TMI Blog1979 (12) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... he bid amount at the fall of the hammer. He, however, did not question the authority of the excise authorities to put up the excise privileges for resale and to claim the loss occasioned by such resale from him. In these circumstances I am of the view that it is not possible to hold that the respondent was not in law liable for the claim made by the State Government even though no contracts were formally entered into between the respondent and the State Government. The liability of the respondent in the instant case arises under the statute and it also arises as the result of a civil wrong or a tort committed by him, in offering the highest bid with open eyes and in not fulfilling the obligations arising therefrom. Thus the respondent should be made liable for the sum claimed in the suit and the decree made by the trial court should be restored. - C.A. 173 OF 1969 - - - Dated:- 21-12-1979 - A.C. GUPTA, V.D. TULZAPURKAR AND E. S. VENKATARAMIAH, JJ. JUDGMENT This appeal by certificate is from a judgment of the Allahabad High Court, Lucknow Bench, dismissing the suit instituted by the appellant, State of Uttar Pradesh, for recovery of a sum of Rs. 20,100 from the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, 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 be resold, and if the price finally bid at the re-sale be less than that bid at the first sale, the difference will be recovered from the defaulter. I Section 77 of the U.P. Excise Act, 1910 states: All rules made and notifications issued under the Act shall be published in the official gazette and shall have effect as if enacted in this Act from the date of such publication or from such other date as may be specified in that behalf. The High Court found that the conditions mentioned in rule 357 had A never been published as required and they did not, therefore, have the force of law. The High Court held that Part II of the Excise Manual which includes rule 357 contained provisions which where commonly referred to as rules but were not really statutory rules and that it was a sort of book of guidance . Before us it was claimed on behalf of the appellant that some of the conditions contained in rule 357 had been published in the official gazette, but the learned counsel for the appellant, State of Utta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eptance is conditional the, offer can be withdrawn at any moment until absolute acceptance has taken place. The appeal is dismissed but in the circumstances of the case we make no order as to costs. VENKATARAMIAH, J. I have had the advantage of perusing the judgment prepared by my learned brother, Gupta, J. I regret my inability to agree with the conclusion reached by him. Since some of the facts which are necessary for the purpose of this case have not been set out in the judgment of my learned brother, I have to mention them at this stage. The excise auctions for the year 1951-52 were held on February 22, 1951 under the provisions of the U.P. Excise Act, 1910 (hereinafter referred to as 'the Act'). The respondent offered the highest bid of Rs. 73,000 for the chowk group shops and of Rs. 48,000 for Rakabganj group shops. At that auction, the shops in question were knocked down for the above-mentioned amounts in favour of the respondent who affixed his signatures to the respective bid sheets in token of his acceptance and also in the register of Settlement Record. The respondent, however, did not deposit 1/6th of the above mentioned amounts on the aforesaid date b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration are (1) whether there came into existence a contract, (2) whether by reason of non-deposit of one-sixth of the bid money there was a breach of the contract on the part of the appellant; (3) whether this breach entitled the respondent to re-auction the shops and to recover the loss on re-auction from the appellant; and (4) whether the deficit of Rs. 20,100 represents the legal loss recoverable from the appellant. Before the High Court in so far as the first point was concerned, the respondent's contention was three fold-(i) since the bids were not accompanied by l/6th of the bid amount, there were no completed proposals and, therefore, there could be no acceptance thereof so as to bring into existence a contract; (ii) as the Excise Commissioner had not accorded his approval, there was no acceptance of the proposal and (iii) as no agreements in writing had been executed by the person competent to do so under Article 299 of the Constitution, no contracts had come into existence. The High Court rejected the first two contentions by holding that the failure to deposit l/6th of the bid amount did not make the proposals incomplete and that the absence of the approva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the High Court, the State Government has come up in appeal to this Court. In the instant case, the only question which arises for consideration is whether the respondent is not liable to pay the damage even though no contract in writing had been executed in accordance with Article A 299 of the Constitution. It was not the case of the respondent that the excise authorities had no right to re-sell the excise licences. after he had committed default in depositing l/6th of the bid amounts. His principal pleas were (i) that there were no completed contracts between the State Government and himself and consequently there could be no breach of contract; (ii) that the entire auction proceedings, having been against the rules and instructions of the Government were illegal and void and (iii) that the State Government, having accepted his prayer to be relieved from the bids made by him and