TMI Blog2021 (1) TMI 1216X X X X Extracts X X X X X X X X Extracts X X X X ..... tract. Even though the High Court referred to the submission of the Appellant that the letter of intent was subject to ratification by the Board and the only witness of the Respondent-Port Trust had admitted that no contract had been concluded, the High Court did not deal with the same. It is a cardinal principle of the law of contract that the offer and acceptance of an offer must be absolute. It can give no room for doubt. The offer and acceptance must be based or founded on three components, that is, certainty, commitment and communication. However, when the acceptor puts in a new condition while accepting the contract already signed by the proposer, the contract is not complete until the proposer accepts that condition as held by this Court in HARIDWAR SINGH VERSUS. BAGUN SUMBRUI AND ORS. [ 1972 (2) TMI 95 - SUPREME COURT] . An acceptance with a variation is no acceptance. It is, in effect and substance, simply a counter proposal which must be accepted fully by the original proposer, before a contract is made. In UOI. VERSUS BHIMSEN WALAITI RAM [ 1969 (9) TMI 109 - SUPREME COURT] , a three-Judge Bench of this Court held that acceptance of an offer may be either absolute o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncluded contract, irrespective of whether the offerer accepts the further condition proposed by the acceptor. This question does not appear to have been addressed by the High Court or the Court below. 2. This appeal is against a common Judgment and Order dated 10.10.2006 passed by the High Court of Judicature at Hyderabad in Appeal Nos. 2196 and 2197 of 2000 confirming a Judgment and Order dated 31.3.2000 of the Additional Senior Civil Judge, Visakhapatnam allowing the suit being O.S. No. 106 of 1993 filed by the Respondent-Port Trust against the Appellant for damages, and dismissing O.S. No. 450 of 1994 filed by the Appellant for refund of earnest deposit. 3. On or about 17.7.1990, the Respondent-Port Trust floated a tender for supply of Wooden Sleepers. The tenders were due to be opened on 01.08.1990. 4. Clauses 15 and 16 of the tender are extracted hereinbelow: 15. The purchaser will not pay separately for transit insurance and the supplier will be responsible till the entire stores contracted for arrive in good condition at destination. The consignee will as soon as but not later than 30 days of the date of arrival of stores at destination notify the supplier of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retransist the rejected materials if any to our the depot without any additional financial commitment. If you still require inspection, at your site we will charge 25% extra in our rate. 3. As the tender committee had mentioned during the discussion on 10.10.90, we are agreeable to the condition for the 100% payment a weekday, after acceptance of the materials. 4. We charge 24% interest on all belated payments. 5. We can immediately supply two thousand of BG Tracks sleepers and the supply can be completed as per your requirement. 6. We are regular supplier of sleepers to Indian Railways. We wish to extend our transaction with the V.P.T. 7. We will execute 10% of security deposit as on bank guarantee and also you have refund to our E.M.D. amount of ₹ 75,000/- awaiting your favourable order. 10. Thereafter, further correspondence ensued between the parties. By another letter dated 20.10.1990 addressed to the Controller of stores of the Respondent-Port Trust, the Appellant reiterated that it had not agreed to inspection at the General Stores of the Respondent-Port Trust. The Appellant made it clear that, in the event the Respondent-Port Trust insisted on inspec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to supply 10596 Broad Gauge Track Sleepers and 761 Broad Gauge Special Sleepers of 1st Class Salwood as per the latest Indian Railway Standards, on the terms and conditions specified in the Purchase Order and the Special Conditions of purchase appended thereto, according to the specifications and at the rates mentioned in the Purchase Order. 16. The Letter of intent and the purchase order were followed by a letter dated 12.11.1990, written in response to the letter dated 30.10.1990 of the Appellant. By the aforesaid letter, the Respondent-Port Trust requested the Appellant to supply the materials ordered as per the purchase order, inter alia, contending that the purchase order had duly been placed on the Appellant within the period of validity of the price quoted by the Appellant, after issuing a letter of intent to the Appellant, accepting its offer. The Appellant was warned that if supply was not made as per the purchase order, risk purchase would be made at the cost of the Appellant and the Earnest Deposit of ₹ 75,000 would be forfeited. The Respondent-Port Trust also noted that the Appellant had not made the security deposit, to which the purchase order was subject. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1994, the Appellant filed the suit being O.S. No. 450 of 1994 in the Court of Subordinate Judge, Visakhapatnam claiming refund of earnest money deposited by the Appellant with the Respondent-Port Trust along with interest @ 24% per annum from 24.4.1991 to 23.4.1993, costs and other consequential reliefs. The Respondent-Port Trust filed a written statement denying its liability to refund the earnest deposit. 23. The two suits being O.S. No. 106/1993 and O.S. No. 450/1994 were clubbed together and heard by the First Additional Senior Civil Judge, Visakhapatnam. In the first suit, the following issues were framed for trial: (i) Whether the Appellant committed breach of contract? (ii) Whether the Respondent-Port Trust was entitled to recover the suit amount from the Defendant? (iii) To what relief was the Respondent-Port Trust entitled? 24. In O.S. 450/1994 (the second suit), the issues were: (i) Whether the Appellant was entitled to refund of earnest money with interest as claimed from the Respondent-Port Trust. (ii) Whether the suit (second suit) was barred by limitation? (iii) To what relief, if any, was the Appellant entitled? 25. Since the two suits were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent-Port Trust and the Appellant, the Trial Court relied on Section 4 of the Indian Contract Act, 1872, which is set out hereinbelow for convenience: 4. Communication when complete.--The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. The communication of an acceptance is complete,-- as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; as against the acceptor, when it comes to the knowledge of the proposer. The communication of a revocation is complete,-- as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; as against the person to whom it is made, when it comes to his knowledge. 