# K. SREEDHARA REDDY v. THE CONSERVATOR OF FORESTS AND ORS

- **Citation:** [1976] 1 S.C.R. 770
- **Court:** Supreme Court of India
- **Decided:** 1975-09-12
- **Case number:** Civil Appeals Nos. 814-815 of 1968
- **Bench:** V. R. Krishna Iyer, A. C. Gupta Ands. Murtaza Fa2;Al Ali
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/k-sreedhara-reddy-v-the-conservator-of-forests-and-ors-6672
- **Pages:** 6

## Headnote

H'\!derabad Forest .Act-Forest Contract rules-Rule 29-30-3l-Whether tenninatio;z vf contract to precede i111po~ition of penc.J.ty-Natural Justice.
A
B
The appellant & Forest Contractor
fell'~d trees in excess of the perrnitted
number aut1horised by
th·~ contract entered into by him with the State
of
Andhra Pradesh.
Certain penalty was in1posed on the appellant under rule
29 of he_ Forest Contract Rules framed in exercise of the powers conferred
by Hyderabad Forest Act.
The Forest Officer found that the appellant felled
more trees and, therefore. gave a show cause notice to the appellant.
The
C
appellant prayed for re-enumeration of the trees given from the forest.
}Ie
was given an opportunity which was not availed by him to check. the stun1ps
in the coupe as desired by him.
Consequently, a penalty was Jev1red.
Thereafter, the contract was terminated.
After the termination of the contract the
process for recovery of the penalty was startred.
Rule 29 reads as under :
- +- -
+
( 1) Penalty on termination of a contract for breach of conditions :--
..,
Every fore91: contract shall be in writing in the form annexed he~to
D
and shall contain a provision whereby the forest contractor bind~ himself to do all the duties and acts required to be done by or under the,
contract, and convenants that hre. and his servants and
agents
shall
abstain from all the acts forbidden by or under such contract.
(2) The sums to be mentioned in a forest contract as payable in case
of a breach of any such stipulation shall not exceed one-quarter of the
total consideration to be paid by the· contractor, and shall be recoverable
in accordance \Vith the provisions of the Hyderabad Forest Act 1355 F
E
and of this rule.
Provided that where such consideration i5
not
an
ascertained
amount the forest officer executing the contract !!-hall make an estimate
of the total amount that would be payable if the contract were fully
complied with, and such estimate shall be deemed to be for the purpose
of this sub-rule. the total consideration to be Paid by the contractor.
(3) This sum shall be realized from the contractor if the contract
has been duly terminated in accordance with the provision3 of rule 30,
and then only under the written order of the forest officer executins
the contract."
The appeIIant filed a Writ Petition in the High Court challenging the validity of the imposition of the penalty. The learned Single Judge allowed the
Writ Petition but the· Division Bench allowed the appeal filed by the State.
Jn an appeal by certificate, it w<i.s contended by the appellant before this
Court that the termination of the contract for breach of conditions m-entioned
in rule 29· should precede the impost of penalty.
It was further contended that
tho principles of natural justice were violated.
The respondent contended that
ascertaining the amount which is to be levied as a penalty need not be preceded
by the t'ermination of the contract.
Dismissing the appeal,
HELD : 1. It is clear that in the absence of a statutory exclusion of natural
justice any exercise of ,power prejudicially affecting another must be in confol'·
mity with the rules of natural justice. In the present case, we are satisfied
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B
c
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K. s. REDDY v. CONSERVATOR OF FORESTS (!Krishna Iyer. J.) 771'.
that there is no foundation for the grievance of the appellant on the score
of natural justice since an opportunity was afforded to the appellant before·
finally quantifying the penalty to be levied but the appellant did not avail him~
self of the opportunity.
(773-E-F]
2. On a true construction of ru1e 29 once a Forest Authority detects
a
breach it must investigate thie, extent and estimate, the nature and degree
of·
damage caused bv the breach.
