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TMI Blog1979 (12) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... sh it suffered-a total loss of Rs. 20,100 which is the difference between what the respondent had offered and the sum for which the shops were later sold, and the respondent was liable to compensate the loss. The suit was decreed by the trial court. On appeal the High Court dismissed the suit on the view that there was no valid contract which could be enforced by the plaintiff as the requirements of Article 299(1) of the Constitution had not been complied with. We are also of the view that the suit must be dismissed but for a slightly different reason; in our opinion there was no concluded contract between the parties, nor was there any statutory rule permitting recovery the deficiency on re-sale from, the respondent. The sale proclamation which is said to have contained the conditions of sale was not produced. The Assistant Excise Commissioner (P.W. 1) in his testimony referred to rule 357 of the Excise Manual. The relevant part of the rule is as follows: "The following conditions shall apply to all sales under the auction system, and will be inserted at the foot of the sale proclamation if such proclamation is issued by the Excise Commissioner: (1) The officer conducting the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the first sale and the price fetched at the re-sale. The sale proclamation containing the conditions of sale has not been produced. Assuming that the different clauses of rule 357 barring the last part of the 5th clause embody the conditions of sale, it is clear from the 2nd clause that in the absence of the final sanction of the Excise Commissioner, the bid cannot be said to have been finally accepted. lt is not claimed by the appellant that the bid offered by the respondent was sanctioned by the Excise Commissioner. There was thus no concluded contract between the parties to make the respondent liable for the alleged loss. The point appears to have been decided by this Court in Union of India and another v. M/s. Bhimsen Walaiti Ram(1). This was a case of an auction for the sale of licence for a country liquor shop in Delhi for the year 1949-50. Clause 33 of the conditions of sale provided inter alia : "All final bids will be made subject to the confirmation by the Chief Commissioning who may reject any bid without assigning any reasons". This condition is similar to clause 2 of rule 357 in the instant case. Ramaswami J. speaking for the court in Bhimsen's case observed: " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following additional pleas:- "1. There was no completed contract between the plaintiff and defendant. Consequently there had been no breach and no cause of action for the suit. 2. The entire auction proceedings having been against the rules and instructions of the Government were illegal, void and ineffective. 3. The plaintiff himself having accepted the prayer of the defendant to be relieved from the bid made by him and subsequently re- auctioning the shops or the groups of shops to others was now estopped from fixing any civil liability on the defendant." Four contentions were urged on behalf of the respondent in the 1 trial court viz. (1) since the offers of the respondent had not been accepted, no valid contracts had come into existence; (2) as the respondent had withdrawn the offers before their acceptance, there could be no enforceable contracts in existence; (3) the contracts, if any, were unenforceable as then did not satisfy the conditions mentioned in Article 299 of the Constitution and (4) that even though the respondent had committed the breach of the agreements he was not liable to pay any damages as the excise authorities had not taken any steps to mitigat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of the appellant, the answer must be in the affirmative for the simple reason that the deposit of the money was one of the conditions of the contract. This condition, as has been shown above, follows both from the statutory provision and the admission of the appellant himself that there was this deposit to be made." On the third point viz. whether the breach committed by the respondent in each of the two cases entitled the State Government to re-auction the shops and to recover the loss on such re-auction from him the High Court held that the right to re-auction had not been proved to be founded on either any statutory rule or on any express terms of the contract but the said right was the 'natural outcome of the breach of an accepted term of contract', when the respondent failed to deposit the amounts in terms of the agreement. It further held that when the respondent had failed to deposit the amounts in terms of the agreement on which the bids were given and accepted the State Government was under an obligation for minimising the loss arising from the breach of the contract to re-auction the shops and in case of any loss arising therefrom, to recover the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posit with the officer holding the auction l/6th of the bid amounts and that if he committed any default in doing so, the excise licences in question were to be resold and that he would be liable to pay any loss suffered by the State Government on such resale. The contention that in the absence of the approval of the Excise Commissioner, he would not be liable to