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K.S. Lakshminarayana Setty N. Kamakshiah Setty Vs. State of Mysore Represented by Deputy Commissioner, Mysore - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKarnataka High Court
Decided On
Case NumberSecond Appeal No. 3 of 1960
Judge
Reported inAIR1967Kant156; AIR1967Mys156
ActsIndian Contract Act, 1872 - Sections 10; Madras Revenue Recovery Act, 1964 - Sections 52; Constitution of India - Articles 299(1) and 367; Code of Civil Procedure (CPC), 1908 - Sections 80 - Order 41, Rule 2; General Clauses Act, 1897 - Sections 19; Government of India Act, 1935 - Sections 175(3)
AppellantK.S. Lakshminarayana Setty N. Kamakshiah Setty
RespondentState of Mysore Represented by Deputy Commissioner, Mysore
Appellant AdvocateG.S. Ullal, Adv.
Respondent AdvocateG.D. Shirgurkar, Adv.
Excerpt:
.....that the latters offer having been accepted by it (government), there was a completed and concluded contract between the parties and that since the plaintiff did not take away the inferior cocoons, the government had to resell them and that the plaintiff was bound to make good the loss suffered by it as a result of such resale, and also pay the storage charges as per the terms in para 9 of the tender notice. this is clearly an offer made by the plaintiff to purchase the cocoons, and the director of industries of commerce (government of madras) having accepted the offer, the contract between the parties is complete and concluded. a-4 is signed by a person 'for director of industries and commerce on behalf of the governor of madras'.but a notification seems to have been produced..........that the latters offer having been accepted by it (government), there was a completed and concluded contract between the parties and that since the plaintiff did not take away the inferior cocoons, the government had to resell them and that the plaintiff was bound to make good the loss suffered by it as a result of such resale, and also pay the storage charges as per the terms in para 9 of the tender notice. it also disputed the plaintiffs allegation that it (defendant) could not have recourse to section 52 of the madras revenue recovery act to recover the loss sustained by it on the basis that there was no completed and concluded contract between them. on these among other grounds it contested the plaintiff's claim and asked for the dismissal of the suit.8. several issues were.....
Judgment:

1. The appellant-plaintiff has filed this appeal against the decree dated the 29th Day of November 1959, passed by the Civil Judge at Mysore, in Regular Appeal No. 18 of 1959, by which he allowed the appeal of the defendant, reversed the decree of the trial court and dismissed the plaintiffs suit, and it is the correctness of this decree that is being challenged by the appellant in this appeal.

2. The plaintiff is a firm of Messrs. K. S. Lakshminarayana Setty, N. Kamakshiah Setty, trading in silk at Kollegal. In February 1954, the Government of Madras, in the Department of Industries and Commerce called for tenders for the purchase of double and inferior cocoons from the Government Silk Filatures, Kollegal. The plaintiff gave a tender for both the varieties of cocoons and quoted Rs. 1-4-0 per pound for double cocoons and Re. 0-12-0 per pound for inferior cocoons, and also made the required deposit of Rs. 50/- at the treasury under Ext. A-3, dated 1st March 1954.

3. By Ext. A-4, the Director of Industries and Commerce informed the plaintiff that its tender for the purchase of inferior cocoons at the rate noted in the schedule to the tender notice viz. As. 12/- per pound, had been accepted and asked the firm to remit the amount of Rs. 225/-, which was 1/10th of the value of the accepted tender, in accordance with Clause 5 of the tender notice. It was further informed that the inferior cocoons should be removed before the 1st of April 1954 and that it should execute an agreement as required by Clause 8 of the tender, in the form that would be supplied to it after affixing an adhesive stamp of the value of Rs. 1-8-0.

4. The plaintiff was dissatisfied with its acceptance of the offer in respect of inferior cocoons only, thereby rejecting its offer in respect of double cocoons. Correspondence ensued between the plaintiff and the defendant. Ultimately the Government refused to consider its request for the acceptance of its tender for the purchase of double cocoons also and for the reduction of the price in respect of inferior cocoons. Thereafter, it issued a notice to the plaintiff of resale of the inferior cocoons by inviting fresh tenders. Accordingly, they were sold by the Government the amount realised being Rs. 730-14-0.

