1980 (10) TMI 211 - SC - Indian Laws

Validity of bid retraction both orally and by telegram - Doctrine of avoidable consequences - statutory body - telegraphic withdrawal or retraction of bids - Prohibited or Not - Conditions of Sale governing pool auctions - quantum of loss - default lots of coffee - delay in holding the re-sale - HELD THAT - Here the material on record clearly shows that internal coffee prices in the year 1952 particularly from March to October 1952 had soared very high on account of malpractices indulged in by coffee dealers and even the Government of India felt itself very much concerned about it and suggestions had been made by Government officials as well as by the Members of the Coffee Board to take steps to bring down the coffee prices at reasonable level in the interest of both the trade as well as the consumer and in fact several measures including the step of accepting lower bids in preference to the higher bids with a view to regulate coffee prices were taken by the Coffee Board pursuant to the Government s directive in that behalf. Clearly these measures were being taken by the Board in discharge of their main function and duty to maintain the coffee prices at proper level in the interest of all concerned particularly the consumer and were not directed against the defaulting dealers at the concerned pool auction. When in spite of such warning being issued unnecessarily higher bids were given exceeding the average prices prevailing in the month of September 1952 (which themselves were high) the Chief Coffee Marketing Officer decided to accept lower bids in preference to the higher ones. It was in these circumstances that at the re-sale held on December 23 1952 the prices realised were lower than the appellant s bids which had been accepted at the pool auction held on October 7 1952. It must be stated here that at the re-sale admittedly only the highest bids were accepted. So it is not as if at the re-sale lower bids were deliberately accepted to enhance the loss. It is impossible to subscribe to the proposition that the Board should have maintained the high price level at the cost of the consumers merely with a view to see that the defaulting bidders did not suffer any loss on re-sale. The loss arising on the re-sale therefore cannot be regarded as unreal loss. The attack of the appellants against the grant of damages to the respondent on this ground is clearly unsustainable. As regards the alleged delay in holding the re-sale it must be observed that both the trial court as well as the High Court have taken the view that the same was held within reasonable time at the next pool auction conducted in the normal course. The results of the concerned pool auction were declared some time after 2 P.M. on October 8 1952. The period of 17 days (14 days initial period plus 3 days of grace for taking delivery) expired on October 26 1952 but the evidence on record shows that there was a general request on behalf of the successful bidders for extension of time for making payment and taking delivery and such extension had been granted by the Board upto November 10 1952 by issuing a circular. We have already held that there was no valid retraction of bids by the appellants and to their knowledge their retraction had been rejected by the Board on October 8 1952 itself. That the appellants were interested in the extension granted by the Board becomes evident from their telegram dated October 22 1952 (Ex. A 129) seeking confirmation of the extension. After November 10 1952 some reasonable notice of re-sale would have to be issued so the defaulted coffee could not be put up for sale in the pool auction that was held in the month of November 1952. The next pool auction was to be held in December 1952 and therefore after issuing notice of re-sale on December 18 1952 the re-sale was held by conducting a pool auction on December 23 1952. In our view both the Courts were right in taking the view that the re-sale had been held within the reasonable time. Appeals are dismissed with costs.

Summary

Issues Involved:
1. Validity of bid retraction by the appellants.
2. Authority of the Coffee Board to accept lower bids.
3. Quantum of loss claimed by the Coffee Board.

Issue-wise Detailed Analysis:

1. Validity of Bid Retraction by the Appellants:

The appellants contended that they had retracted their bids both orally and by telegram before the auction results were announced, thus no concluded contracts existed. They relied on the telegram sent on October 7, 1952, and an oral retraction made to the Assistant Coffee Marketing Officer before the results were declared. The respondent argued that telegraphic withdrawal of bids was barred under Condition No. 8 of the Conditions of Sale, and the oral retraction was ineffective as it was not made to the proper officer.

The court held that Condition No. 8, which states, "Telegraphic bids or telegraphic instructions regarding bidding will not be considered," was broad enough to include withdrawal or retraction of bids. The court reasoned that the solemn procedure followed in "pool auctions" necessitated that any instructions regarding bids, including retraction, should not be permissible by telegrams, which are often cryptic and lack authenticity. Additionally, the oral retraction made to the Assistant Coffee Marketing Officer was ineffective as it was not made to the Chief Coffee Marketing Officer, who was the proper authority. Therefore, the court concluded that there were concluded contracts between the appellants and the Coffee Board.

2. Authority of the Coffee Board to Accept Lower Bids:

The appellants argued that the Chief Coffee Marketing Officer had no power to accept lower bids when higher bids were submitted, as a lower bid lapses on receipt of a higher bid. They contended that Condition No. 6 of the Conditions of Sale did not confer any power on the Board to accept lower bids.

The court held that Condition No. 6, which states, "The seller does not bind himself to accept the highest or any bid. He is not bound to assign any reasons for his decision, and his decision shall be final and conclusive," impliedly conferred power on the Board to accept lower bids. The court reasoned that the addition of the words "or any bid" after "the highest" indicated an intention to confer separate powers to decline the highest bid and to decline any bid. The court also noted that the respondent Board had a history of accepting lower bids in preference to higher bids to regulate coffee prices and prevent malpractices. Therefore, the court concluded that the Chief Coffee Marketing Officer was within his rights to accept the lower bids from Giri Coffee Works.

3. Quantum of Loss Claimed by the Coffee Board:

The appellants contended that the Coffee Board had an obligation to mitigate the loss arising from their failure to pay for and take delivery of the coffee. They argued that the Board had deliberately depressed coffee prices before the re-sale, making the loss unreal and not recoverable. They also contended that the re-sale was held after an inordinate delay.

The court held that the principle of mitigation of loss requires the non-defaulting party to act reasonably to minimize the loss. The court found that the Coffee Board had taken steps to regulate coffee prices in response to Government directives and in the interest of consumers, not specifically to enhance the loss from the re-sale. The court also noted that the re-sale was held within a reasonable time, as the next "pool auction" was conducted in December 1952 after issuing the notice of re-sale on December 18, 1952. Therefore, the court concluded that the loss claimed by the Coffee Board was real and the re-sale was held within a reasonable time.

Conclusion:

The court dismissed the appeals with costs, upholding the High Court's decrees in favor of the Coffee Board. The court found that the appellants' bids were validly accepted, the Coffee Board had the authority to accept lower bids, and the loss claimed by the Coffee Board was real and recoverable.