If it is serious they must proceed to ascertain
the <;um to be fiXed as penalty.
In doing this, a reasonable opportunity must
be given to the affected party.
After that, the penalty shall be quantified and·
the contract shall be tern1inat

## Text

770
K. SREEDHARA REDDY
V.
THE CONSERVATOR OF FORESTS AND ORS.
September 12, 1975
[V. R. KRISHNA IYER, A. C. GUPTA ANDS. MURTAZA FA2;AL ALI, JJ.]
H'\!derabad Forest .Act-Forest Contract rules-Rule 29-30-3l-Whether tenninatio;z vf contract to precede i111po~ition of penc.J.ty-Natural Justice.
A
B
The appellant & Forest Contractor
fell'~d trees in excess of the perrnitted
number aut1horised by
th·~ contract entered into by him with the State
of
Andhra Pradesh.
Certain penalty was in1posed on the appellant under rule
29 of he_ Forest Contract Rules framed in exercise of the powers conferred
by Hyderabad Forest Act.
The Forest Officer found that the appellant felled
more trees and, therefore. gave a show cause notice to the appellant.
The
C
appellant prayed for re-enumeration of the trees given from the forest.
}Ie
was given an opportunity which was not availed by him to check. the stun1ps
in the coupe as desired by him.
Consequently, a penalty was Jev1red.
Thereafter, the contract was terminated.
After the termination of the contract the
process for recovery of the penalty was startred.
Rule 29 reads as under :
- +- -
+
( 1) Penalty on termination of a contract for breach of conditions :--
..,
Every fore91: contract shall be in writing in the form annexed he~to
D
and shall contain a provision whereby the forest contractor bind~ himself to do all the duties and acts required to be done by or under the,
contract, and convenants that hre. and his servants and
agents
shall
abstain from all the acts forbidden by or under such contract.
(2) The sums to be mentioned in a forest contract as payable in case
of a breach of any such stipulation shall not exceed one-quarter of the
total consideration to be paid by the· contractor, and shall be recoverable
in accordance \Vith the provisions of the Hyderabad Forest Act 1355 F
E
and of this rule.
Provided that where such consideration i5
not
an
ascertained
amount the forest officer executing the contract !!-hall make an estimate
of the total amount that would be payable if the contract were fully
complied with, and such estimate shall be deemed to be for the purpose
of this sub-rule. the total consideration to be Paid by the contractor.
(3) This sum shall be realized from the contractor if the contract
has been duly terminated in accordance with the provision3 of rule 30,
and then only under the written order of the forest officer executins
the contract."
The appeIIant filed a Writ Petition in the High Court challenging the validity of the imposition of the penalty. The learned Single Judge allowed the
Writ Petition but the· Division Bench allowed the appeal filed by the State.
Jn an appeal by certificate, it w<i.s contended by the appellant before this
Court that the termination of the contract for breach of conditions m-entioned
in rule 29· should precede the impost of penalty.
It was further contended that
tho principles of natural justice were violated.
The respondent contended that
ascertaining the amount which is to be levied as a penalty need not be preceded
by the t'ermination of the contract.
Dismissing the appeal,
HELD : 1. It is clear that in the absence of a statutory exclusion of natural
justice any exercise of ,power prejudicially affecting another must be in confol'·
mity with the rules of natural justice. In the present case, we are satisfied
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A
B
c
D
K. s. REDDY v. CONSERVATOR OF FORESTS (!Krishna Iyer. J.) 771'.
that there is no foundation for the grievance of the appellant on the score
of natural justice since an opportunity was afforded to the appellant before·
finally quantifying the penalty to be levied but the appellant did not avail him~
self of the opportunity.
(773-E-F]
2. On a true construction of ru1e 29 once a Forest Authority detects
a
breach it must investigate thie, extent and estimate, the nature and degree
of·
damage caused bv the breach.
