# ORIENT PAPER AND INDUSTRIES LTD. AND ANR. ETC. ETC v. STATE OF ORISSA AND ORS. ETC

- **Citation:** [1990] Supp. 2 S.C.R. 480
- **Court:** Supreme Court of India
- **Decided:** 1990-10-30
- **Bench:** L.M. Sharma, T.K. Thommen, K.N. Saikja
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/orient-paper-and-industries-ltd-and-anr-etc-etc-v-state-of-orissa-and-ors-etc-10878
- **Pages:** 23

## Headnote

Orissa Forest Produce (Control of Trade) Act, 1981: Section 1(3)
and 3 Amendment and Validation Acts 1987 and 1989 and Notifications
C
dated September 21, 1988-Whether nu// and void-Rescindement of
contracts-Permissibility of
The appellants/petitioners in each of the two Appeals Writ Peti·
tions are contractors. They had entered Into agreements with the State
of Orissa in terms of which they bad obtained exclusive rights and
D licences to fell, cot and remove bamboos from certain specified areas
for the purpose of connrtlng them into pulp. The agreements were doe
to expire on 30th September 1989. There contracts were rescinded by
the Orissa Forest Produce (Control of Trade) Act, 1981(Act22of1981)
which, in respect of bamboos, came into force w.e.r. 1.10.1988, when
Orissa Forest Produce (Control of Trade) Amendment Act, 1989 (Act ·
E
4of1989) came into force. By virtue of the provisions of the Act and the
notifications issued thereunder, the contractors were divested of all their
contractual rights.
Being aggrieved the appellants in both the appeals tiled writ petitions in the High Court praying for a declaration that the Act 22 of 1981
F
and the notification of 21.9.1988 issued under Section 1(3) of the said
Act have no application to the contracts entered into between the
appellants and the State of Orissa and for a direction that the State be
prohibited from enforcing the provisions of the said Act and to allow the
••
appellants to cot and remove the bamboos from areas covered by the
I
contracts. It was urged by the appellants that their rights in respect of
G
bamboos are not annulled or affected by reason of Act 22 of 1981 as
their rights are in the nature of profit a prendre, and thus not susceptible of repudiation by statutory rescission of contracts. They relied on a
decision of this Court in State of Orissa and Others v. The Titaghur
Paper Mills Co. Ltd. and Anr .. [1985] 3 SCR 26. The High Court
rejecting their contention that the rescission of their contracts did not
H affect their pre-existing l"ights which allegedly originated in grant inde480
--
ORIENT PAPER v. STATE OF ORJSSA
481
pendent of any agreement of parties, held that the contractors were
replaced by the agents and that the decision in Titaghur's case did not
A
deal with the question arising in the present case. The High Court
accordingly dismissed the writ petitions. Hence these two appeals by the
contractors.
The appeUants Straw Products Ltd. med in this Court a writ
B
petition under Art. 32 of the Constitution praying inter alia for &declaration that Act 4 of 1989 and the notification dated 21.9.1988 (S.R.O.
No. 666 of 1988) and (S.R.O. 667 of 1988) are null and void. Orient
Paper and Industries Ltd., the appeUants in the other appeals also med
a writ petition for a declaration that Act 16 of 1987 and Act 15 of 1987
(lst and 2nd Amendment Acts) and Notification dated 21.9.1988
C
(S.R.O. No. 667 of 1988) are null and void.
Before this Court besides the arguments advanced before the
High Court by the appellants/petitioners it was further urged that the
Act suffers from the vice of excessive delegation of powers to the
Government and separate notification should have been issued to bring D
the amended provisions into the principal Act. The respondent-State
controverted the arguments of the appellants and asserted that the .Acts
in question are constitutionally valid.
Dismissing the appeals and writ petitions, this Court,
HELD: Any right or interest granted or recognised under such
agreement was not an independent or pre-existing right or interest to
survive the statutory rescission of the contract. Legislation has supu•
seded all inconsistent and contrary rights. No right or interest or grant,
whether contractual or prerogative in character in origin, whatever be
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its nature, source and scope, can survive a superseding valid legislation.
F
-·-- The decision in Titaghur is consistent with the proposition that all rights
derived by the contractors, includi

## Text

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ORIENT PAPER AND INDUSTRIES LTD. AND
ANR. ETC. ETC.
v.
STATE OF ORISSA AND ORS. ETC.
OCTOBER 30, 1990
[L.M. SHARMA, T.K. THOMMEN AND K.N. SAIKJA, JJ.]
Orissa Forest Produce (Control of Trade) Act, 1981: Section 1(3)
and 3 Amendment and Validation Acts 1987 and 1989 and Notifications
C
dated September 21, 1988-Whether nu// and void-Rescindement of
contracts-Permissibility of
The appellants/petitioners in each of the two Appeals Writ Peti·
tions are contractors. They had entered Into agreements with the State
of Orissa in terms of which they bad obtained exclusive rights and
D licences to fell, cot and remove bamboos from certain specified areas
for the purpose of connrtlng them into pulp. The agreements were doe
to expire on 30th September 1989. There contracts were rescinded by
the Orissa Forest Produce (Control of Trade) Act, 1981(Act22of1981)
which, in respect of bamboos, came into force w.e.r. 1.10.1988, when
Orissa Forest Produce (Control of Trade) Amendment Act, 1989 (Act ·
E
4of1989) came into force. By virtue of the provisions of the Act and the
notifications issued thereunder, the contractors were divested of all their
contractual rights.
