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Shamrao Dayaram Lodhi Vs. the Municipal Committee - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtMumbai High Court
Decided On
Case NumberSecond Appeal No. 136 of 1953
Judge
Reported in(1958)60BOMLR189
AppellantShamrao Dayaram Lodhi
RespondentThe Municipal Committee
DispositionAppeal allowed
Excerpt:
.....is accepted when acceptance is made in a manner prescribed or indicated by the offeror. where an auction sale is held with a condition that it is at the option of the person putting up the property for sale by auction to accept the highest bid or not, i.e. where acceptance of a bid is reserved, the bid is only an offer and nothing more. such a bid cannot be turned into a contract without acceptance. where a bid is reserved for acceptance of the person who puts the property for sale by auction, it is implicit that acceptance must, in the absence of any agreement to the contrary, be communicated to the offeror. until there is such communication, the offer can be withdrawn or revoked.; carlill v. carbolic smoke ball company [1893] 1 q.b. 269, referred to. - - 4. the defendant municipal..........to his letter dated october 28, 1947, withdrawing his bid. in that letter it is observed:this auction sale was sanctioned by the general committee of the municipal committee saoner by its resolution no. 2f., dated 17-10-47. this acceptance of your said bid by the municipal committee saoner is hereby notified to you and you are hereby required to pay the balance of the auction price within thirty days since the receipt of this letter by you. if you fail to pay the balance within this period, the property in question will be re-auctioned at your risk.the fact that the acceptance of the bid by the municipal committee was communicated by it to the plaintiff on november 15, 1947, is not mentioned by the plaintiff in his plaint, nor even relied upon by him as a ground enabling him to.....
Judgment:

Mudholkar, J.

1. This is a second appeal from the decree of Shri S.N. Raina, Second Additional District Judge, Nagpur, confirming the decree of Shri B.M. Sapre, Civil Judge, Class II, Saoner, dismissing the plaintiff-appellant's suit for the refund of a sum of Rs. 650 and awarding to the defendant a sum of Rs. 1,293-12-0 by way of set-off.

2. The relevant facts are briefly as follows. The municipal committee, Saoner, advertised plot No. 6 for being leased for a period of 30 years by a public auction to be held on October 10, 1947. That plot was put up for auction on that date and the plaintiff offered a bid of Rs. 2,600 in respect of it. His bid being the highest, he was called upon to deposit one-fourth of the amount bid by him and accordingly he forthwith deposited Rs. 650. The plaintiff did not pay the balance but withdrew his bid and intimated this fact in a letter sent to the municipal committee on October 28, 1947. The ground on which he withdrew his bid was that there was a dispute as to the title of the municipal committee to a portion of the land put up for auction. Thereafter the plot was re-auctioned by the municipal committee at a public auction and it fetched Rs. 2,150. It may be mentioned that the amount fetched on each occasion represented the premium and the purchaser was liable to pay ground rent at the rate of one anna per rupee on the amount of premium.

3. The plaintiff then demanded the refund of Rs. 650 which he had deposited when he had made his bid. The municipal committee refused to refund the amount. Thereupon he brought a suit for its recovery out of which this second appeal arises.

4. The defendant municipal committee contended that the plaintiff was not entitled to withdraw the bid, that there was a completed contract between the parties and that as loss had been occasioned to the municipal committee by the re-auctioning of the plot and by the failure of the plaintiff to perform his part of the contract, the municipal committee was liable to be reimbursed in respect of the loss. This loss, according to the municipal committee, amounted to Rs. 1,293-12-0 on the following computation:

Rs. 450- being the difference between the premium offered by the plaintiff and the premium fetched at the re-auction.

Rs. 843/12/- being the loss of ground rent for 30 years on the amount of Rs. 450.

5. What is contended before me by Shri Siras who appears for the plaintiff is that the bid which was made by the plaintiff was merely an offer and that it was withdrawn by him before its acceptance was communicated to him by the municipal committee. In this connection he drew my attention to the rules framed under Sections 42 and 176(1) of the Central Provinces and Berar Municipalities Act, 1922, and in particular to Rules 2, 4 and 6. These rules read thus:

2. A committee may transfer by sale, lease, exchange or otherwise, any immovable property vested in it, if such property is no longer required or is not likely to be required in the near future, for the purpose of the Act, or is of such a nature that it is in the interest of the committee to transfer it.

4. When a transfer is to be made by a public auction, the time, the date and the conditions of the auction shall, not less than fifteen days prior to the date of auction, be advertised in one or more local papers and shall be widely made known by free distribution of notices containing the above information and by beat of drum.