32. The Trial Court found that it had been proved that there was a concluded contract between the Appellant and the Respondent-Port Trust, but the Appellant had admittedly not supplied the wooden sleepers to the Respondent-Port Trust. Once it was proved that there was a concluded contract and the Defendant that is, the Appellant before thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in M/s. Saraya Distillery, Sardarbaggar v. Union of India and Anr. (supra), the Trial Court held that proof of actual repurchase was not necessary for claiming damages. 37. The Trial Court rejected the contention of the Appellant of delay in calling for tenders from a third party, on the ground that the Respondent-Port Trust being a statutory authority and not being a private individual, was required to follow its Rules and procedures in calling for tenders and accepting the tender of a third party. 38. The Trial Court found that the contract was enforceable till its completion or its abandonment. The rescission of the contract and consequential forfeiture of security deposit was proper and within the terms of the contract. 39. In Rajasthan State Electricity Board and Ors. v. Dayal Woods Works (supra), cited on behalf of the Appellant before the Trial Court, the High Court had found on facts that there was no concluded contract for supply of sleepers and consequently the Plaintiff was entitled to refund of security deposit. 40. In Fateh Chand (supra), cited on behalf of the Appellant before the Trial Court, a five-Judge Bench of this Court held: 10 ......In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract had been performed; but this principle is qualified by a second, which imposes on a Plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps: (British Westinghouse Electric and Manufacturing Co. Limited v. Underground Electric Railways Company of London [(1912) AC 673, 689]). These two principles also follow from the law as laid down in Section 73 read with the Explanation thereof. If therefore the contract was to be performed at Kanpur it was the Respondent's duty to buy the goods in Kanpur and rail them to Calcutta on the date of the breach and if it suffered any damage thereby because of the rise in price on the date of the breach as compared to the contract price, it would be entitled to be reimbursed for the loss. Even if the Respondent did not actually buy them in the market at Kanpur on the date of breach it would be entitled to damages on proof of the rate for similar canvas prevalent in Kanpur on the date of breach, if that rate was above the contracted rate resulting in loss to it. But the Respondent did not make any attemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract. 48. In Visakhapatnam Port Trust, Visakhapatnam and Anr. v. Bihar Alloy Steels Ltd. and Ors. (supra) a Division Bench of the High Court held: 17. In the instant case the provisions of Section 34 prescribe the manner in which a contract is to be made on behalf of the Board of Trustees and further Sub-section (3) contains a prohibition that a contract not made in accordance with the earlier portions of Section shall not be binding on the Board. It has been held by the Supreme Court in its decision reported in H.S. Rikhy v. New Delhi Municipality AIR 1962 SC 554 that the effect of such a prohibition as is contained in Sub-section (3) of Section 34 renders the contract itself void and unenforceable. In that case the controversy was about estoppel against New Delhi Municipal Corporation which was governed by the Punjab Municipal Act, 1911, which contains a similar provision viz., Section 47. 49. In Visakhapatnam Port Trust, Visakhapatnam and Anr. v. Bihar Alloy Steels Ltd. and Ors. (supra) this Court held that the promise as contained in the letter of Traffic Manager to lease an area of port trust was void and unenforceable against the Board of Trustees, there being no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ex. A. 1, was that in the event of non-supply of the material, the Port Trust has right to cancel the contract itself whereas the case of the Company was that there was no contract at all. Therefore, one has to see whether there was really any concluded or enforceable contract before one could blame the other. There has been a quite re-assertion through the evidence on behalf of the Port Trust by P.W. 1. There is a reference to a mention in Ex. A. 8 as to the ratification by the Board, which according to the M/s. Padia Timber Company Pvt. Ltd., nothing is forthcoming. Further, P.W. 1 during his cross-examination, stated that it is true that the contract was not concluded. However, that itself cannot be a reflection on the nature of intent, which could follow the facts and circumstances in the documents, which are staring at. It is to be seen that even according to the M/s. Padia Timber Company Pvt. Ltd., and as per its letter dated 27.11.1990 ex. A. 10, the M/s. Padia Timber Company Pvt., Ltd., admitted about the receipt of the letter dated 29.10.1990 and the acceptance of tender which is valid for three months. Therefore, having regard to the letter in Ex. A. 10 mentioning about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the offer and acceptance of an offer must be absolute. It can give no room for doubt. The offer and acceptance must be based or founded on three components, that is, certainty, commitment and communication. However, when the acceptor puts in a new condition while accepting the contract already signed by the proposer, the contract is not complete until the proposer accepts that condition, as held by this Court in Haridwar Singh v. Bagun Sumbrui and Ors. AIR 1972 SC 1242. An acceptance with a variation is no acceptance. It is, in effect and substance, simply a counter proposal which must be accepted fully by the original proposer, before a contract is made. 57. In Union of India v. Bhim Sen Walaiti Ram (1969) 3 SCC 146, a three-Judge Bench of this Court held that acceptance of an offer may be either absolute or conditional. If the acceptance is conditional, offer can be withdrawn at any moment until absolute acceptance has taken place. 58. In Jawahar Lal Burman v. Union of India (supra), referred to by the High Court, this Court held that Under Section 7 of the Contract Act acceptance of the offer must be absolute and unqualified and it cannot be conditional. However, in th ..... 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