If it is serious they must proceed to ascertain
the <;um to be fiXed as penalty.
In doing this, a reasonable opportunity must
be given to the affected party.
After that, the penalty shall be quantified and·
the contract shall be tern1inated in the event the authorities come to the conclu:..
sion that the breach is grave enough for that drastic step.
Once the contract'
is termir.atcd the last procedure is realisation which can in no case be before·
the termination of the contract.
[7741-I, 775 AMB.]
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 814-815
of 1968.
From the Judgment and Order dated 7th September, 1966 of the·
Andhra Pradesh High Court in Writ Appeal Nos. 71 and 72 of 1964·
respectively.
R. V. Pillai, for the appellant.
P. Ram Reddy and G. N. Rao, for the respondents.
The Judgment of the Court was delivered by
KRISHNA IYER, J.
A forest contractor-the appellant-who had
allegedly excess felled trees beyond the permitted number under two
contracts entered into by him with the State of Andhra Pradesh, was
E
directed by the Conservator of Forests-the first respondent-to suffer
two levies.
One item represented the loss sustained by the State on
account of the illicit cutting and the other was a penalty imposed
under r. 29 of the Forest Contract Rules (for short, the Rules) issued
in exercise of the powers
conferred under ss.
44 and 79 of the
Hyderabad Forest Act, 1355F (for short, the Act).
F
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The factual story out of which the legal controversy springs may
be narrated in simple terms.
Admittedly, the appellant was granted
two forest contracts to fell and remove a specific number of trees from
government forest, iri accordance with the Act and the Rnles.
The·
Contracts were of two years' duration ending with
31st December
1960. It was found by the Forest Officers that the appellant contractor had felled more trees and so he was given a notice calling for his
explanation about this detected breach of condition.
In C.A. 814 of 1968 such notice was issued on June 25, 1960
but no explanation was forthcoming.
So the Conservator determined
the amount representing the loss caused by the unauthorised cutting
of trees.
On July 22, 1960 the District Forest Officer informed the
appellant that the Conservator of Forest,
who is the
appropriate
authority under the Rules, had fixed Rs. 11,426/- as representing the
loss sustained by Government and Rs. 11,250/- as penalty under
r. 29. The contractor, thereupon, prayed for re-enumeration of the
772
SUPREME COURT REPORTS
[1976] 1 S.C.R.
trees cut from the forest by his application, dated foly 30, 1960. He
was informed by the forest authori~ics, by communication dated August
24, 1960 to check the stumps in the coupe as desired by the petitioner
before September 15, 1960.
This opportunity was also not availed
of by the appellant.
Consequently, the Conservator levied a penalty,
as earlier proposed.
Thus there were two items (i) the loss caused
by illicit cutting; (ii) the penalty imposed under the rules for breach
of conditions of the contract. There were three small amounts of fine
also, all together resulting in a sum of Rs. 23,088.00.
Eventually,
the contract was terminated on December 28, 1960 under r. 30 of the
Ru!es.
Long later, in January 1962, the amount stated above was
sought to be realised by revenue recovery process by the Tahsildar,
by his attachment order, dated January 8, 1962.
Thereupon a writ
petition was filed by the appellant challenging the demand.
He succeeded before the lear11ed Single Judge but a Division Bench, in appeal
carried by the State, reversed this order and the appellant has invoked
the jurisdiction of this Court under Art. 133(1) (a) and (b) of the
Constitution.
Jn C.A. 815 of 1968 a similar excess felling by the same contractor was detected by the concerned officials and notice was issued
to the appellant to explain how he had felled 255 trees in excess of
the contractual figure.
The appellant denied the illicit felling whereupon a date was fixed for checking the coupe in his presence, as
requested by him.
The contractor however did not avail himself of
the opportunity so afforded despite a second date for inspection being
fixed to suit his convenience.