make good the loss has Loss to be rejected in view of condition No. 5 which according to the testimony of the Assistant Excise Commissioner (P.W. 1), which cannot be rejected, had been mentioned in the sale proclamation, which read thus: "5. A sum equal to one-sixth of the annual fees shall be payable immediately on the conclusion of the sale for the day, and the balance by such instalments as are specified in the licence to be granted. If default be made in the payment of the advance instalment, the shop on farm will he resold, and if the price finally bid at the resale be less than that bid at the first sale, the difference will be recovered from the defaulter." It is no doubt true that in Union of India & ors. v. M/s. Bhimsen Walaiti Ram,(') this Court held that the contract of sale was not complete till the bid w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise authority can be acquired only by paying such fees or amount which may be equivalent to the highest bid offered at an auction when an auction is held. Section 39 of the Act which deals with the recovery of excise revenue reads as follows:- "39. Recovery of excise revenue-All excise revenue, including all amounts due to the Government by any person on account of any contract relating to the excise revenue, may be recovered from the person primarily liable to pay the same, or from his surety (if any) as an arrears of land revenue or in the manner provided for the recovery of public demands by any law for the time being in force. In case of default made by a holder of a licence the Collector may take the grant for which the licence has been given under management at the risk of the defaulter, or may declare the grant forfeited and resell it at the risk and loss of the defaulter. When a grant is under management under this section, the Collector may recover as excise revenue any moneys due to the defaulter by any lessee or assignee: Provided that no licence for an exclusive privilege granted under section 24 shall be forfeited or re-sold without the sanction of the authority gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r conducting the sales. The treasurer of the district, or one of his recognised assistants, shall be required to attend the sales to receive the advance fees paid by bidders provisionally accepted. The amount that has to be paid as advance deposit is a sum equivalent to l/6th of the annual fees which shall be payable immediately on the conclusion of the sales. for the day, and the balance by such instalments as are specified in the licence to be granted. If default be made in the payment of the advance instalments, the shop or farm will be resold. If the price finally offered at the resale be less than that at the first sale, the difference will be recovered from the defaulter through a civil suit If any person whose bid has been accepted at auction fails to make the advance deposit or if he withdraws from his bid, the excise authority may sell the contract immediately or on any subsequent date fixed by him. It is not the case of the respondent in the instant case that he was not aware of the above conditions, which had been set out in the sale proclamation and also which must have been read out at the commencement of the sale, as required by the rules for the information of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l/6th of the bid offered by him on the conclusion of the sale which is a condition precedent for the completion of the contract or for execution of a formal document in accordance with Article 29 of the Constitution. It is not, therefore, correct to determine the liability of a defaulting bidder on the basis of a completed contract or a formal document to be executed under Article 299. If the contention urged on behalf of the respondent is accepted, it will make every public auction held by a Government a mockery. A man without a pie in his pocket may offer the highest bid at an auction thus scaring away other bona fide bidders who have assembled at the auction to offer their bids and then claim that he is not liable to pay any damages only because a completed contract or an agreement in writing in accordance with Article 299 of the Constitution has not come into existence. We should remember that, in the interest of public revenue excise privileges, privileges of cutting and removing timber from Government forests, occupancy rights over Government lands and building sites etc. are disposed of in public auction by the Central Government, State Governments, statutory boards and loca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the State Government ? In a some what similar but not identical situation, this Court in A. Damodaran & Anr. v. State of Kerala Ors was called upon to decide whether the highest bidder at an excise auction was liable to be proceeded with for recovery of excise dues in the absence of an agreement executed in . accordance with Article 299. In that case, the appellants offered the highest bid at the auction sales held in respect of some toddy shops. The conditions of the sales, notified in pursuance of the statutory provisions were: (1) that it was incumbent upon the bidder to pay immediately 10% of the amount due, (.2) that the successful bidder had to deposit 30% of the amount payable on demand by the Assistant Commissioner and to execute agreements before getting the necessary licences and (3) that if The contract could not be executed, the whole amount was to be forfeited and the shop itself was to be resold. The appellants deposited the necessary amount on demand and were allowed to start business even before agreements were executed or licences were issued. But the appellants failed to pay the balance due to the State. The amounts were sought to be recovered under section 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principle stated in Nelson v. Harbolt (1948) 1 K.B. 30 as follows at p. 222:- "It is no longer appropriate to draw a distinction between law and equity. Principles have not to be stated in the light of their combined effect. Nor is it necessary to canvass the.