii in the affirmative and issue

No. iii partly in affirmative. The trial Court has partly decreed

the suit and directed the defendant to pay the following

amounts.

      towards differential value          -     Rs.2,31,612

      towards interest                    -     Rs.59,842

      towards forest development tax      -     Rs.52,181

      towards sales tax and surcharge -         Rs.28,700

(Totally Rs.3,72,335 together with interest at 6% p.a.) The

present appeal has been filed by the plaintiffs being

dissatisfied with the amounts granted by the trial Court and

for not granting the amount in entirety as claimed in the

plaint.

8. Heard Sri. C.M. Poonacha, learned Additional

Government Advocate for the appellants - State. The

defendant - respondent inspite of service of notice remained

absent and unrepresented.

9. The learned Additional Government Advocate would

contend that the trial Court ought to have allowed the claim

of the plaintiffs in its entirety with regard to forest

development tax in a sum of Rs.1,62,297.18, as well as sales

tax and surcharge in a sum of Rs.1,74,454.16 as it is

specifically covered under clause 3 of Ex.P.1 and Ex.P.2

agreements and it is not specifically disputed by the

defendant with regard to the calculations made by the

plaintiffs in respect of forest development tax, sales tax and

surcharge. He would contend that the trial Court has not

granted penal interest as claimed by the plaintiffs. Plaintiffs

had claimed interest 5% p.a. from 23.02.1981 to 13.01.1984

and 10% thereafter. The trial Court only awarded interest at

the rate of 5% p.a. for 3 years and interest portion calculated

at 10% has not been granted by the trial Court.

10. On hearing the arguments advanced by the

learned Additional Government Advocate and on perusal of

the records the following point arises for consideration:

Whether the trial Court has erred in rejecting a portion of the claim of the plaintiffs-appellants towards forest development tax, sales tax and other taxes and penal interest?

11. The answer to the above point is partly in

affirmative for the following reasons :

The defendant company had undertaken to pay the

differential value as fixed by the Government from time to

time and agreed to receive the materials from the plaintiffs

subject to the conditions mentioned in the

agreements/undertakings Ex.P.1 to Ex.P.10. The materials so

supplied by the plaintiffs to the defendant company under the

permits is subsequent to the amendment to Section 101-A of

the Act which came into force from 23.02.1981. The plaintiffs

have supplied the soft wood to the industry of the defendant

in pursuance of 1963 agreement and other supplementary

agreements. The soft wood had been removed by the

defendant between 23.02.1981 to 31.05.1984. The said

aspect itself reveals that it is after 23.02.1981 i.e.,

amendment to Section 101-A of the Forest Act. The plaintiffs

filed the suit only for recovery of differential value for the

materials supplied to the defendant between 23.02.1981 to

28.06.1982. Ex.P.1 to Ex.P.10 are agreements,

supplementary agreements and undertakings between the

plaintiffs and defendants and show that the defendant

Company had agreed to pay differential value of the timber in

pursuance of Section 101-A of the Act and the defendant

company is liable to pay differential value of the timber fell,

cut and transported after 23.02.1981 at new rate. The

defendant company had taken the contention that they cut,

fell and removed the said timber prior to 23.02.1981 and as

such it is not liable to pay the difference amount. The said

contention has not been accepted by the trial Court as the

defendant has not produced any documents in that regard.

The defendant has not challenged the said finding of the trial

Court either by filing an appeal or cross-objection. The

defendant company has undertaken to pay the said

differential value or seigniorage of the material so supplied

between 21.02.1981 to 28.06.1982 by way of five installments

starting from 1985-86 with interest at 5% p.a. from

23.02.1981 to 13.01.1984 and 10% thereafter. Hence, the

trial Court has held that the defendant company is liable to

pay the differential value of the timber fell, cut and removed

from 23.02.1981 to 28.06.1982 as claimed in the suit with

interest as agreed by the parties as per the recommendation

of the Committee as appointed by the Government with the

advise of the defendant and other industries. The trial Court

has held that the defendant company is liable to pay the

differential value of Rs.6,52,257.22 out of which the

defendant has already paid a sum of Rs.4,20,655.47 and

there is balance of Rs.2,31,611.75. The plaintiffs had claimed

interest thereon at Rs.3,28,008.89 out of which the defendant

has already paid a sum of Rs.2,68,166.45 and balance to be

paid is in a sum of Rs.59,841.94. If rate of interest is taken

into consideration interest on a sum of Rs.2,31,612/- at the

rate of 5% from 23.02.1981 to 13.01.1984 comes to

Rs.33,453/-. Further, if the other interest at the rate of 10%

is taken into consideration after 14.01.1984 till the filing of

the suit it comes to Rs.3,75,284/- and in all Rs.4,08,737/-.

The trial Court has considered that the plaintiffs' claim with

regard to interest was Rs.3,28,008.80 which is below the

interest as calculated supra and after taking into

consideration the payment of interest by the defendant in a

sum of Rs.2,68,166.45 the trial Court has allowed the claim

of the plaintiffs for interest at Rs.59,842/-.

12. The learned Additional Government Advocate

appearing for the plaintiffs has contended that the trial Court

has not awarded the penal interest claim of Rs.3,40,642.39.

The said penal interest has been calculated at the rate of 10%

for the period from 14.01.1984 till the filing of the suit. The

trial Court has taken into consideration the said aspect and

calculated the interest at 10% from 14.01.1984 till the filing

of the suit. Therefore the said contention of the learned

Additional Government Advocate has no substance. The claim

of penal interest by the plaintiffs in a sum of Rs.3,40,642.39

has no basis. The defendant has not agreed to pay any penal

interest. The agreements, undertakings executed by the

defendant and the provisions of the Act does not provide for

charging any penal interest. Therefore, the rejection of the

plaintiffs' claim towards penal interest by the trial Court is

proper.

13. The plaintiffs' claim towards forest development tax

in a sum of Rs.1,62,297.18 as well as sales tax and surcharge

in a sum of Rs.1,74,454.60 as per clause 3 of the agreement

dated 16.08.1977 and 12.12.1978 (Ex.P.1 and Ex.P.2) the

defendant had agreed to pay forest development tax, sales tax

and surcharge and other statutory taxes. The defendant has

not specifically disputed the quantum/calculations made by

the plaintiffs with respect to forest development tax, sales tax

and surcharge. Therefore, cutting down of the claim of the

plaintiffs towards the above by the trial Court making its own

calculations is not proper. It is not open for the trial Court to

re-calculate the statutory liability when the same has been

expressly agreed to be borne by the defendant. Therefore, the

claim of the plaintiffs towards forest development tax of

Rs.1,62,297.18, towards sales tax and other taxes in a sum of

Rs.1,74,454.60 requires to be allowed. Therefore, the trial

Court has erred in partly rejecting the claim of the plaintiffs

towards forest development tax, sales tax and other taxes.

Accordingly, we answer the point partly in affirmative.

14. In the result, the following;

ORDER

The appeal is partly allowed. The decree passed in O.S.

No. 42/2000 dated 16.04.2007 by the Civil Judge

(Senior Division), Madikeri, is modified as under:

i. The plaintiffs - appellants are entitled for a sum of

Rs.6,28,205.47 (2,31,611.75 + 59,841,94 +

1,62,297.18 + 1,74,454.60) along with interest at

the rate of 6% from the date of suit till the date of

realization from the respondent - defendant.

ii. Draw the decree accordingly.

Sd/-

JUDGE.

Sd/-

JUDGE.

LRS.