Being aggrieved the appellants in both the appeals tiled writ petitions in the High Court praying for a declaration that the Act 22 of 1981
F
and the notification of 21.9.1988 issued under Section 1(3) of the said
Act have no application to the contracts entered into between the
appellants and the State of Orissa and for a direction that the State be
prohibited from enforcing the provisions of the said Act and to allow the
••
appellants to cot and remove the bamboos from areas covered by the
I
contracts. It was urged by the appellants that their rights in respect of
G
bamboos are not annulled or affected by reason of Act 22 of 1981 as
their rights are in the nature of profit a prendre, and thus not susceptible of repudiation by statutory rescission of contracts. They relied on a
decision of this Court in State of Orissa and Others v. The Titaghur
Paper Mills Co. Ltd. and Anr .. [1985] 3 SCR 26. The High Court
rejecting their contention that the rescission of their contracts did not
H affect their pre-existing l"ights which allegedly originated in grant inde480
--
ORIENT PAPER v. STATE OF ORJSSA
481
pendent of any agreement of parties, held that the contractors were
replaced by the agents and that the decision in Titaghur's case did not
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deal with the question arising in the present case. The High Court
accordingly dismissed the writ petitions. Hence these two appeals by the
contractors.
The appeUants Straw Products Ltd. med in this Court a writ
B
petition under Art. 32 of the Constitution praying inter alia for &declaration that Act 4 of 1989 and the notification dated 21.9.1988 (S.R.O.
No. 666 of 1988) and (S.R.O. 667 of 1988) are null and void. Orient
Paper and Industries Ltd., the appeUants in the other appeals also med
a writ petition for a declaration that Act 16 of 1987 and Act 15 of 1987
(lst and 2nd Amendment Acts) and Notification dated 21.9.1988
C
(S.R.O. No. 667 of 1988) are null and void.
Before this Court besides the arguments advanced before the
High Court by the appellants/petitioners it was further urged that the
Act suffers from the vice of excessive delegation of powers to the
Government and separate notification should have been issued to bring D
the amended provisions into the principal Act. The respondent-State
controverted the arguments of the appellants and asserted that the .Acts
in question are constitutionally valid.
Dismissing the appeals and writ petitions, this Court,
HELD: Any right or interest granted or recognised under such
agreement was not an independent or pre-existing right or interest to
survive the statutory rescission of the contract. Legislation has supu•
seded all inconsistent and contrary rights. No right or interest or grant,
whether contractual or prerogative in character in origin, whatever be
E
its nature, source and scope, can survive a superseding valid legislation.
F
-·-- The decision in Titaghur is consistent with the proposition that all rights
derived by the contractors, including profit a prendre were granted in
te_rms of the agreements. All such rights are conditioned by and totally
dependent on the agreements. Whatever mutual rights or obligations
accrued or arose between the parties· to those agreements are ·purely
contractual in character and incidence. [49SE-F & D]
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All rights recognised under the bamboo contracts thus perished as
from the date on which Act 22 of 1981 came into force in respect of
bamboos in the areas in question, i.e. as from l.10.1988 being the date
specified in terms of section 1(3). [498BJ
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482
SUPREME COURT REPORTS
[ 1990] Supp. 2 S.C.R.
While the protection and management of the forests, 22 of 1981,
as its title and preamble indicate, are meant to control and regulate·
trade in forest produce by creating a State monopoly, the later statute
has rescinded all contracts for the purchase, sale, gathering or collection of forest produce and has repudiated all rights created under such
contracts and all grants of profit a prendre. The bamboo contractors,
are, therefore, not entitled to claim any independent right inconsistent
with lhe statute as from the date specified under Section 1(3) namely
1.10.1988. [500A-B]
Smuggling in foresi produce has been a serious threat to national
economy. No society can tolerate activities endangering the morale and
economy of the people. This substantive evil with its corrupting and
debilitating influence is sought to be remedied by legislative control of
trade in forest produce through State monopoly. These measures are
undoubtedly well within the province of the legislature and reasonable
and rationally adapted to the end sought. [501F-G]
The legislative findings and the subject-matter of the legislation,
the area of its operation; its purpose and intent; its legislative history;
the objects and reasons for the amendment made consequent on judicial
decisions, the vice that is sought to be remedied, the legislative response
to compelling necessities; all this, lends support to the presumption in
favour of reasonableness, legality and constitutionality of the legislative
aciions in question. [SOlG-H]
All rights and interests contrary to and inconsistent with the
statute accordingly stands rescinded. There is no excessive delegation in
such statutory grant of power. [502A-B]
F
Mis. Utkal Contractors and Joinery I PJ Ltd. and Ors. v. State of
Orissa, [1987] Supp. SCC 751 & [.1987] 3 SCC 279; The State of Orissa
v. Sudhansu Sekhar Misra and Ors., [1968] 2 SCR 155, 162; Krishna
Kumar v. Union of India, JT (1988) 3 SC 173, 187, 192; Gangabai w/o
Rambilas Gilda v. Chhabubai w;o Pukharajji Gandhi, [1982] 1 SCR
1176, 1182; Prakash Amichand Shah v. State of Gujarat and Ors.,
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(1985] Supp. 3 SCR 1025, 1052, Sreenivasa General Traders and
Others v. State of Andhra Pradesh and Others etc., AIR 1983 SC 1246;
Attorney General v. De Keyser's Royal Hotel Ltd., [1920] AC 508;
Thakur Jagannath Baksh Singh v. The United Provinces, AIR 1946 PC
127, para 17; East End Dwelling Co. Ltd. v. Finsbury Borough
Council. 1952 Ac 109, Shamrao V. Parulekar v. The District Ma1<istrate,
H
Thana, Bombay, [1952] SCR 683; Sardar !nder Singh v. The State of
•
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•.
