EXECUTIVE DIRECTOR, STEEL AUTHORITY OF INDIA & ORS.versusTYCOON TRADERS & ORS.

                         [2014] 3 S.C.R. 838


A   EXECUTIVE DIRECTOR, STEEL AUTHORITY OF INDIA &
                        ORS.
                                   v.
                   TYCOON TRADERS & ORS.
                  (Civil Appeal No. 4026 of 2014)
B
                          MARCH 26, 2014
                   [GYAN SUDHA MISRA AND
                 PINAKI CHANDRA GHOSE, JJ.)
        CONTRACT:
c
         Contract becoming unenforceable impossible-Contract
  for removal of iron ore fines-Granted in 2007 -- Renewed in
  2009 -- Principal Chief conservator of Forests declining to
  grant permission for lifting and transporting of iron ore fines
D by plying vehicles as the area was declared as 'Tiger Reserve'
  -- High Court holding that contract stood frustrated and it was
  illegal for SAIL not to refund entire amount -- Held: Contract
  is unenforceable and further, it is a/so hit by s.38(v) of Wildlife
  (Protection) Act -- High Court was correct in allowing the writ
E petition, and there is no reason to interfere - Wild life
  (Protection) Act, 1972 - s.38(v).

       In an e-auction for removal of iron ore fines,
  respondent no.1, being the successful bidder deposited
  the required amount and security deposits in March 2007.
F The contracted was revalidated till November 26, 2009.
  However, the Principal Chief Conservator of Forests
  declined to grant permission for lifting the iron ore fines
  by plying vehicles as the area was declared as 'Tiger
  Reserve'. The High Court allowed the writ petition of
G respondent no.1 holding that the contract itself stood
  frustrated and could not have been performed by the
  respondent even if it desired to do so, and further held
  that in case of frustrated contract, parties must be

H                                 838
EXECUTIVE DIRECTOR, STEEL AUTH. OF INDIA v.                 839
             TYCOON TRADERS
restored to their original position and, as such, it was            A
illegal for SAIL not to refund the entire money received
by it from the respondent.

    Dismissing the appeal, the Court

    HELD:                                                           B

     The contract is unenforceable and further, the
contract is also hit by s.38(v) of the Wildlife (Protection)
Act, 1972 as amended in 2006 and, as such, the object
of the contract is forbidden by law. Therefore, the said            c
contract is unlawful and cannot be given effect to. The
High Court was correct in allowing the writ petition, and
there is no reason to interfere with its order. [para 8-9]
[842-F-H]
    CIVIL APPELLATE JURISDICTION : Civil Appeal No.                 D
4026 of 2014.
    From the Judgment and Order dated 21.02.2012 of the
High Court of Karnataka at Bangalore in WP No. 38280 of
2011.                                                               E
    Dr. Rajiv Dhawan, Anurag Sharma, Prashant Kumar,
Joseph Pookkatt, AP & J Chambers for the Appellants.
   Shushil Kumar Jain, Satish G., H. Chandra Sekhar, AV.
Manavalan, V.N. Raghupathy for the Respondents.                     F
    The Judgment of the Court was delivered by
    PINAKI CHANDRA GHOSE, J. 1. Leave granted.
    2. This appeal has been filed against the order dated
February 21, 2012 passed by the High Court of Karnataka in          G
W.P. No.38280/2011.
    3. The facts of the case reveal that on February 19, 2007,
Steel Authority of India (for short 'SAIL') had advertised for E-
auction of 1.00 lakh metric tons of iron ore (fines) from           H
    840      SUPREME COURT REPORTS                   [2014] 3 S.C.R.

A Kemmanagundi mines. On March 13, 2007, auction was held
  and respondent No.1 was declared as the successful tenderer.
  It would be evident from the sale order dated March 16, 2007
  that the price was agreed upon at Rs.1, 132/- per metric ton plus
  VAT of 4% aggregating to Rs. 11,32,00,000/- plus VAT of 4%.
s The appellant duly paid 176 lakhs being 15% of the total sale
  value on March 15, 2007. Out of the said amount, Rs.58.86
  lakhs being 5% of the total sale value was retained as Security
  Deposit and a sum of Rs.117.74 lakhs was kept for adjustment
  along with the final instalment. The balance payment was to be
c made in two monthly instalments with the grace period of 30
  days with interest at the rate of 6% per annum. The entire
  material was to be lifted within four months from the date of the
  sale order.

