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Vittal Laxman Kalgutkar and ors. Vs. State of Mysore and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKarnataka High Court
Decided On
Case NumberFirst Appeal No. 177 of 1963
Judge
Reported inAIR1968Kant279; AIR1968Mys279; (1967)1MysLJ533
ActsBombay Ferries (and Inland Vessels) Act - Sections 5 and 17
AppellantVittal Laxman Kalgutkar and ors.
RespondentState of Mysore and ors.
Excerpt:
.....by executive engineer, delegated power produced concluded contract and there was no longer any power in government to reject it - further alleged that acceptance by executive engineer was made in exercise of power under section 17 and resulted in unenforceable contract - clause in notification preserves some overriding power in government to form its own decision as to suitability of bid accepted by executive engineer under preceding clauses - delegation under section 17 did not preclude recall of power delegated nor did it denude government of authority to so exercise it as to exclude its exercise by delegate - government did not act in any unreasonable, arbitrary or unjust manner. - karnataka land reforms act, 1961.[k.a. no. 10/1962]. section 48a: [h.v.g. ramesh, j] grant of..........on the ground that the acceptance of the highest bid by the executive engineer was subject to the power of government to accept or refuse that bid and that the plaintiff's bid was rejected by government for reasons considered by government to be sufficient. so, it was contended that there was no concluded contract or any breach on the part of government or by the other defendants.(9) the first issue raised in the suit was whether there was a concluded contract between the state government which is defendant 1 and the plaintiff, and whether there was breach of that contract by government. the finding of the civil judge was that there was no such concluded contract and that the question whether there was a breach did not, therefore, arise. the second issue reads:'whether defendant 1 acted.....
Judgment:
ORDER

(1) On January 15, 1959, the right to operate a power launch service and the collection of ferry toll in respect of the Sadashivagad Kodibagh ferry in the District of North Canara, was the subject matter of a public auction concerning the period commencing on August 1, 1959 and ending on March 31, 1962. Ex. 43 was the proclamation incorporation the conditions of the auction.

(2) A certain V. L. Kalgutkar who is now dead and who was the plaintiff who instituted the suit out of which this appeal arises, offered the highest bid of Rs. 27,000 in respect of the entire period. The commencement of the auction was preceded by a deposit of Rs. 200 made by the bidders including the highest bidder and according tot he allegations in the plaint, there was an acceptance of the highest bid by the Executive Engineer and a deposit of a tenth part of the highest bid amounting to Rs. 2,700.

(3) On July 30, 1959, the concerned Executive Engineer addressed a letter to the highest bidder V. L. Kalgutkar requesting him to operate the ferry from August 1, 1959 'for about a week or till further orders' on the basis of the old lease agreement which was referred to as the existing lease agreement.

(4) On August 5, 1959, by Exhibit 71, Government made an order by which the second highest bid of R. L. Kalgutkar for Rs. 26,995 was accepted. The contract was directed to be finalised accordingly. V. L. Kalgutkar, will be referred to in the course of this judgment as the plaintiff and R. L. Kalgutkar whose bid was accepted by Government will be referred to as the next highest bidder.

(5) The plaintiff who was dissatisfied with this order made by Government called it in question in W. P. 664 of 1959, but by an order made by this Court on March 1, 1960, that writ petition was dismissed with the observation that the proper remedy was a suit for appropriate reliefs if so advised. So, the suit out of which this appeal arises was a sequel to that order. In the suit so instituted, the plaintiff claimed from Government, the Executive Engineer and Mr. R.M. Honnatti, Executive Engineer personally, a sum of Rs. 40,000 by way of damages in respect of the breach of contract on the part of the defendants which the plaintiff attributed to them.

(6) The plaintiff's case was that the concerned Executive engineer who conducted the auction on June 15, 1959 had been delegated the power grant a lease of the right to operate the power launch service and that that Executive Engineer accepted the plaintiff's highest bid. This acceptance, it was contended, resulted in an enforceable contract under which the plaintiff acquired the right to operate the ferry service during the relevant period.

(7) It was maintained that there was no power left in Government to review the acceptance of the bid by the Executive Engineer or to accept the bid of the next highest bidder.