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ORIENT PAPER v. STATE OF ORISSA [THOMMEN, J.[
· 483
Rajasthan, [1957] SCR 605; Her Majesty the Queen v. Burah, [1877-78] 5
IA 178, 194-95; Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. The Asst!.
Commissioner of Sales Tax and Ors., .[1974] 2 SCR 879; Harishanker
Bag/av. The State of M.P., [1955] 1 SCR 380, 388; Akadasi Padhan v.
State of Orissa, [1963] Supp. 2 SCR 691; Hamdard Dawakhana (Wakf)
Lal Kuan, Delhi and Anr. v. Union of India and Ors., [1960] 2 SCR
671, 678-79; Mahant Motidas v. S.P. Sahi, AlR (1959) SC 942, 948,
referred to.
CIVIL APPELLATE/ORIGINAL JURISDICTION: Civil Appeal Nos. 4346-47 of 1988.
From the Judgment and Order dated 7.10.1988 and 30.9.1988 of
the Orissa High Court in O.J.C. Nos. 3235 and 3100 of 1988.
AND
Writ Petition Nos. 1132/88 amd 474/89.
(Under Artice 32 of the Constitution of India).
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A.K. Ganguli, Dr. Shankar Ghose, F.S. Nariman, Parag TriD
pathi, A.T. Patra, P.N. Gupta, Praveen Kumar, S.R. Agarwal,
Sandeep Agarwal, P.N. Misra, R.F. Nariman and R.K. Jena for the
Appellants/Petitioners.
N.S. Hegde, Additional Solicitor General, S.C. Roy and G. Rath,
Advocate Generals, Orissa, R.K. Mehta and Ms. Mona Mehta for the
Respondents.
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The Judgment of the Court was delivered by
THOMMEN, J. These appeals by special leave arise from the
judgments of the Orissa High Court in O.J.C: No. 3235 of 1988 and
O.J .C. No. 3100 of 1988. The High Court dismissed the appellants'
wtit petitions praying for a declaration that the Orissa Forest Produce
F
(Control of Trade) Act, 1981 ('Act 22 of !981') and the Notification
No. 6F- 10/88/21691/FFAH dated September 21, 1988 issued under
section 1(3) of the said Act have no application to the contracts
entered into between the appellants and the State of Orissa and for a
direction to prohibit the respondent-State from enforcing the provisions of the said Act in pursuance of the said notification in respect of
G
the said contracts and to allow the appellants to cut and remove
bamboos from the areas covered by the contracts. One of the appellants in C.A. No. 4347 of 1988, namely, Straw Products Ltd. filed Writ
Petition No. 474 of 1989 under Article 32 ·of the Constitution for a
declaration that Ordinance No. I of 1989, the Orissa Forest Produce
(Control of Trade) (Amendment) Act, 1989 ('Act 4 of 1989'). Notification No. 6F-10/88/21691/FFAH dated 21.9.1988 (S.R.0. No. 666 of
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SUPREME COURT REPORTS
[ 1990] Supp. 2 S.C::R.
1988) and Notification No. 6F- 10/88/21693/FFAH dated 21.9.1988
(S.R.O. No. 667 of 1988) are null and void and for certain other reliefs.
The appellants in C.A. No. 4346 of 1988, namely, Orient Paper &
Industries Ltd. and another filed Writ Petition No. 1132 of 1988 (as
amended in 1989) under Article 32 of the Constitution praying for a
declaration that the Orissa Forest Produce (Control of Trade)
(Amendment and Validation) Act, 1987 ('Act 16 of 1987') and Orissa
Forest Produce (Control of Trade) (Second Amendment) Act, 1987
{'Act 15 of 1987'); Ordinance No. 1 of 1989 and the Act which
replaced.it (Act 4 of 1989); Notification No. 6F-10/88/21691/FFAH
dated September 21, 1988 (S.R.O. No. 666 of 1988); and Notification
No. 6F-10/88/21693/FFAH dated September 21, 1988 (S.R.O. No. 667
C
of 1988) are null and void, and for certain other reliefs. The parties in
these appeals and writ petitions shall hereinafter be conveniently
referred to as 'the contractors'.