          4. On May 26, 2010, SAIL informed the respondent that
D   the contract was revalidated by letter dated July 27, 2009 till
    November 26, 2009 for a period of four months commencing
    from July 27, 2009 and that the said contract had expired on
    the lapse of the said period. It is also not in dispute that on
    November 9, 2009, SAIL had addressed a letter to the Principal
E   Chief Conservator of Forests (Wildlife) and Chief Wildlife
    Warden, Karnataka, for renewal of permission granted for lifting
    and transporting iron ore fines through Bhadra Wildlife
    Sanctuary. The Principal Chief Conservator of Forests by letter
    dated March 31, 2010, declined to grant such permission for
F   the removal of 1.00 lakh tons of iron ore fines by plying vehicles.
    In these circumstances, the High Court held that the contract
    itself stood frustrated and could not have been performed by
    the respondent even if it desired to do so, and further held that
    in case of frustrated contract, parties must be restored to their
G   original position.
         5. On the basis of the aforesaid reason, the High Court
    held that it is illegal and unconscionable for SAIL not to refund
    the entire sum of money received by it from the respondent. The
    High Court further held that the extension was granted at the
H
EXECUTIVE DIRECTOR. STEEL AUTH. OF INDIA v. 841
TYCOON TRADERS [PINAKI CHANDRA GHOSE, J.]

instance of SAIL and such extension amounts to waiver of the        A
delivery conditions in the sale order dated March 16, 2007. The
High Court further held that the Bhadra Wildlife Sanctuary has
been declared as a 'Tiger Reserve' and that it is required to
be maintained as 'inviolate' for tiger population, and the
permission which has been refused cannot be granted in view         B
of section 38(v) of the Wildlife (Protection) Act, 1972 as
amended in 2006. In this background, the writ petition was
allowed and SAIL was directed to refund the entire amount
within four weeks from the date of the order.

     6. Being aggrieved, the appellant filed the present appeal     C
before this Court. It was contended before us that this is a case
where there was a breach of contract which was committed by
the respondent and thereby SAIL has a right to forfeit the
earnest money and security deposit on the basis of such
breach. It is also stated whether it would come within the          D
purview of a case of frustration of the contract. Dr. Rajiv
Dhawan, learned senior counsel appearing in support of the
appellants, has drawn our attention to the original agreement
and contended that there was a breach of the original
agreement since no clearances were obtained, payments were          E
not made and further contract was not completed. It has been
further submitted that the respondent could not lift the iron ore
fines although SAIL could manage to get permission from the
State Government. Furthermore, it is the case of the appellant
that in the light of the respondent's request, the contract was     F
revalidated on July 27, 2009 on the same terms and conditions
and, in fact, there was no waiver of any conditions stipulated
in the sale order dated March 16 2007; therefore, on this
question the High Court is not correct since, according to him,
there was no question of any waiver. He further submitted that      G
there was rio frustration due to impossibility because the
 Principal Chief Conservator of Forests had granted clearance.
     7. Per contra, Mr. Sushil Kumar Jain, learned senior
counsel appearing on behalf of the respondent, drew our
attention to the letter dated March 31, 2010 whereby the            H
    842      SUPREME COURT REPORTS                 [2014] 3 S.C.R.


A Principal Chief Conservator of Forests (Wildlife) & Chief
  Wildlife Warden, Bangalore, has specifically stated to the
  General Manager (Operations) of the appellant that Bhadra
  Wildlife Sanctuary was declared as a Tiger Reserve and was
  required to be maintained as 'inviolate' for tiger population,
B hence, refused to allow the transportation through the said Tiger
  Reserve under Section 38(v) of the Wildlife (Protection) Act,
  1972 as amended in 2006. By the said letter, the request to
  lift and transport the iron ore fines was rejected. Therefore, the
  contract which was entered into between the parties, as would
c be evident, is in violation of the said Act and is against public
  policy. Hence, the contract cannot be given effect to as the
  contract is already frustrated. He also drew our attention to the
  fact that the appellant by a fax message dated July 6, 2007 duly
  relaxed condition Nos.8, 9 and 10 as stipulated in the G.O.
  dated 2nd May, 2007. Learned senior counsel further
0
  contended that by relaxing the said conditions, there was no
  need for the respondent to obtain permission. On the contrary
  it was the duty of the appellant to take permission from the
  authority for implementation of such contract.

E      8. After considering the submissions made on behalf of
  the parties, we find that there is substance to accept the
  contentions of Mr. Jain, learned senior counsel in the matter.
  In our opinion, the contract is unenforceable and further, the
  contract is also hit by Section 38(v) of the Wildlife (Protection)
F Act, 1972 as amended in 2006. Therefore, the object of the
  contract is forbidden by law. Hence, the said contract is unlawful
  and cannot be given effect to. In these circumstances, we do
  not accept the contention of Dr. Dhawan, appearing on behalf
  of the appellants.
G
         9. Accordingly, we hold the High Court was correct in
    allowing the writ petition, and we do not find any reason to
    interfere with the said order of the High Court. Hence, we do
    not find any merit in the appeal, and the same is dismissed.

H R.P.                                         Appeal dismissed.