(8) The suit was defended on the ground that the acceptance of the highest bid by the Executive Engineer was subject to the power of Government to accept or refuse that bid and that the plaintiff's bid was rejected by Government for reasons considered by Government to be sufficient. So, it was contended that there was no concluded contract or any breach on the part of Government or by the other defendants.

(9) The first issue raised in the suit was whether there was a concluded contract between the State Government which is defendant 1 and the plaintiff, and whether there was breach of that contract by Government. The finding of the Civil Judge was that there was no such concluded contract and that the question whether there was a breach did not, therefore, arise. The second issue reads:

'Whether defendant 1 acted illegally in not accepting the bid of the plaintiff?'

It is strange that the plaintiff who contended that the acceptance of the bid by defendant 1 was no longer necessary after its acceptable by the Executive Engineer, allowed this issue to stand in this form. This issue by implication involves the idea that acceptance by Government was necessary. However, that may be, the finding of the Civil Judge was that although the rejection of the Plaintiff's bid by Government 'smacked of illegality' it was nevertheless protected by the relevant statutory provisions to which we shall presently refer.

(10) The third issue related to damages and the Civil Judge recorded no finding. On the fourth issue there was similarly no finding which posed the question whether defendant 5, the Executive Engineer was personally liable to pay damages. On these findings the Civil Judge dismissed the plaintiff's suit and the legal representatives of the plaintiff appeal.

(11) Under Section 17 of the Bombay Ferries (and Inland Vessels) Act, which we shall call the Bombay Ferries Act, there was delegation of the power of Government to lease a public ferry by public auction or private contract under section 5 of that Act. In support of the contention that there was such delegation, our attention was asked to a notification of Bombay Government of December 15, 1923 by which that Government passed a resolution that that power should be delegated to their Executive Engineers. Dependence was next placed upon another notification of that Government promulgated on November 20, 1923 by which under section 17 of the Bombay Ferries Act, that Government delegated to all the Executive Engineers in the then Presidency of Bombay, their powers under section 5 of the Act in respect of the public ferries which were on Government canals and provincial roads.

(12) On behalf of the defendants it was maintained in the court below and in this court, that although the Executive Engineer of North Kanara District was a delegate of the power to grant a lease of a public ferry under section 5 of the Bombay Ferries Act, the power to accept the highest bid in the public auction conducted by the Executive Engineer was reserved by Government under the 31st clause of the notification relating to the auction. So it was said that the acceptance of the bid by the Executive Engineer, did not bring into being a concluded contract.

(13) If it undisputed that there was a delegation under section 17 of the Bombay Ferries Act of the power of Government to the concerned Executive Engineer; to grant a lease under section 5 of the Act. It is thus plain that it was within the competence of the Executive Engineer to bring into being a concluded contract in respect of the ferry with which we are concerned in this appeal, through the power so delegated to him. The question is whether he did so.

(14) The Civil Judge was of the view that by the 31st clause of the notification relating to the auction the Executive Engineer proclaimed to the bidders that Government alone had the power to accept the bid which they considered suitable. So, he felt persuaded to say that the acceptance of the bid by the Executive Engineer did not result in the formation of a contract and that notwithstanding the delegation under S. 17. Government had the competence to refuse the highest bid and accept the next highest.

(15) It is not controverted that the Executive Engineer did accept the highest bid of the plaintiff. So, Mr. Datar contended that once that bid was accepted, the delegated power produced a concluded contract there being no longer any power in Government to reject it. In support of this submission, he asked attention to six clauses of the notification Ex. 43, and they are clauses 1, 3 (b), 4, 6, 7 and 31. They read:

'1. The right to run satisfactorily launch service and to collect ferry toll at the Sadashivgad Kodibeg ferry, for the period from the 1st of August 1959 to 31st March 1962, will be sold by public auction in the office of Executive Engineer, Karwar at 3.00 p.m. on 15-6-1959.

3 (b) Every bidder has to deposit Rupees 200 in cash with the Executive Engineer, for each ferry service. If the bid is not accepted, this amount will be kept as a deposit for satisfactorily performing all the thirty conditions (Sharaths) as mentioned in the agreement. On the completion of the auction period, this amount will be returned only if all the required conditions were being performed.