The contractors had entered into agreements with the State of
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Orissa in terms of which they had obtained exclusive rights and
licences to fell, cut and remove bamboos from certain specified areas
for the purpose of converting them into pulp. The agreements would
have expired on. September 30, 1989. These agreements are generally
referred to as the "bamboo contracts". These contracts were rescinded
by Act 22 of 1981, which, in respect of bamboos, as we shall presently
E
see, came into force as from I. 10.1988. The contractors contend that
their rights in respect of bamboos are not annulled or affected by
reason of Act 22 of 1981. Their rights, they say, are in the nature of
profit a prendre, and are not susceptible of repudiation by statutory
rescission of contracts. They rely upon a decision of this Court in State
of Orissa and Others v.· The Titaghur Paper Mills Co. Ltd. & Another,
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[ 1985] 3 SCR 26.
The bamboo contract was considered by this Court in Titaghur
(supra) with reference to the question whether the amount payable·
under the contract was exigible to purchase tax under the Orissa Sales
Tax Act, 1947 (as amended in 1977). This Court held:
" . . . . . . the. Bamboo Contract is not and cannot be a
contract of sale of goods, It confers upon the Respondent
Company a benefit to arise out of land, namely, the right to
cut and remove bamboos which would grow from the soil
coupled with several ancillary rights and is thus a.grant of a
profit a
prendre .... "
'
ORIENT PAPER v. STATE OF ORISSA (THOMMEN, J.I
485
Being a benefit to arise out of land, the contractors had.an interest in
immovable property. So stating, this Court observed that the fact that
the agreement under which this interest in immovable property was
created was not evidenced by a registered document did not derogate
from its character as a grant because section 90 of the Registration Act
exempted it from registration. The question which arose in that decision was whether the amount payable under the bamboo contract was
exigible to purchase tax. The answer depended on the basic question
as to whether it was a contract of sale of goods or a contract conferring
an interest in immovable property. It was in answering that question
and in coming to the conclusion that it was not a contract of sale of
goods, but a grant of an interest in immovable property, that the Court
made an observation about the exemption from registration under
section 90 of the Registration Act. But whether the contract itself or
any right or interest stipulated or granted or recognised under the
contract was invalid for want of registration was not a question which
was directly or substantially in issue in that case. Whether any right or
interest was granted independently of or prior to contract was not
directly or even indirectly considered. We refer to this aspect of the
decision in Titaghur, ( 1985) 3 SCR 26 because much of the challenge
against the validity of the impugned provisions turns on the question as
to whether the right arising under the bamboo contract was a contractual right so as to be affected by Act 22 of 1981 arid the notifications issued thereunder. On this question, Titaghur (siipra) is neither
res judicata nor precedent.
We may at this stage refer to the reliefs sought in Writ Petition
No. 1132 of 1988 (as amended in 1989). The writ petitioner in that case
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has challenged the validity of Act .J6 of 1987. This challenge is no
longer sustainable in view of the decision e.f this Court in M/s. Utkal
Contractors and Joinery (P.) Ltd. and Others v. State of Orissa, ( 1987)
F
Supp. SCC 751 upholding the validity of the Orissa Forest Produce
(Control of Trade) (Amendment and Validation) Ordinance, 1987,
which was repealed by· Act 16 of 1987. The writ petitioner has also
•
challenged the validity of Act 15 of 1987 by which clause (b) of subsection (2) of section 5 of Act 22 of 1981 was deleted and section 12 of
the. said Act was substituted by a new provision. These amendments
G
are, in our view, procedural changes and a valid exercise of legislative
power to regulate and control trade in forest produce.
Two forests Acts were in operation in the State of Orissa, i.e.,
the Indian Forest Act, 1927 and the Madras Forest Act, 1882. These
two enactments were repealed by the Orissa forest Act, 1972, which
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486
SUPREME COURT REPORTS
'
[ 1990] Supp. 2 S.C.R.
was enacted to consolidate and amend the laws relating to the protection and management of forests in the State. Power is conferred on the
Government under the Forest Act, 1972 to constitute any land which is
the property of the Government, or over which the Government has
proprietary rights, a reserved forest in the manner provided by the·
Act. Protection and management of forest is the purpose of the Forest
Act. Act 22 of 1981 has been, on the other hand, enacted with a view
to providing for control and regulation of trade in certain forest produce by creation of State monopoly in such trade. The Statement of
Objects and Reasons shows that the main object of creating State
monopoly is to prevent smuggling of various kinds of forest produce
which has been 'increasing day by day'. State monopoly of trade in
forest produce is thus the object of Act 22 of 1981.
'Forest produce' is defined to include bamboo as one of the
items. One of the other items is sal seed. The Statement of Objects and
Reasons shows that, barring a few items like sal seeds, many other
items of minor forest.w;oduce were grown in private holdings as well as
in the Government owned forest areas. The implication was, therefore, that sal seeds had been grown only on Government land. For the
reason, referring to Act 22 of 1981, this Court in Utka/ Contractors and
Joinery Pvt. Ltd. and Others v. State of Orissa and Others, [ 1987] 3
sec 279 held:
"that scheme of the Act is, therefore, fully in tune with the
object set out in the Statement of Objects and Reasons and
in the preamble, namely, that of creating a monopoly in
forest produce by making the government the exclusive
purchaser of forest produce grown in private holdings".