5. Thereafter, under Ext. A-10, dated 2nd May 1956, the defendant called upon the plaintiff to make good the loss sustained by it as detailed therein. It also informed the plaintiff that in case it failed to pay the amount on or before the 15th of May 1956, the same would be recovered under Section 52 of the Madras Revenue Recovery Act.

6. Thereafter the plaintiff issued a notice to the defendant under Section 80 of the Code of Civil Procedure stating that there being no concluded and binding contract between them, the latter had no right to recover the amount claimed by it and called upon the Government to return the earnest money deposited with it. Ultimately the plaintiff filed the suit on 23rd November 1956 against the State of Mysore, represented by its Deputy Commissioner, Mysore District, Mysore, since, by that time, the Kollegal District formed part of Mysore.

7. The defendant dented the allegations made by the plaintiff, and inter alia contended that the latters offer having been accepted by it (Government), there was a completed and concluded contract between the parties and that since the plaintiff did not take away the inferior cocoons, the Government had to resell them and that the plaintiff was bound to make good the loss suffered by it as a result of such resale, and also pay the storage charges as per the terms in Para 9 of the tender notice. It also disputed the plaintiffs allegation that it (Defendant) could not have recourse to Section 52 of the Madras Revenue Recovery Act to recover the loss sustained by it on the basis that there was no completed and concluded contract between them. On these among other grounds it contested the plaintiff's claim and asked for the dismissal of the suit.

8. Several issues were raised by the trial Court on the pleadings of the parties. It held that there was no completed and concluded contract between the plaintiff and the defendant and that the former was entitled to succeed. It held that the provisions of Section 52 of the Madras Revenue Recovery Act would come into play only in the event of loss or damage resulting from a breach of the contract by the plaintiff and that since there was no valid and enforceable contract between the parties the allegation that it sustained loss by its breach disappeared. The Government could not, therefore, resort to the provisions of Section 52 of the Madras Revalue Recovery Act. Consequently, it decreed the plaintiff's suit declaring that there was no completed and enforceable contract between the parties, and restraining the defendant from enforcing the provisions of the Madras Revenue Recovery Act or resorting to other powers vested in its executive authority for recovery from the plaintiff of any loss in respect of its lender, and also directing the defendant to pay buck to the plaintiff the sum of Rs. 50/- deposited by it as earnest money.

9. On appeal by the defendant, the learned Civil Judge, Mysore disagreed with the conclusion reached by the trial Court and held that there was a completed and concluded contract between the parties and that the plaintiff could not maintain its suit. Consequently, it reversed the decree of the trial Court and dismissed the plaintiff's suit and, as I stated, it is the correctness of this decree that is being challenged by the appellant-plaintiff in this appeal.

10. Mr. Ullal appearing for the appellant-plaintiff has submitted the following propositions of law for my consideration. They are:

(1) that the tender submitted by the plaintiff under Ext. A-3 was not an unconditional offer and the so-called acceptance thereof under Ext. A-4 did not bring about an agreement in the eye of law on a true and correct interpretation of the documents Exts. A-2, A-3 and A-4;

(2) that even assuming that there was an agreement between the plaintiff and the defendant, there was no valid contract for the following reasons :

(i) the so-called acceptance under Ext. A-4 is contrary to Article 299(1) of the Constitution;

(ii) before a valid contract could come into existence, two conditions precedent of a vital nature had to be fulfilled.

They are:

(a) the security deposit of Rs. 225/- had to be made by the plaintiff tinder Clauses (5) and (7) of Ext. A-2;

(b) an agreement on a stamped paper of Rs. 1-8-0 had to be executed under Clause 8 of Ext. A-2

and that since both these vital conditions precedent, had not been fulfilled, the contract was not valid.

(3) that on a true construction of Section 52 of the Madras Revenue Recovery Act, 1964 the defendant, even assuming that it was right in believing that there was an enforceable contract, ought to have filed a suit for a decree for loss or damage.