6. The auction shall, in addition to any other conditions which the committee may think fit to impose, be subject to the following conditions, namely:

(i) the highest bid shall be subject to acceptance by the committee or such office-bearer or officer as may be appointed by it in this behalf;

(ii) the committee or the person referred to in condition (i) shall not be bound to accept the highest bid or any bid;

(iii) the highest bidder shall deposit 25 per cent, of the auction price immediately after his bid is accepted by the person under whose supervision the auction is held. The balance shall be paid and the deed of transfer executed within thirty days of the final acceptance of the bid being notified to him. If he fails immediately to deposit 25 per cent, of the auction price, or to pay the balance within the abovementioned period, the property may be re-auctioned at his risk. If the re-auction results in any loss to the committee, he shall be liable for it. If the highest bid is not accepted by the committee, the amount deposited by the highest bidder shall be refunded to him;

(iv) if a lower bid is accepted, the person whose bid is accepted shall pay the amount of such bid within thirty days of the acceptance of his bid being notified to him. If he fails to pay such amount within the said period, the property may be re-auctioned at his risk. If the re-auction results in any loss to the committee, he shall be liable for it;

(v) if the transfer is by way of lease, the lessee shall not grant a sub-lease without the sanction of the committee. (Italics mine).

6. No doubt, Sub-rule (i) of Rule 6 says that the highest bid shall be subject to acceptance by the committee or such office-bearer or officer as may be appointed by it in this behalf, which implies that the bid could be accepted by a named office-bearer. The portion italicized by me in Sub-rule (iii) of that rule would show that the final acceptance of the bid is to be by the committee itself and that this fact has to be notified by it to the bidder. Reading these two provisions together the inference must be that there is no final acceptance of the bid till the committee itself decides to accept it and notifies that fact to the bidder.

7. In the instant case, though the Lilao Fird (auction list) Ex. D-6, which is under the signature of the president of the municipal committee, states that the plot in question was sold to the plaintiff for Rs. 2,600 and though it also shows that this transaction received the sanction of the General Committee on October 17, 1947, the actual acceptance of the bid was not communicated to the plaintiff till November 15, 1947. This is clear from Ex. D-1, which is a letter addressed by the president of the municipal committee to the plaintiff in answer to his letter dated October 28, 1947, withdrawing his bid. In that letter it is observed:

This auction sale was sanctioned by the General Committee of the Municipal Committee Saoner by its Resolution No. 2F., dated 17-10-47. This acceptance of your said bid by the Municipal Committee Saoner is hereby notified to you and you are hereby required to pay the balance of the auction price within thirty days since the receipt of this letter by you. If you fail to pay the balance within this period, the property in question will be re-auctioned at your risk.

The fact that the acceptance of the bid by the municipal committee was communicated by it to the plaintiff on November 15, 1947, is not mentioned by the plaintiff in his plaint, nor even relied upon by him as a ground enabling him to withdraw his bid before that date. But it is averred in the written statement of the defendant and is established by Ex. D-1 which is one of the documents filed by the defendant itself. In view of these circumstances, it is open to this Court to take notice of the fact and decide the plaintiff's claim in the light of that fact.

8. Now, it is clear law that an offer is accepted when acceptance is made in a manner prescribed or indicated by the offeror. Where an auction sale is held with a condition that it is at the option of the person putting up the property for sale by auction to accept the highest bid or not, that is, in other words, where acceptance of a bid is reserved, the bid is only an offer and nothing more. Such a bid cannot be turned into a contract without acceptance. Again, where a bid is reserved for acceptance of the person who puts the property for sale by auction, it is implicit that acceptance must, in the absence of any agreement to the contrary, be communicated to the offeror. Until there is such communication, the offer can be withdrawn or revoked. Upon this subject I can do no better than quote the well-known observations of Bowen L.J. in the famous Carbolic Smoke Ball case Carill v. Carbolic Smoke Ball Company [1893] 1 Q.B. 256. The learned Judge has said (p. 269):.One cannot doubt that, as an ordinary rule of law, an acceptance of an offer made ought to be notified to the person who made the offer, in order that the two minds may come together. Unless this is so, the two minds may be apart, and there is not that consensus which is necessary according to the rules of English Law-I say nothing about the law of other countries-to make a contract. But there is this clear gloss to be made upon that doctrine, that as notification of acceptance is required for the benefit of the person who makes the offer, the person who makes the offer may dispense with notice to himself if he thinks it desirable to do so, and I suppose there can be no doubt that where a person in an offer made by him to another person, expressly or impliedly intimates a particular mode of acceptance as sufficient to make the bargain binding, it is only necessary for the other person to whom such an offer is made to follow the indicated mode of acceptance; and if the person making the offer, expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating acceptance of it to himself, performance of the condition is a sufficient acceptance, without notification.

In the instant case, as already pointed out, there is a clear provision in Sub-rule (iii) of Rule 6 that the final acceptance of a bid shall be notified to the bidder. I presume that this condition was also set out in the proclamation of sale. However, whether it was so set out or not, being embodied in the rule, it must be held that acceptance of an offer could not be deemed to be complete till it was notified to the bidder.

9. Shri Najbile, who appears for defendant-respondent, however relies upon a number of cases in support of his contention that a person who holds a sale has an authority to accept the bid, that in the instant case he did accept the bid and that, therefore, the contract came into existence immediately after such acceptance. That being the position, he argues, it was too late for the plaintiff to withdraw the offer by his letter dated October 28, 1947.