So observing, this Court further held:
"that the Act and the notification issued under the Act do
not apply to forest produce grown in government forests
and that it was not therefore, open to the government to
treat the contra""ct dated May 25, 1979 as rescinded."
To remove the impediment created by this decision in extending the
Act to contracts concerning forest produce grown on Government
lands, the Act was amended w.e.f. 5.9.1981 by Ordinance No. 1 of
1987, which was repealed by Act 16 of 1987, the validity of which, as
stated earlier, has been upheld by this Court in M/s. Utkal Contractors
H
and Joinery (Pvt.) Ltd. and Others v. State of Orissa, [ 1981] Supp. SCC
ORIENT PAPER v. STATE OF OR!SSA ITHOMMEN, J.]
487
751. As a result of Ordinance No. 1 of 1987 and Act 16 of 1987, the
vice pointed out by this Court in Utkal Contractors and Joinery Pvt.
Ltd. and Others v. State of Orissa and Others, [1987] 3 SCC 279 has
been removed, and the Act has been made retrospectively applicable
with effect from 5.9.1981 to forest produce 'grown or found on land
owned by private persons or on land owned by the State Government
or in Government forests'. [See section 5(l)(a) as substituted by Act
16 of 1987.]
·
The principal Act, namely, Act 22 of 1981 "extends to the whole
of the State of Orissa": Section 1(3) says the Act 'shall come into force
in .such area or areas in relation to such forest produce and on such
date or dates as the State Government may, from time to time, by
notification, specify in this behalf'. Section 2 defines 'forest produce'.
Bamboo, as stated earlier, is one of the items of forest produce
specified under clause (c) of section 2. The effect of section 1(3), the
validity of which is in question in these proceedings, is that the Act
comes into force on different dates in respect of different areas and
different items of forest produae.
Three notifications were issued on September 21, 1988. Notification No. 6F-10/88/21691/FFAH (S.R.O. No. 666 of 1988) says".· ....
in exercise of the powers conferred upon by sub-section (3) of section 1
of the Orissa Forest Produce (Control of Trade) Act, 1981 (Orissa Act
22 of 1981), the State Government do hereby specify that the said Act
shall come into force in the areas covered by Government forests in
t.he State of Orissa in relation to bamboos of all species on the first day
of October, 1988". The result of this notification is that, as from
1.10.1988, Act 22 of 1981 is made applicable to bamboos of all species
in areas covered by Government forests in the State of Orissa. That
Act 22 of 1981 is applicable to all Government forests in respect of all
forest produce is no longer in doubt in view of Act 16 of 1987. [See
M/s. Utkal Contractors and Joinery (Pvt.) Ltd. and Others v. State of
Orissa, [1987] Supp. SCC 751] Notification No. 6F-10/88/21695/FFAH
says " .... in pursuance .of the powers conferred upon by section 3 of
the Orissa Forest Produce (Contra.I of Trade) Act, 1981 (Orissa Act 22
of 1981), the State Government do hereby constitute with effect from
the !st day of October, 1988, the areas covered by Government
Forests in the State of Orissa excepting the area covered by the felling
series of J eypore Forest Division listed in the schedule in the district of
Koraput, into a unit for extraction of and trade in bamboos of all
species which is a forest produce specified in the Notification .....
No. 21691/FFAH., Dated the 21st September, 1988 issued unde~ subA
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SUPREME COURT REPORTS
[ 1990] Supp. 2 S.C.R.
section (3) of section 1 of the said Act." Notification No. 6F-10/88/
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21693/FFAH (S.R.O. No. 667 of 1988) .says" ... in exercise of the
powers conferred upon by sub-section ( l) of section 4 of the Orissa
Forest Produce (Control of Trade) Act, 1981 (Orissa Act 22 of 1981)
read with sub-rule (7) of the rule 3 of the Orissa Forest Produce (ConB
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trol of Trade) Rules, 1983, the State Government do hereby appoint
the Orissa Foresi Corporation Ltd. as the agent for extraction of and.
trade in bamboo of all species, on its behalf, with effect from the first
day of October, 1988 in respect of the Unit specified in the notification
of the Government of Orissa .... no. 21695/FFAH dated the 21st
Sept., 1988". The effect of these three notifications dated 21.9 .1988 is
that as from the specified date, namely, 1st October, 1988, bamboos of
all species in Government forests in the State of Orissa, come within
the purview of Act 22 of 1981, and all contracts for the purchase, sale
etc. of bamboos grown or found in the said areas stand rescinded. The
agents appointed by. the Government have, in respect of the notified
units, become the sole repositories of authority to purchase or transport bamboos as from 1.10.1988.