It is on these submissions that the learned counsel contends that the decree passed by the learned Civil Judge cannot be sustained and that the same is liable to be set aside.

11. Now I will proceed to examine the three points submitted by the learned counsel for the plaintiff-appellant seriatim. I will first determine whether there was a completed and concluded contract between the plaintiff and the defendant. This depends upon the interpretation and understanding of Exts. A-2, A-3 and A-4.

12. Exhibit A-2 is the tender notice by the Department of Industries and Commerce of the Government of Madras. The Director of Industries and Commerce on behalf of the Governor of Madras invited tenders thereunder for the purchase of about 4,000 lbs. of double co-coons (dry weight) and 3,000 lbs. of inferior cocoons (dry weight) as indicated in the schedule. Paras 2 to 13 relate to the conditions of purchase and acts required to be done by the purchaser. It was in pursuance of this tender notice that the plaintiff, in its communication Ext. A-3, dated the 1st of March 1954, addressed to the sericulture Expert, Government Silk Filatures, Kollegal, quoted its rates for both the double and inferior cocoons, enclosing to it a challan for Rs. 50/- being the deposit for the earnest money as required by the said lender notice.

13. The Director of Industries and Commerce informed the plaintiff by Ext. A-4, dated 23rd March 1954 that its tender for the purchase of inferior cocoons described in the schedule thereto had been accepted at the rate noted against it, and also stated that on no account would the question of remission of the rate agreed by it would be considered in the course of the contract period, and asked it to remit the sum of Rs. 225/-, being one-tenth of the value of the accepted tender, in accordance with clause 5 of the tender notice. It was further asked to execute an agreement as required under Clause 8 of the tender in the form prescribed which would be supplied to it later, and was also called upon to remove the cocoons before the first of April 1954. The question is whether it can be said that there is a completed and concluded contract under Exts. A-3 and A-4.

14. Now it is clear that the offer made by the plaintiff under Ext. A-3, in pursuance of the lender notice Ext. A-2, was accepted by the Director of Industries and Commerce, Government of Madras and that the acceptance of such offer was duly intimated to the plaintiff by Ext. A-4. This, in my opinion, is sufficient in law to constitute a completed and concluded contract between the plaintiff and the defendant.

15. Mr. Ullal, however, contends that Ext. A-3 cannot be said to be an offer, it being merely a memo mentioning the rates for the double and inferior cocoons and, therefore, it amounts to a counter proposal and not an offer. In my opinion, there is no substance in this contention. It is clear that the plaintiff did offer to purchase the cocoons at the rates mentioned by it and also deposited Rs. 50 by way of earnest money with the Government. This is clearly an offer made by the plaintiff to purchase the cocoons, and the Director of Industries of Commerce (Government of Madras) having accepted the offer, the contract between the parties is complete and concluded.

16. The next submission that requires consideration is whether this agreement is valid. And, as I stated, its validity has been challenged on two counts. The first is, that the acceptance under Ext. A-4 is contrary to Article 290(1) of the Constitution which provides:

'All contracts made in the exercise of the executive power of the UNOION or of a State shall be expressed to be made by the President, or by the Governor of the State, as the case may be, and all such contracts and all assurances of property made in the exercise of that power shall be executed on behalf of the President or the Governor by such persons and in such manner as he may direct or authorise.'

Thus, what is required is that all contracts on behalf of the Government have got to be made by the Governor of the State and such contracts shall be executed on behalf of the Governor by such persons and in such manner as he may direct or authorized The question is whether the contract under consideration satisfies the requirements of Article 299(1) of the Constitution.

17. It would be seen that a contract is required to be made in writing. From Exts. A-3 and A-4 is clear that the offer and the acceptance of the offer are in writing and therefore it can be said that the contract is in writing. It is also clear from Ext. A-4 that the Director of Industries and Commerce accepted this tender on behalf of the Governor of Madras. The next question is whether he (Director of Industries and Commerce) was a person duly authorised by the Governor to execute the contract on his behalf.