subsequently re-auctioning the groups of shops to others was estopped from fixing any civil liability on him. It is seen from what is stated above that no attempt was made; by the respondent to make good his plea regarding the legality of the auction proceedings and the plea of estoppel. The only plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner and this is borne out by the following observations of this Court at page 598:- It is not disputed that the Chief Commissioner had disapproved the bid offered by the respondent. If the Chief Commissioner had granted sanction under cl. 33 of Ex. D-23 the auction sale in favour of the respondent would have been a completed transaction and he would have been liable for any shortfall on the resale. As the essential pre-requisites of a completed sale are missing in this case there is no liability imposed on the respondent for payment of the deficiency in the price. In the case before us there was no disapproval of the Excise Com missioner of the bids offered by the respondent. On the other hand, the excise authorities requested the respondent to perform his part of the obligation under the sale proclamation. It is also further been that this Court in the case of M/s. Bhimsen Walaiti Ram (supra) proceeded on the basis that the liability of the bidder could arise only as a consequence of the breach of a completed contract. No attention appears to have been given in that case to the question whether the act of the offering of the highest bid which was accepted by the officer ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue include within their scope not merely any compensation which a person may be liable to pay on account of the breach of a contract committed by him after the contract is completed but also any other amount that may become flue on account of a contract which would come into existence if all formalities are completed having regard to the scheme and manner in which the excise privilege is disposed of by the excise authorities. The relevant rules governing the conduct of excise sales are found in a notification bearing No. B. O. No. 423/V-284-B dated September 26, 1910. The rules require the publication of a sale proclamation announcing the dates of sale and the place where it will be held. Before the sales for the day commence, the general conditions governing the sale which are set out in paragraph 373 of the U.P. Excise Manual (Vol. I) shall be read out and explained to all present so that the competitors may clearly understand the conditions on which they bid. The general conditions governing retail vend and the special conditions governing each class of licence shall also be read out in public before the sales to which they apply. Information should be freely given on all mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the Excise Commissioner. It, however, did not mean that the acceptance of the bid would be complete only after the sanction was accorded by the Excise Commissioner because of the other conditions which read as under:- 1. The officer conducting the sales is not bound to accept the highest or any bid. 2. The final acceptance of any bid is subject to the section of the Excise Commissioner. A reading of the two clauses referred to above shows that the officer holding the sale was empowered to accept the bid and that his acceptance was only subject to the sanction of the Excise Commissioner. They meant that the power which had been reserved to the Excise Commissioner only enabled him to set aside the acceptance already made by the officer conducting the sale. If it was not so set aside by him, the acceptance of the officer conducting the sale would be effective. As mentioned earlier, in this case, the Excise Commissioner had not refused to sanction the acceptance of the highest bids offered by the respondent. The liability of the highest bidder to deposit a sum equivalent to l/6th of the bid offered by him arises as a consequence of his offering the highest bid with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st bid by writing a letter immediately after the conclusion of sale to the concerned authority expressing his intention to withdraw from the bid or by resiling from it in any other manner. The result will be that on the one hand the other bona fide bidders who have come to offer the bids would not be entitled to claim the privilege or property that is put up for sale and on the other the defaulting bidder would also be not liable to carry out his obligation flowing from his act or offering the highest bid. If the liability of such a bidder is to be founded only on the basis of a completed contract then in the case of auctions held by or on behalf of the Central or State Governments, no liability can arise even if such sanction is accorded, unless it is followed up by a formal document executed under Article 299 of the Constitution-which alone amounts to a completed contract where Government is a party. Judged from the foregoing, I am of the view that the acceptance of the conclusion reached by my learned brother would lead to enormous public prejudice and instead of advancing the cause of justice would hamper it. This case is an illustration of what prejudice is likely to be caused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not liable to pay the amounts sought to be recovered. Dismissing The appeal, the Court held that the absence of an agreement executed in accordance with the provisions of Article 299 of the Constitution could not be a bar for recovering the excise dues in view of section 28 of the Kerala Act. The Court held that the liability was one which arose under the statute and therefore was enforceable. In taking that view, this Court observed at pages 782-783 thus: The