Manneni Srinivasa Rao vs. The State Of Andhra Pradesh

Held

The Court held that the petitioner's failure to enter into a formal agreement and fulfill other conditions was directly attributable to the COVID-19 pandemic and the nationwide lockdowns imposed under the Disaster Management Act, 2005. The Court found that the petitioner did not act with wilful default. It emphasized that Section 72 of the Disaster Management Act, 2005, grants overriding effect to its provisions, meaning the lockdown measures and guidelines issued thereunder would prevail over the terms and conditions of the auction. The Court distinguished the situation from typical unforeseen calamities mentioned in Condition No. 43 of the auction terms, stating that the COVID-19 pandemic was a widespread disease leading to restrictions on public movement. Therefore, the respondents could not take shelter under the conditions that the petitioner had not entered into a formal agreement or that they were not responsible for losses due to unforeseen calamities. Since the 2021 yielding season was already over, the Court directed the respondents to permit the petitioner to collect the cashew seed crop for the 2022 yielding season without any further payment. It also directed that the stock of 5440 Kgs of cashew seeds, if in usable condition, could be sold by the respondents and the proceeds appropriated to the government exchequer.

Facts

The petitioner was the highest bidder for cashew nut usufruct for Unit-X 1982, Ramasingavaram (128.47 Hectares) for the 2020 yielding year, with a bid of Rs. 20,30,000/-. He paid the initial 1/4th installment and GST. However, due to the COVID-19 pandemic and subsequent lockdowns, he could not make the remaining payments by the stipulated deadlines or enter into the formal agreement. He paid the full bid amount in installments. The respondents accepted the payments but did not finalize the agreement. The petitioner represented for the allotment of the same unit for the 2021 yielding year without further payment, which was pending. Subsequently, the respondents issued a tender notice for the auction of the usufruct for the 2021 yielding year, including the same unit, scheduled for 30.11.2020. The petitioner filed a writ petition challenging this action, seeking allotment for the 2021 season without additional payment.

Key Issues

1. Whether the petitioner's failure to enter into a formal agreement and fulfill other conditions of the auction for the 2020 yielding year, due to the COVID-19 pandemic and lockdown measures, constitutes a breach of contract that disentitles him from any relief, particularly concerning the 2021 yielding year? 2. Whether the provisions of the Disaster Management Act, 2005, and the guidelines issued thereunder, have an overriding effect on the terms and conditions of the auction and the contractual obligations of the parties, in light of the COVID-19 pandemic? Petitioner's arguments: The petitioner contended that his inability to comply with the auction conditions was solely due to the force majeure event of the COVID-19 pandemic and the resultant lockdowns, as evidenced by various government orders and guidelines. He argued that Section 72 of the Disaster Management Act, 2005, grants overriding effect to its provisions, meaning the lockdown measures should prevail over contractual obligations. He relied on the principle that no wilful default was on his part and cited the case of Devashree Ispat Private Limited v. State of Telangana. Revenue/State's arguments: The respondents argued that the petitioner failed to fulfill the conditions of the auction sale and became a defaulter, thus having no right to participate in future auctions. They contended that the petitioner did not enter into a formal agreement and did not lift the collected seed material, despite repeated requests. They also pointed to conditions in the auction notice stating the corporation is not responsible for losses due to unforeseen calamities after confirmation orders.