10. The first case on which he relies is Tirathprasad v. Municipal Committee, Jubbulpore 28 N.L.R. 130. In that case Staples A.J.C. held that an auction-sale is complete on the fall of the hammer, which signifies the acceptance of the last bid. That also was a case under the C.P. Municipalities Act. The relevant facts stated by the learned Additional Judicial Commissioner are these:

Building plots in Jubbulpore were sold by public auction, and on the 23rd of November 1927 the applicant Tirathprasad purchased a plot for Rs. 600. The bid was accepted and he deposited one-tenth of the price, namely, Rs. 60/-, according to the terms of the auction. The balance was to be deposited after the confirmation of sale. The sale was confirmed by the Municipal Committee, and a letter dated the 24th April 1928, signed by the President of the Municipal Committee, was sent to Tirathprasad, informing him that the sale had been confirmed and requesting him to deposit the balance of the purchase money with other charges immediately.

it is not clear whether the rules in force at the date of the auction sale in the instant case are identical with those which were in force in the case decided by Staples A.J.G. From the narration of the facts it would appear that what was required in the case before him was the confirmation of the sale by the Municipal Committee and not acceptance of the bid by the Committee. Under the present rules, as already stated, what is important is the acceptance of a bid itself by the municipal committee. A mere confirmation of sale by the committee is not contemplated in the present rules. Shri Najbile however argues that even in the present rule there is a provision for acceptance of the bid by a person holding the sale, that is to say, Sub-rule (1) of Rule 6, and, therefore, what is left to be done by the municipal committee is something quite formal. That however is not how the rule reads. No doubt, the sub-rule says that the highest bid shall, be subject to acceptance by the committee or such office-bearer or officer as may be appointed by it in this behalf. But where acceptance is by an office-bearer or an officer appointed in that behalf, by the municipal committee, Sub-rule (iii) also requires acceptance of the bid by the municipal committee itself. If acceptance by the municipal committee is made a pre-requisite for a contract to be made binding upon the municipal committee, it is difficult to see how the bidder could be said to be concluded by the offer made by him and which is purported to have been accepted by an office-bearer or an officer of the municipal committee, though authorised in that behalf by the municipal committee, till the committee itself accepts the offer. Probably what the sub-rule permits is the receiving of the bid by the person authorised and not its acceptance in the sense the word is used in the Contract Act. I must confess, Sub-rule (i) is not too happily worded, but that fact does not help the defendant at all in view of the very clear requirement contained in Sub-rule (iii) as to the acceptance of the bid by the municipal committee.

Shri Najbile then relies upon a decision in Mannulal v. Nanhelal (1932) 29 N.L.R. 52. In that case, Grille, A.J.C., as he then was, held that an acution-sale held in the mofussil is complete if the final bid is accepted by the Sale Amin who conducts it and the sanction of the Court ordering the sale is not necessary under law to make it binding on the parties concerned. This is a case under the Code of Civil Procedure. Condition No. 3 of sales by public auction contained in Form No. 29 in App. E, Schedule I of the Code of Civil Procedure is as follows:

The highest bidder shall be declared to be the purchaser of any lot, provided always that he is legally qualified to bid, and provided that it shall be in the discretion of the Court or Officer holding the sale to decline acceptance of the highest bid when the price offered appears so clearly inadequate as to make it advisable to do so.

By virtue of this condition, whoever holds the sale, whether the Court, or the officer authorised by it in that behalf, has a right to decline to accept even the highest bid. But where such a bid is accepted by the person holding the sale, the Court has no power to go behind it. That is what the condition means. It does not empower a Court to reject a bid accepted by a person authorised to accept bids. The decision relied upon lays down nothing more than that. To the same effect is the decision in Lokman v. Motilal [1941] Nag. 485, which is a decision of a Division Bench.

11. Finally, he relied upon a decision in Mahomed Yacoob v. P.L.R.M. Firm ILR(1931) 9 Rang. 608. In that case it was held that at a Court sale the sale is effected when the offer of the highest bidder is accepted by the officer conducting the sale, and that the auction-purchaser cannot withdraw his bid after such acceptance. This decision is under the Code of Civil Procedure and proceeds on the same basis as the two Nagpur cases already referred to earlier. It is difficult to see how these cases are of any assistance to the defendant inasmuch as in those cases there was no condition as in the present case, that the bid could be accepted by the committee alone.

12. It would be against all principles to hold that though the bidder is bound by his offer or by his bid, the municipal committee is free whether to accept his bid or not. The law always regards mutuality as of the essence in contracts. It would not, therefore, be according to principle to hold that by virtue of the rules the bidder alone is incapable of withdrawing his bid though the municipal committee is free in the meanwhile to accept the bid or not.

13. Upon this view, I hold that the plaintiff, having withdrawn the bid before its acceptance was notified by the municipal committee, is entitled to the refund of the earnest money deposited by him. He is not bound to pay any compensation to the municipal committee in respect of the loss caused by the re-auction inasmuch as he withdrew his bid before its acceptance was notified to him by the municipal committee.

14. Accordingly, I allow the appeal, set aside the decrees of the two Courts below and instead pass a decree in favour of the plaintiff for the amount claimed by him with interest at 4 per cent, per annum from the date of suit till realisation. Costs throughout will be borne by the respondent.

15. Leave to appeal refused.


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