We shall now read the relevant sections.of the Act, in so far as·
they are l)laterial:
"1(3). It shall come into force in such area or areas in
relation to such forest produce and on such date or dates as
the State Government may, from time to time, by notification, specify in this behalf".
"3. Constitution of units-The State Government may ·
divide every specified area into such number of units as it
may deem fit:
Provided that a specified area may be divided into
different units for different specified forest produce.,.
"4. Appointment of agents. ( !) The State Government
may, for the purchase of and trade in specified forest produce on its behalf, appoint one or more agents in respect of
different units for all or any specified forest produce and
any such agent may be appointed .in respect of more than
one unit.~'
"
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Section 5, as it stood before it was amende~ by Act 4 of 1989,
reads:
·
·,
ORIENT PAPER v. STATE OF ORISSA (THOMMEN, J.)
489
"5. Restriction on purchase and transport and rescission of
subsisting contracts. ( 1) On the issue of a notification under
sub-s. (3) of S. 1 in respectnf any area-
(a) all contracts for the purchase, sale, gathering or collection of specified forest produce grown or found in the said
area shall stand rescinded, whether such forest produce is
grown or found on land owned by private persons or on
land owned by the State Government or in Government
forests, and,
(b) no person, other than-
(i) the State Government.
(ii) an officer of the State Government authorised in
writing in that behalf, or
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(iii) an agent in respect of the umt m which the
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specified forest produce is grown or found.
shall purchase or transport any specified forest produce in
the said area.
"
By these provisions and the notifications issued thereunder, the
contractors are divested of all their contractual rights. The High Court
rejected their contention that the recission of their contracts did not
affect their pre-existing rights which allegedly originated in grant independent of any agreement of parties. The High Court held that the
contractors were replaced by the agents. The High Court further held
that the decision in Titaghur, [1985] 3 SCR 26 which related to the
question of exigibility to tax under the Orissa Sales Tax Act did not
deal with the question arising in the present cases.
During the pendency of the proceedings in this Court, Act 22 of
1981 was amended by Act 4 of 1989 with retrospective effect. Subsequent to this amendment, Writ Petition No. 1132 of 1988 was
amended. Section 2 of the Amending Act provides:
"2. In section 5 of the principal Act, for sub-section ( I)
excluding clause (b) and the explanations thereunder, the
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following shall be substituted, namely:
'5. ( 1) Notwithstanding any provision to the contrary in any other law, on the issue of a Notification
under sub-section (3) of section 1 in respect of any
area,-
(a) all contracts for the purchase, sale, gathering or
collection of specified forest produce grown or found
in the said area and all grants ofp~ofii:a-prendre including the right to enter upon the land, fell, cut and
remove the specified interest produce from the said
area, shall stand rescinded, whether such forest produce is grown or found on land owned by private
persons or on land owned by the State Government
or in Government forests:
Provided that rescission of such contracts and
grants shall not affect the customary rights, if any, of
the local Tribals to gather and collect the specified
forest produce;
,,
This amendment, beginning with the non obstante clause, provides
that, on the coming into force of Act 22 of 1981 by notification issued
under section 1(3), all contracts relating to any specified forest produce for the purchase, sale, collection etc., including grants of profit a
prendre, whether such produce is grown or found on private land or on
Government land or
0in Government forest, would stand rescinded, but
such rescission would not affect customary right, if any, enjoyed by the
local tribals to gather and collect specified forest produce.
This sub-section overrides ""any provision to the contrary in any
other law". These words are an expression of the widest amplitude
engulfing all rules having the force of law, whichever be the source
from which they emanate--statutory, judicial or customary-the only
exception, in the context, being the Constitution of India. This means,
once brought into force, the sub-section will, subject to the Constitution, operate with full vigour, notwithstanding any statute or judicial
decision or any other rule recognising any right or interest or grant
inconsistent with or contrary to the provisions of the sub-section.
ORIBNT PAPER v. STATE OF ORISSA ITHOMMEN, J.]
491
Sub-section (2) of section 1 of Act 4 of 1989 says that the Act
"shall be deemed to have ·come into force on the date on which the
Orissa Forest Produce (Control of Trade) Act, 1981 (hereinafter referred to as the principal Act) had come into force, i.e. 5.9.81 when the
principal Act wa> notified in the Orissa Gazette." The effect of this
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· amendment is that all contracts and grants relating to the purchase,
sale, collection etc. of forest produce, including profit a prendre, stood
rescined as from the date on which Act 22 of 1981 came into force in
the particular areas in respect of the forest produce in question. The
produce in question here being bamboos, the principal Act, as
amended by Act 4 of 1989 with effect from 5.9.81, was attracted in full
fqrce repudiating all contractual rights or grnnts of profit a prendre
relating to bamboos wherever grown or found within the State as from
the date specified by the notification issued under section 1(3) of the C
Act. i.e., i. 10. 1988.