4. As soon as the highest bid is concluded by calling it out three times the bidder concerned must pay to the Executive Engineer Kanara Division, 1/10th of the said bid amount on the spot. This amount will be taken as a set off against the last installment due to the department.

6. If, as stated in clause 4 above, the highest bidder fails to pay 1/10th of the bid amount on the spot immediately after the 3rd call, his bid will be cancelled and the ferry will again be put to auction at the same sitting and the original bidder will not be allowed to bid again. The loss to Government if any by the second auction will be recovered from the original bidder according to rules. If however a higher bid in the second auction is realised the original bidder has no claim to the excess amount.

7. The acceptance of the final bid rests with the Executive Engineer, Kanara Division. If the bid is rejected for any reason, he (Executive Engineer) is not bound to assign reasons.

31. Though the auction sale for running the ferries at Sadashivagad-Kodibagh is held, Government reserves the right to accept any bid whichever is considered advantageous to Government in this connection no complaints will be entertained. Government also reserves the right to reject any or all bids without assigning any reasons.'

The argument constructed on the foundation of clauses 1, 3 (b), 4, 6 and 7 was that the Executive Engineer was invested with the power to make final acceptance of the bid considered by him to be advantageous and satisfactory and that there was such acceptance in the present case. Its acceptance, it was asserted, was made in the exercise of the power delegated under S. 17 of the Bombay Ferries Act, and so, resulted in an enforceable contract. We were asked to ignore the 31st clause which preserved for Government the power to make a further selection of the bids offered at the sale.

(16) Mr. Datar asked us to say that the exercise of the delegated power to grant a lease which the Executive Engineer could not decline to exercise precluded the exercise by Government of the identical power which had spent itself after its exercise by the delegate.

(17) His other submission was that the reference to the Government in the 31st clause, is in truth a reference to the Executive Engineer and that the clause did no more than to emphasize that the Executive Engineer was the repository of the power to grant the lease to the person whose bid in his opinion merited acceptance.

(18) We do not find it possible to understand the 31st clause in this way. The suggested construction has the weakness that if accepted, it would render the clause as unmeaning reproduction of clause 7. In more than one clause of the notification preceding the 31st clause, we find a reference to the Executive Engineer and if the 31st clause preserved certain power in Government, it will be unreasonable to think that the author of the notification was referring to the Executive Engineer in that clause was a reference to him. In our opinion, the 31st clause preserves some overriding power in Government to form its own decision as to the suitability of the bid accepted by the Executive Engineer under the preceding clauses. That clause does not create any power in the Executive Engineer to be exercised by him.

(19) So, we should now consider the challenge to the exercise of that power created in Government by the 31st clause after delegation by them of the power to grant a lease under section 5. The postulate on behalf of the appellants was that there was a complete transmission by Government of all their powers under Section 5 to the concerned Executive Engineer and that such transmission denuded Government of the power which Government purported to exercise under clause 31.

(20) The proposition so stated is founded upon the assumption which has not been accepted that the functionary who delegates power abdicates it. That there is no such renunciation is as well settled as the principle that delegation does not excluded the exercise of the delegated power by the functionary to whom it was statutorily confided as explained by the Supreme Court in Godavari S. Parulekar v. State of Maharasthra, : 1966CriLJ1067 .

(21) So, the delegation under S. 17, did not preclude the recall of the power delegated; nor did it denude Government of the authority to so exercise it as to exclude its exercise by the delegate.

(22) If the 31st clause in the notification means that the acceptance of the bid by the Executive Engineer under the preceding clauses is not enough to produce a concluded contract and that no contract comes into being unless there is the acceptance of a suitable bid by Government under that clause, it becomes obvious that that clause announced to the intending bidders that in respect of the sale proposed to be conducted, the power created by section 5 would be effectively exercised only by Government and that the selection of the bid by the Executive Engineer would have no higher status that a mere recommendation.