- niceties of the old forms of action. Remedies now depend on the substance of the right, not on whether they can be fitted into a particular framework. The right here is not peculiar to equity or contract or tort, but falls naturally within the important category of cases where the Court orders restitution if the justice of the case so requires." In the case before us, we are concerned with the legality of proceedings under section 28 quoted above of the Act. It is evident that these proceedings can be taken in respect of "all amounts due to the Government by any grantee of a privilege or by any farmer under this Act or by any person an account of any contract relating to the Abkari Revenue._". It is clear that dues may also be "recovered from the person primarily liable to pay the same or from his surety (if any) ". It is not a condition precedent to recovery of an amount due and recoverable that it should be due under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the suit he questioned the said sale proceeding on the ground that the counterpart of the agreement and the mortgage deed executed by him were void for nonfulfillment of the requirements of Article',- 299 of the Constitution. The learned Judge held that the absence of a document conforming to Article 299 was not a bar in view of the statutory provisions contained in the Mysore Excise Act. The Rajanagaram Village Co-operative Society by its Secretary, . Parthasarathi Pillai v. P. Veerasami Mudaly was a reverse case and the facts involved in it were these: The defendant Co-operative Society put up a property belonging to it for sale at a public auction. H The auction was held by a sale officer. One of the conditions of the auction sale was that the sale would be knocked down in favour of the highest bidder subject to the approval of the defendant Co operative Society and the Chittoor District Bank. The plaintiff was the highest bidder at the auction and the sale was knocked down in his favour by the sale officer. He-deposited on the date of the sale with the sale officer the amount which he had to deposit under the conditions of the sale and also deposited the balance with t t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proval. Ever since the well-known decision of payne v. Cave, (1789) 3 T.R. 148: 100 E.R. 502, it has been established that the position of an auctioneer is that of an agent of the vendor and that until the bid is knocked down, there is no concluded contract in favour of the bidder and the bidder was at liberty to withdraw his offer before it was accepted. To a similar effect is also the decision Cook v. oxley, (1790) 3 T.R. 653: 100 E.R. 785. If there. is . no further condition of an approval or confirmation, ordinarily if the bid is knocked down, the acceptance is communicated by the acceptance of the bid in the presence of the bidder and no further communication would be necessary. If, however, the acceptance was conditional, the condition being that it is subject to the approval or confirmation by some other person, what is the position ? The acceptance in such circumstances, in my opinion, is conditional acceptance and that has to be communicated. Nobody suggests that in order to make the contract enforceable, it is not necessary to have the approval of the person indicated in the conditions of the auction sale. The question is whether the approval also in such circumstances, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n conduct in not depositing the 1/6th of the bids offered by him made it impassible, for the excise authorities to conclude the contract. The question may have been different if the respondent had done all that he had to do under the conditions of the auction but the excise authorities had not intimated him that he could exploit the excise privileges in accordance with law. The documents produced before the Court show that on February 24, 1951, the Deputy Commissioner, Faizabad wrote a letter (Exh. S) 11' calling upon the respondent to make the initial deposit which he had to make at the conclusion of the sale at the fall of the hammer on the date of the sale within three days of the receipt of that letter and intimating that in the absence of compliance with the said demand, the shops would be re-auctioned and the amount of deficiency resulting on such re-auction would be recovered from him. That letter was received by the respondent on March 8, 1951. As the respondent did not comply with the demand, the excise authority concerned decided to conduct a resale of the excise privileges on March 21, 1951, and also to prosecute the respondent for an offence punishable under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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