The resultant position is that the contractors have lost all their
rights under contract or grant respecting bamboos and they are
deemed to have lost such rights, not prospectively from 3.4.1989,
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when the assent of the President to Act 4 of 1989 was first published in
the Official Gazette (as per section 3(1)(ii) of the Orissa General
Clauses Act, 1937), but from 1.10.1988 which is the date specified in
the Notification dated September 21, 1988, issued under section 1(3)
of Act 22 of 1981. In other words, the effect of Act 4·of 1989 is that the
provisions of that Act are projected backwards and read into Act 22 of
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1981, and all the provisions of the principal Act, including the provisions added by the Amending Act, are deemed to have been on the
statute book as from 5.9.1981, when the principal Act was notified in
the Orissa Gazette, and the principal Act, including the amended
provisions, came into force only as from the date speciiied m the
notification issue.d under section 1(3) which, as seen above, in respect
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of the bamboosifo the areas in question, was 1. 10.1988.
Mr. A.K;. Ganguli and. Dr. Shankar Ghosh, appearing for the
contractors, have raised various contentions. They submit that the
right of the contractors has arisen not by reason of contract but on the
strength of grant. Act 22 of 1981 rescinding contracts did not affect
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rights in the nature of profit a prendre although their agreements in
terms stipulate that right. This question, they say, had been concluded
as early as 1985 by this Court in Titaghur [ 1985] 3 SCR 26. The
bamboo agreements are, therefore, not mere contracts attracted by
section 5 of Act 22 of 1981. Jn any view, they contend, neither Act 22
of 1981 _nor the subsequent amendments can affect bamboo contracts,
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for section 1(3) which provided for coming into force of the Act on
different dates in different areas of different items of forest produce is
invalid by reason of excessive delegation of power to the Government.
They further point out that even assuming that Act 22 of 1981 was
validly brought into force in respect of bamboos in the areas in question with effect from 1.10.1988, as provided by the Notification dated
September 21, 1988, such notification does not have the effect of
bringing into force the provisions of the subsequent Act, namely, Act
4 of 1989, notwithstanding the deeming provisions contained in the
latter Act. They submit that the original Act having been brought into
force in respect of bamboos as from 21.9.1988 by the aforesaid notification under section 1(3), the subsequent amendment of Act 22 of
1981 by Act 4 of 1989, stating in section 1(2) thereof that the amended
provisions are deemed to have come into force as from 5.9.1981,
would not introduce into the original Act the amended provisions of
Act 4 of 1989, until specifically notified in terms of section 1(3).
The Additional Solicitor General, Mr. Santosh Hegde as well as
the Advocate General for the State of Orissa, appearing for the
respondents, submit that the rights or interests claimed by the contractors arose under the bamboo agreements. They can have no right
apart from or independent of contract. Assuming that their right is in
the nature of an interest in immovable property, characterised as profit
a prendre it is neverthele.ss a right created or granted by. contract and
there is no independent existence for such right. The decision of this
court in Titaghur, [ 1985] 3 SCR 26 is no authority for the proposition
that the alleged rights of the contractors arose from a grant independent of contract. All that was, and could have been, decided in that
case on the point was that the bamboo contracts were not contracts of
sale of goods, but contracts under which a certain interest in immovable property was created, and the amounts payable under such contracts did not fall within the ambit of the Orissa Sales Tax Act. It is
true that the Court used the expression 'grant' but that expression was
borrowed from the agreements themselves. One of the parties to each
of these agreements, namely, the Government of Orissa is referred to
as the Grantor, and the other party, namely, the contractor is referred
to as the company. In terms of the agreements, certain rights and
interests came to be granted to, or vested in, the contractors. Those
rights and interests were granted by the agreements and not independent of the agreements.
The Additional Solicitor General points out that Act 4 of 1989,
by reason of the deeming provisions, must be projected into Act 22 of
ORIENT PAPER v. STATE OF ORISSA [THOMMEN, J.)
493
1981, as if the provisions of the later Act had been written into the
earlier Act, and as if they formed part of it, as from the date of
notification of the earlier Act, i.e., 5.9.1981. But the earlier Act came
into force in respect of a particular forest produce in question, i.e.,
bamboos in all the areas covered by Government forests from such
date as was specified by the notification issued under section 1(3}, i.e.,
1.10.1988. Even assuming, he contends, that section 5(1), as it originally stood, did \not have the effect o( affecting the contractors' rights,
and assuming further that their rights, as claimed by them, flowed
from grant, such rights were rescinded as from 1.10.1988. In any view,
he contends, no grant or contract can survive legislation rescinding it.
The Additional Solicitor General points out that section 1(3) of Act 22
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of 1981 cannot be assailed on the ground of.excessive delegation, for
there is no such vice in the provision and, in any view, it is a valid
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"conditional legislation". He further submits that Act 22 of 1981 is
intended to control and regulate trade in forest produce by creation of
State monopoly, and its objects are not identical to the Orissa Forest
Act, 1972 which is intended for the protection and management of
forests in the State. The legislative object is, therefore, clearly distinct D
and separate in respect of either enactment. In any view, he submits,
both the enactments having been passed by the same legislature, the
latter must prevail over the former in case of inconsistency. This is
clear from section 22 of Act 22 of 1981. Counsel says that no property
of the contractor is acquired as a result of the statute in question, for
all that is sought to be accomplished by it is taking over trade with a
view to State monopoly, and that the contractors had been given sufficient notice to remove the bamboos already felled a.nd stored by them
in the premises. In any view, refund of proportionate royalty has been
tendered to them by the Government. Bamboos felled but not
removed from the forests prior to the date of the notification will be
sold by the Government exclusively to the contractors at the price
determined by the Government at Rs. 700 per MT minus Rs.310 per
MT being the cost of extraction and Rs.115 per MT being the royalty
already paid, the total deduction being Rs.425 per MT. Accordingly,
the balance sum of Rs.275 per MT is due and payable to the
contractors.