(23) But it was maintained that that announcement was made by the Executive Engineer without the authority of Government and that the inclusion of that provision in the notification in that way eliminates the supposition that there was any assumption of power by Government. But it was mentioned to us during the argument that there is no evidence as to the authorship of the 31st clause and so, the theory, that its introduction into the notification was neither known to Government nor authorised by them, was constructed on the inadequate if not slippery foundation that the notification was published under the signature of the Executive Engineer.

(24) The course of events culminating in the selection of the next highest bid by Government makes it difficult for the appellants to sustain the theory of unauthorised reservation of power. Its exercise by Government when it made the choice of the next highest bid strongly persuades a contrary view.

(25) The plaintiff who participated in the sale which was plainly regulated by the 31st clause to his knowledge could not take himself out of its operation. It is clear, in our opinion, that he subject himself like the other bidders to the choice which Government proposed to make under its provisions.

(26) So, neither the acceptance of his bid by the Executive Engineer nor the return of the deposits to the two other bidders and not even the insistence on a tenth part of the highest bid could be of any assistance to him. Those were all the various preliminary steps which the Executive Engineer was directed to take in the conduct of the sale, as can be seen from the first clause of the notification. The words 'though the auction sale.... is held' occurring in the 31st clause make it perfectly manifest that the performance of those acts as a prelude to the eventual selection of the bid by Government did not have the efficacy attributed to them.

(27) If that was how the lease was proposed to be granted, it becomes immaterial to consider whether the provision for selection by Government was introduced on a direction by Government or without it.

(28) If, as contended by Mr. Datar, the architect of the 31st clause was the Executive Engineer, its introduction into the sale proclamation, amounted to a clear abstinence from the exercise of the power delegated to him, and was an announcement that he would not exercise the power to grant the lease but that Government instead would. The conduct of the sale in the course of which he made a tentative selection of the highest bid was not an act performed by him in the role of a delegate of Government but as the designated authority for the conduct of the sale proceedings to assist the final selection of the lessee by Government. So, the lease which might have normally emerged from the exercise of the delegated power, became impossible except by its grant by Government.

(29) In the view that we take, the submission made to us on behalf of the appellants by Mr. Datar that the papers relating to the auction were not called by Government but were transmitted to them by the Executive Engineer suo motu does not have any relevance.

(30) It was at one stage contended that the Executive Engineer was influenced by an interested politician to bring about a deprivation of the right of the plaintiff flowing from the bid accepted by the Executive Engineer. We were not shown any evidence on the basis of which we can say that this charge against the Executive Engineer is true. We think it is not.

(31) We are of the opinion that the Civil Judge was right in reaching the conclusion that there was no concluded contract between the plaintiff and the Executive Engineer or the State but we think that the Civil Judge embarked upon irrelevant and unjustified animadversions against Government and the Executive Engineer in extremely immoderate language. We do not share the view expressed by the Civil Judge in more than one part of his judgment during his discussion of matters which were utterly irrelevant, that the rejection of the plaintiff's bid was unjust, indefensible and arbitrary. In Exhibit 71 which was an order by which Government accepted the next highest bid, there was an allusion to complaints against the plaintiff in respect of the operation of the ferry service during the antecedent period. If Government had the power to select a bid which they considered suitable, on the question of suitability, Government had the power to form their own opinion, and, although Mr. Datar explained to us that there was no allusion to any such complaint against the plaintiff in the course of the written statement, it is plain that what was responsible for the selection of the next highest bid was the view entertained by Government that the next highest bidder would operate the ferry in a more satisfactory way.

(32) The Civil Judge thought that Government were under a duty to hear the plaintiff in regard to the complaints to which the impugned Government order refers, before they could reject his highest bid or select the next. It is in the context of this impression in his mind that the Civil Judge said many things about the ethics of what had been done by Government. We are of the opinion that his discussion was irrelevant and beside the point. It is plain that there was no such duty on the part of Government to hear the plaintiff or anyone, before they exercised the power which was reserved under the 31st clause and, it is difficult to understand how it could be said that there was anything arbitrary, unjust or unreasonable in what the Government did.

(33) We, therefore, dismiss this appeal. But in the circumstances we make no direction in regard to costs.

DGB/D.V.C.

(34) Appeal dismissed


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