appellants submit that they had not become grantee of any privilege without the execution of con tracts complying with the requirements of Article 299 of the Constitution. The learned Judge of the Kerala High Court relied on Madhavan v. Assistant Excise Commissioner, Palghat (I.L.R. (1969) 2 Kerala 71), affirmed by a Division Bench in Damodaran v. State of Kerala (1969) Kerala Law Times 587. It appears that, although the Division Bench did 'not specifically consider whether a bidder at an auction of the kind before us was the grantee of a privilege within the meaning of section 26 of the Act, yet, it held that the liability to satisfy the dues arising out of a bid was enforce able under section 28 of the Act q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the Supreme Court in H. P. Chowdhry v. State of M.P. (AIR 1967 SC 203) and Mulamchand v. State of M.P. (1969(II) S.C.W.R. 397), for the proposition that unless there is an agreement executed in accordance with the provisions of Article 299 of the Constitution, the petitioners in the case where no agreements have been executed, would not be liable to pay rental. The argument was that the liability to pay rental arises only out of the agreement, and if there is no agreement, then there is no liability to be enforced As I have indicated the liability to pay the renal arises not only by virtue of the agreement but also by the provisions of section 28 of the Act. The decision of the Supreme Court in H. P. Chowdhry v. State of M.P. would make it clear that if there are provisions in the Act, the liability to pay the rental can be enforced. I think that even if no agreement has been executed, there was the liability under section 28 of the Act, and that the liability would be enforced under the provisions of the Revenue Recovery Act. (See Sections 6 and 62 of the T.C. Act) . Chandrashekhar, J. (as he then was) has also taken more or less the same view in-State of Mysore v. Dasa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us resolution and directed a re-sale of the property. The plaintiff thereafter instituted a suit for enforcing the sale on the basis that there was a concluded contract in his favour which was denied by the defendant in the written statement. The main contention urged on behalf of the defendant was that the contract did not become final and complete as the approval of the Chittoor District Bank was not communicated to the plaintiff. Under section 4 of the Contract Act, it was claimed, that even the approval should have been communicated like acceptance as according to the contention of the defendant that constituted a final acceptance of the contract. The trial court accepted the contention of the defendant and dismissed the suit. The first appellate court reversed the decision of the trial court and granted a decree for specific performance of the contract in favour of the plaintiff. While affirming the Judgment of the first appellate court, the High Court observed in the above decision as follows:- The defendant appointed a sale officer who, under the terms of E. D. I was authorised to knock down in favour ' of the highest bidder the property subject of course to the appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is decision is doubted elsewhere. It is not necessary in this case to decide whether the view expressed by the High Court of Madras in the above case is correct or not for the situation in the instant case is anterior to the situation which obtained in the said case. The officer who held the same in the present case had the power to accept the bids though it was subject to sanction by the Excise Commissioner. The respondent who offered the bids after conclusion of the sale failed to make the initial deposit and thereby drove the Department to hold the resale. It was high conduct which ultimately resulted in the loss suffered by the Department. The decision of this Court in K. P. Chowdhary v. State of Madhya Pradesh Ors is not of much assistance to the respondent in this case, since in that case the officer who held the sale was not competent to accept the bids of the appellant therein as the bids offered were higher than what he could accept. The appellant therein resiled from the offer made by him by raising a dispute as to the marking of the trees even before the Chief Conservator of Forests who was competent to accept the bids could accept them. This Court no doubt upheld t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reason for not depositing 1/6th of the bid amount at the fall of the hammer. He, however, did not question the authority of the excise authorities to put up the excise privileges for resale and to claim the loss occasioned by such resale from him. In these circumstances I am of the view that it is not possible to hold that the respondent was not in law liable for the claim made by the State Government even though no contracts were formally entered into between the respondent and the State Government. The liability of the respondent in the instant case arises under the statute and it also arises as the result of a civil wrong or a tort committed by him, in offering the highest bid with open eyes and in not fulfilling the obligations arising therefrom. The latter source of liability in this case may appear to be novel but if justice requires, the Court should not hesitate to impose it on the person who has committed the wrong and secure justice for the innocent injured party. The following observation of Denning L.J. (as he then was) in Candler v. Crane, Chrismas Co.(1) at page 178, though in minority, are apposite:- This argument about the novelty of the action does not a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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