Eventually the Conservator of Forests
fixed the loss sustained by government on account of the illicit felling
·of trees and also the penalty for breach of the conditions of the con·
tract.
This was done on October 16, 1960 and the appellant was
asked to pay the sum by notice dated October 28, 1960.
On the
same date, the lease was also terminated.
Long later, on January 9, 1962 proceedings for realisation of the
amounts were initiated by the Tahsildar.
This step drove the contractor to move a writ petition, which shared the fate, at the single Judge's
level and in appeal, of the sister writ petition already adverted to.
In
the same manner he has moved this Court in appeal, by certificate.
Two points were urged by Mr. R. V. Pillai, learned counsel for
the appellant, one relating to the loss assessed and sought to be
realised by the State under the two contracts on account of excess
felling, the other relating to the imposition of penalty under r. 29 and
its validity. The first point docs not survive because in both the writ
petitions which were disposed of together by a common judgment the
learned Single Judge rejected the contention with the observation 'I
find no substance in the arguments advanced in this behalf ... No
provision was brought to my notice which disentitles the government
to collect those items'. If the appellant had been aggrieved by the
negation of his plea under this head he should have challenged it in
appeal which he did not.
Thus the matter has become final and he
cannot, in this Court, revive it at all.
There is only a single question
that therefore deserves our consideration.
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B
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K. s. REDDY v. CONSERVATOR OF FORESTS (Krishna Iyer, J.) 773
Was the penalty in the two cases imposed validly ?
The learned
Single Jndge held, on a study of rr. 29 and .31 that the impost was
illegal for reasons which we find difficult to accept.
The Division
Bench, in appeal, disagreed with the learned Single Judge for reasons
which are unclear although our conclusion concurs with theirs.
The
rules regnlating the consequence of a breach of the conditions of forest
contracts were originally promulgated in Urdu in the Hyderabad State
but we have been handed up the Manual of
Civil Laws, Andhra
Pradesh, which contains those mies in English.
Rule 29(3) reads
sligl1tly obscurely but, in the absence of the original Urdu rules, we
have to make-do with the English version.
There are two types of penalties which
we
may
conveniently
designate as 'major' and 'minor', in the contemplation of the Forest
Rules.
Rule 29 deals with the major penaliies while r. 31 relates to
minor penalties.
Where the breach of the conditions of the contract
coillffiitted by the forest contractor is serions, tile contract itself is to
be terminated and a substantial penalty is to be imposed which 'shall
not exceed one quarter of tile total consideration paid by the contractor'. If the breach is of lesser significance, then the autilority may
not propose to terminate the contract on account tilereof bu, may
recover a portion of the 'whole penalty provided for in r. 29' not
exceeding Rs. 100/-. In short, if the contravention is grave, the
contract is cancelled and a heavy penalty imposed but if the breach
is inconsequential tile contract continues but a
lighter
penalty is
imposed.
1n the present case it is apparent that the authorities term'.
nated the contract and it is equally clear tllat tile breach was serious.
Rilie 31 which deals witll trivial breaches and lighter penalties
is
inapplicable.
The only question then is whether the exercise of the
power to impose a penalty under r. 29 has been (a) in compliance
with natural justice; and (b) in fulfilment of the conditions precedent
for the exercise of the power.
The facts we have set out earlier
make it clear that an opportunity had been afforded in the case of
botii the contracts before finally quantifying the penalty to be levied
but the contractor did not avail hinlself of the opportunity. While it
is clear that in the absence of a statutory exclusion of natural justice
any exercise of power prejudicially affecting another must be in conformity with the rules of natural justice, we are satisfied that in the
prc•ent case there is no foundation for the grievance of tile petitioner
on this score.
'The substantial issue is as to whether the termination of the contract for breacl;t of conditions should precede the impost of penalty.