18. Exhibit A-4 emanates from the Director of Industries and Commerce, Government of Madras and states that the Director of Industries and Commerce has accepted the offer made under Ext. A-3. It is true that Ext. A-4 is signed by a person 'For Director of Industries and Commerce on behalf of the Governor of Madras'. But a notification seems to have been produced on behalf of the Government, and the learned Civil Judge, after looking into it, is apparently satisfied when he states 'that the Director of Industries and Commerce had accepted the tender and the fact of acceptance of the lender was being communicated from the office of the same officer, and the person who has signed this letter A-4 being a Deputy Director has signed it for the Director of Industries and Commerce on behalf of the Governor of Madras.' Therefore the learned Civil Judge held that the acceptance of the offer by the Director of Industries and Commerce, Government of Madras, was on behalf of the Governor of Madras. Since the letter was signed by the Deputy Director, the learned Civil Judge pointed out 'that under Section 19 of the General Clauses Act (1897) any law relative to the Chief or Superior of an office applies to deputies lawfully performing the duties of that office in the place of their superior' and that 'Under Article 367 of the Constitution, the General Clauses Act applies for the interpretation of the Constitution'. Therefore, in my opinion, all the requirements of Article 299(1) of the Constitution have been duly complied with and consequently the agreement is valid.

19. Mr. Ullal, however, in support of his contention, relied upon the decision of their Lordships of the Supreme Court reported in : [1964]3SCR164 , where their Lordships had to consider the effect of the provisions of Sec-lion 175(3) of the Government of India Act, 1935, which is in pari materia with Article 299(1) of the Constitution. Their Lordships have held that the provisions of Section 175(3) are mandatory and that all contracts have got to be made on behalf of the Governor-General and must be executed on his behalf by a person authorised in that behalf and that they must be in writing. In my opinion, all the requirements laid down by their Lordships of the Supreme Court have been duly satisfied by the contract under consideration between the plaintiff and the defendant and therefore, Mr. Ullah's contention that the agreement does not satisfy the requirements of Article 299(1) of the Constitution cannot be accepted.

20. Then I have got to examine the other two contentions on which the validity of the contract has been challenged. They relate to paras 5 and 7 of the tender notice. The former requires a deposit of Rs. 225/- to be made by the plaintiff, and the latter stipulates that it should execute an agreement on a stamped paper. Mr. Ullal contends that since these two conditions have not been satisfied, the contract is invalid. In my opinion, this submission cannot be accepted since, once the contract is completed and concluded between the parties, then the subsequent requirements relating to deposit of security and the execution of an agreement on a stamped paper being formal, would not make the contract invalid which is otherwise valid. It has been held by their Lordships of the Privy Council in Currimbhoy & Co. Ltd. v. L. A. Creet, AIR 1933 PC 29 as follows: --

'Where the documents or letters relied on as constituting a contract contemplates the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or a term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract. In the latter case there is binding contract and the reference to the more formal document may be ignored.'

It is clear from the tender notice Ext. A-2 that the deposit of the security amount and the execution of the agreement on a stamped paper are all to be made after the offer made by the tenderer is accepted, as is clear from para 5 onwards, since it states that 'the successful tenderer will have to deposit as security within one week from the date of receipt of the communication intimating him of the acceptance of his tender an amount equivalent to 10 per cent (Ten per cent ) of the total value of the quantity stated in Clause 1 at the rate accepted.' Thus once there has been an acceptance of the offer made by the tenderer, there is a valid contract, and the subsequent requirements to be fulfilled by the parties are merely formal which may be ignored.

21. To the same effect is the decision of the Privy Council in AIR 1923 PC 47, Harichand and Mancharam v. Govind Luxman.

22. Thus, in my opinion, all the arguments, addressed by the learned counsel for the appellant to sustain the contention that the agreement is invalid, fail. Therefore, I hold that there has been a completed and concluded contract between the parties and that the same is valid and binding between them.