We are in complete agreement with the learned Judges of the
High Court that the decision of this Court in Titaghur, [ 1985] 3 SCR 26
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is not an authority for the proposition that a right or .interest was
created in favour of the. bamboo contractors irrespective and independent of contract. No such question arose, or could have arisen, m. that
case, for the assessment proceedings in question there arose Ion~
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before Ac.t 22 of 1981 was enacted. In fact this Court proceeded on the
assumption ·that whatever was the nature of the right or interest that
was ;n question, such right or interest wa:-; the creature or result of
agreements between parties. What was in issue in that case was
whether or not the Orissa Sales Tax Act was attracted. In negativing
the contentions of the Revenue, this Court held that the contracts
crated merely an interest in immovable property and the amounts paid
under the contracts did not represent sale or purchase of goods, and
the Orissa Sales Tax Act was not attracted. The bamboo contracts
conferred upon the contractors a benefit to arise out of land. It was a
contractual right relating to immovable property and not relating to
goods. This .was the crucial issue that was decided in that case regarding bamboo contracts.
The authority of Titagt.ur, (1985] 3 SCR 26 is c•rnfined to matters
which were directly and substantially in issue in that case. It is neither
precedent nor res judicata for any other matter. "What is of the essence in ii .decision is its ratio and not every observation found therein
nor what logic~lly follows from the various observations made in it."
[Per Hegde, J., The State of Orissa v. Sudhansu Sekhar Misra and Ors.,
[ 1968] 2 SCR 155, 162]. As stated by one of us (Saikia, J .) in Krishena
Kumarv. Union of India, JT 19883SC 173, 187, 192:
"The doctrine of precedent, that is, being bound by a previous decision, is limited to the decision itself and as to what
is necessarily involved in it. It does not mean that this
Court is bound by the various reasons given in support of
it, especially when they contain 'propositions wider than
the case itself required' ..... A deliberate and solemn
decision of court made after argument on question of law
fairly arising in the case, and necessary to its determination, is an authority, or binding precedent .. , .. ".
In the words of Lord Halsbury, L.C. [Quinn v. Leathern, (1901] AC
495, 506]: Quoted by Hegde; J., ibid.
" ..... there are two observations of a general character
which I wish to make, and one is to repeat what I have very
often said before, that every judgment must be read. as
applicable to the particular facts proved, or assumed to be
proved, since the generality of the expressions which may
be found there are not intended to be expositions of the
whole law, but governed and qualified by the particular
ORIENT PAPER v. STATE OF ORISSA !THOMMEN, J.]
495
facts of the case in which such expressions are to be found.
The other is tha\ a case is only an authority for what it
actually decides. I entirely deny that it can be quoted for a
proposition that may seem to follow logically from it. Such
a mode of reasoning assumes that the law is necessarily a
logical code, whereas every lawyer must acknowledge that
the law is not always logical at all."
(emphasis supplied)
See also Gangabai w/o Rambilas Gilda v. Chhabubai w/o
Pukharajji Gandhi, [1982] 1SCR1176, 1182; PrakashAmichand Shah
v. State of Gujarat & Ors., [1985] Supp. 3 SCR 1025, 1052 and
Sreenivasa General Traders & Others v. State ofAndhra Pradesh and
Others etc., AIR 1983 SC 1246.
The decision in Titaghur, [1985] 3 SCR 26;as we see it, is consistent with the proposition that all rights derived by the contractors,
including profit a prendre, were granted in terms of the agreements.
All such rights are conditioned by, and totally dependent on, the
agreements. Whatever mutual rights or obligations accrued or arose
between the parties to those agreements are purely contractual in
character and incidence.
Any right or interest granted or recognised under such agreement was not an independent or pre-existing right or interest to survive the statutory resci~sion of the contract. Legislation has superseded all inconsistent and contrary rights. No right or interest or grant,
whether contractual or prerogative in character or origin, whatever be
its nature, source and scope, can survive a superseding valid legislation. See Attorney General v. ·De Keyser's Royal Hotel Limited, [1920]
AC 508. In this context, the observation of the Privy Council in
Thakur Jagannath Baksh Singh v. The United Province.s, AIR 1946 PC
127, Para 17, is relevant:
" . . . . . if once it be found that the subject-matter of a
Crown ,grant is ·within the competence of a Provincial
Legislature nothing can prevent that Legislature from
legislating about it unless the C.onstitution Act itself expressly prohibits legislation on the subject either absolutely or
conditionally."
All rights recognised under the bamboo contracts thus perished as
froni the date on which Act 22 of 1981 came into force in respect of
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