According to Shri Pillai, that is the meaning of r. 29 read in the light
of r. 30( 3). There is seeming varbal support for this contention but
a closer scrutiny pricks the bubble. Rule 29 may well be read at this
8tage :
''29. (1) Penalty on termination of a contract
for breach of
H
conditions.-
Every forest contract shall be in wntmg in the form
annexed hereto and shall contain a provision whereby the
774
SUPREME COURT REPORTS
[1976] 1 S.C.R.
forest contractor binds himself to do all the duties and acts
required to be done by or under the contract, and covenants
tltat he and his servants and agents shall abstain from all
the acts forbidden by or under such contract.
(2) The sums to be mentioned in a forest contract as
payable in case of a breach of any such stipulation shall
not exceed one-quarter of the total consideration to be paid
by the contractor, and shall be recoverable in accordance
with the provisions of the Hyderabad Forest Act 1355 F
.and of this rule :
Provided that where su.ch consideration is not an ascertained amount the forest officer executing the contract shall
make an estimate of the total amount that would be payable
if the contract were fully c;omplied with, and such estimate
shall be deemed to be,. for t.he purpose of this sub-rule, the
total consideration to be paid by the contractor.
( 3) This sum shall be realized from the contractor if the
contract has been duly terminated in accordance with the
provisions of rule 30, and then only under the written order
of the forest officer executing the contract."
:Shri Ram Reddy, for the respondent, urges that ascertaining the
amount which is to be levied as a penalty need not be preceded by
1he termination of the contract.
Indeed, according to him, it is only
if there is an investigation of the nature of the breach, the quantum
.of loss inflicted .on the State and other circumstances that a decision
as to whether the contract should be terminated or not can be taken.
If it is found that the breach of condition be wilful and the damage
substantial, the penalty will be imposed under r. 29 and a decision
will be taken for termination of the contract.
However, the sum
fixed as penalty shall not be realised from the contractor until th~
.contract has been duly terminated in accordance with the provisions
of r. 30.
This is because you cannot keep a contract alive and claim
that a grave breach of conditions has been committed.
That would
be too inconsistent a stance for the State to adopt.
It is true that
the termination of the contract under r. 30 is a condition precedent
to realisation of the penalty from the contractor but realisation is
·different from imposition.
The forest authorities quantify and impose
the penalty.
The revenue authorities as well as the forest authorities
adopt the various steps prescribed in r. 30(3) for realisation of the
sum.
In the present case it was the Tehsildar who sought to realise
the penalty and he did this after the contract was terminated. Indeed,
r. 30(3) uses the expression 'recover' which is in consonance with
'realise' in r. 29(3).
We think that the true meaning of rr. 29 and 30, read together,
is that the forest authorities must move from stage to stage in
the
following manner.
Once they detect a breach, they must investigate
to understand and estimate, the nature and degree of damage caused
:by tbe breach. If it is serious, they must proceed to ascertain the
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K. s. REDDY v. CONSERVATOR OF FORESTS (cKrishna Iyer,!.) 775
sur.1 to be fixed as penalty.
In doing this, a reasonable opportunity
must be given to the affected party.
After that the penalty shall be
quantified and the contract shall be terminated, in the event of the
authorities coming to the decision that the breach is grave enough for
that drastic step. Once the contract is terminated, the last procedure
is realisation which can in no case be before the termination of the
contract.
The realisation of the penalty may be in one or other of
the ways set out for recovery under r. 30.
Cf course, if the breach
is of a venial nature, r. 31 is attracted, the contract is continued and
only a small portion of the penalty envisaged in r. 29 is collected.
The view we have taken of the scheme of the rules leaves us in
no doubt that the order of penalty is right and the judgment of the
Division Bench is correct in the conclusion and the appeals, in the
C
result, must fail.
The circumstances are such that the litigation is
purely induced by the obscure official translation of r. 29 from Urdu
to English with an obvious omission o[ 'not'.
This and the other
attendant features of the case persuade us to direct that the parties
shall bear their costs throughout.
V.M.K.
Appeals dismissed.