23. The other contention relates Lo the right of the defendant to have recourse to the provisions of Section 52 of the Madras Revenue Recovery Act, 1864. What is contended by the learned Counsel Mr. Ullal for the appellant is that before recourse could be had by the Government to the provisions of that Section, it must file a suit and obtain a decree for damages and that it is only thereafter that it might have recourse to those provisions. Such a contention has not been put forward in either of the courts below. All that has been alleged and prayed for in the plaint by the plaintiff is that since there was no completed and concluded contract between the parties, the defendant has no right to recover the amount under the provisions of Section 52 of the Madras Revenue Recovery Act, thereby making it clear that in case there is a completed and concluded contract between the parties, the defendant may have recourse to the said provisions. The trial court held that since there was no completed and concluded contract between the parties, the defendant could not have recourse to the provisions of Section 52 of the Madras Revenue Recovery Act, and it is only on that basis that it granted an injunction against the defendant. It is clear that it was neither contended nor is there any decision as to whether even if there is a completed and concluded contract, the defendant cannot have recourse to the provisions of Section 52 of the Madras Revenue Recovery Act unless it files a suit and obtains a decree to recover damages from the plaintiff. In fact, it appears to me from the observation of the trial court that the quantum of damages was never challenged. This is what it says in para 7 of its judgment:

'The main relief sought for by him is a declaration to this effect. If this foundational contention is accepted, he succeeds. Otherwise, he has to be non-suited. I am, therefore, relieved of the need to go into the further questions as to whether he committed breach of the contract and whether it resulted in any damage. I am also not called upon either to fix the quantum of damages or to pronounce whether the claim made by the defendant in this regard is just and reasonable.

'The sole question for decision in the suit is whether or not a contract came into being between the parties.'

Thus the quantum of damages claimed by thedefendant under Ext. A-10 or the questionwhether it was just and reasonable was neverchallenged in the trial court. As I stated, thetrial court having come to the conclusion thatthere being no completed and concluded contract between the parties, issued an injunctionrestraining the defendant from resorting to theprovisions of Section 52 of the Madras RevenueRecovery Act.

24. In the Judgment of the appellate court, there is no discussion whatsoever by the learned Civil Judge nor is such a point taken in the memorandum of appeal to this court.

25. However, Mr. Ullal, by an application made under Order XLI, Rule 2 of the Code of Civil Procedure, sought permission to raise such a point and have a 'decision thereon. The burned Government Pleader objected to this application on the ground that the plaintiff had made out no case that unless the defendant obtained a decree for damages, it was not entitled to have recourse to the provisions of Section 52 of the Madras Revenue Recovery Act. Further the quantum of damages claimed by the defendant under Ext. A-10 was never challenged. That was also how the trial court understood the dispute between the parties. The Government Pleader contended that in such circumstances there is no justification for the plaintiff-appellant to raise this question, for the first time, in this third court and therefore urged for the dismissal of that application.

26. In my opinion, the objection of the learned Government pleader is valid and must be sustained. I have not been able to find that the ground now urged by the learned counsel for the appellant was ever urged in either of the courts below. However, Mr. Ullal contends that this being a pure point of law, he is entitled to raise it for the first time in this court and have a decision thereon.

27. It is true, as stated by their Lordships of the Supreme Court, that where a pure point of law arises from the facts found and no further investigation of facts is required, then such A point of law may be permitted to be urged in the appellate court,

28. But, what is sought to be done here is, that the plaintiff having failed in its prayer to have an injunction against the defendant on the ground that there is no completed and concluded contract, now wants an injunction on the different ground that the provisions of Section 52 of the Madras Revenue Recovery Act cannot be resorted to unless a decree is obtained; and this in my opinion, the plaintiff cannot be permitted to do to the prejudice of the defendant, especially when it was open for it to do so in the courts below. That being so, I reject the application made by the appellant under Order XLI, Rule 2 of the Code of Civil Procedure. I do not think it is necessary for me to refer to the decisions cited by the learned counsel for the appellant in this regard.

29. Consequently, I agree with the conclusion reached by the learned Civil Judge, Mysore confirm his decree and dismiss this appeal with costs.

30. Appeal dismissed.


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