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G. Srinivasa Reddy Vs. the Commissioner of Excise Board of Revenue and ors. - Court Judgment

LegalCrystal Citation
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Appeal No. 519 of 1969
Reported inAIR1973AP178
ActsHyderabad Abkari Act - Sections 3 and 41
AppellantG. Srinivasa Reddy
RespondentThe Commissioner of Excise Board of Revenue and ors.
Appellant AdvocateB.P. Jeevan Reddy, ;G. Haridatha Reddy and ;B.N. Reddy, Advs.
Respondent AdvocateVenkataramaniah, Adv. for ;Govt. Pleader
contract - breach of contract - sections 3 and 41 of hyderabad abkari act - petitioner revoked his offer in view of apprehension that third shop located near to petitioner's shop likely to undersell and cause loss to petitioner - respondent by notice demanded loss from petitioner which incurred due to re-auction of concerned shop - writ challenging such notice - dismissed in view that rules and conditions of sale governed by statutory provisions - petitioner wrongly withdrew his offer - appeal preferred - offer in final bid when knocked down becomes concluded contract and cannot be revoked - objection and subsequent legal notice attempting to withdraw offer by petitioner was without any legal enforce - re-auction was valid - held, petitioner being guilty of breach of contract must be held.....gopal rao ekbote, c.j. 1. this appeal is from the judgment of our learned brother chinnappa reddy, j., given in w. p. no. 318 of 1968, on 14-10-1969, whereby the learned judge dismissed the writ petition.2. the writ petitioner is a new entrant in the business of excise. his experience and lack of understanding seem to have brought him into a plight from which is finding it difficult to escape. his attempts to extricate himself out of the impasse created by himself cannot succeed in view of the construction of clause 8 of the conditions of sale made by the commissioner of excise in pursuance of statutory authority which he had and which conditions the petitioner accepted while making an offer and entering into a contract. the fate of the case hangs on the true interpretation of condition.....

Gopal Rao Ekbote, C.J.

1. This appeal is from the judgment of our learned brother Chinnappa Reddy, J., given in W. P. No. 318 of 1968, on 14-10-1969, whereby the learned Judge dismissed the Writ Petition.

2. The Writ Petitioner is a new entrant in the business of excise. His experience and lack of understanding seem to have brought him into a plight from which is finding it difficult to escape. His attempts to extricate himself out of the impasse created by himself cannot succeed in view of the construction of Clause 8 of the conditions of sale made by the Commissioner of Excise in pursuance of statutory authority which he had and which conditions the petitioner accepted while making an offer and entering into a contract. The fate of the case hangs on the true interpretation of condition No. 8.

3. In Nizamabad town originally there were two foreign liquor shops. One was located in Das Cafe and the other in the Ananda Hotel. For the first time for the excise year 1966-67, a third shop was sanctioned for the town and its location was fixed at the Kwality Hotel.

4. In the year 1966-67 the right to vend foreign liquor at these shops was auctioned and they fetched Rs. 41,000 /-, Rupees 31,000 /- and Rs. 10,000 /- respectively. For the year 1967-68, when the petitioner entered this business for the first time, these three shops were again auctioned on 20th July, 1967. The first two shops were knocked down in the name of the petitioner as he happened to be the highest bidder. These shops were knocked down for an amount of Rs. 1,09,000 /- and Rs, 90,000 /- respectively.

5. The location of the third shop was shifted from Kwality Hotel to Navrang Hotel a few days prior to its auction. In the auction, the third shop was knocked down in the name of the previous contractor for an amount of Rs. 57,000 /-. The Navrang Hotel, it is alleged, is near to the Anand Hotel where the second shop was located. The petitioner apprehended that the third shop holder at Navrang is likely to undersell the liquor which might cause losses to the petitioner in his sales at Anand Hotel.

6. He, therefore, on 27-7-1967 made representation through a petition to the Commissioner, Collector and the Superintendent of Excise. He objected to the shifting of the third shop to the Navrang Hotel. He wanted the shop to be located at Kwality where it was previously. He threatened that if the said shop was not shifted back, then ' the offer and bid of this petitioner in respect of foreign liquor shops Nos. 1 and 2 shall stand cancelled and withdrawn for all intents and purposes. '

7. As there was no response from any of the officers to whom the petitioner had so addressed, he gave a notice through an Advocate on 7th August, 1967. For the reasons mentioned in the petition of 27th July, 1967, the petitioner revoked and rescinded his offer in respect of foreign liquor shops Nos. 1 and 2 of Nizamabad made in the auction held on 20th July, 1967, for the year 1967-68, and which, according to him, was provisionally and conditionally accepted by the Collector of Nizamabad. This notice was swerved upon the Commissioner, Excise on 15-8-1967. Copies were also served upon the Collector and the Superintendent, Excise at about the same time.

8. In view of the notice, the Department was left with no alternative than to re-auction shops Nos. 1 and 2. The re-auction was therefore held on 12-9-1967. These shops fetched Rs. 57,000 /- and Rs. 40,000 /- respectively.

9. The petitioner had also obtained another shop at Mupla for an amount of Rs. 19,000 /- for the same year. He backed out from that offer also. It was also therefore re-auctioned. It fetched Rs. 10,600 /- only.

10. The total loss to which the Government was put to was about Rs. 1,10,000 /-. The respondents served notice upon the petitioner demanding the said amount of deficit to be paid within a stipulated time. It is this notice which brought the petitioner to this Court.

11. The Writ Petition was dismissed by the learned Single Judge holding that the Clause 8 is a statutory condition and even if it were to be a term of contract the petitioner could not have withdrawn his bid. The matter, however, was governed by statutory provision. Observing that Raghunandhan Reddy v. State of Hyderabad, : AIR1963AP110 was decided on a concession that condition No. 10 was not a statutory condition and was therefore liable to be distinguished, the learned Judge therefore held that the petitioner has no right to withdraw his offers, and he was liable to compensate the loss caused to the Government in the re-auction.

12. When the appeal from this judgment filed by the petitioner came before a Bench of this Court, it was referred to a Full Bench by an order dated 9-7-71. The correctness of the Bench decision reported in : AIR1963AP110 was challenged, in view of which and because of the question of importance involved in the case, the matter was referred to the Full Bench. That is how the case has come before us.

13. The principal contention of Sri B. P. Jeevan Reddy, the learned counsel for the petitioner, is that the petitioner was entitled to revoke the offer before it was finally accepted by the Excise Commissioner within 30 days from the date of the auction, and since the petitioner has revoked his offer within the stipulated period in condition No. 8 of the auction sale, there was no concluded contract and consequently the petitioner could not be held liable for any loss caused in re-auction of the shops.

14. It is not now in doubt that a bid in the public auction of excise shops itself constitutes an offer which the auctioneer is free to accept or reject. Such an acceptance in case of a sale by auction is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner. Consequently, until such announcement is made any bid may be retracted. It is thus plain that revocation of an offer is possible and effective at any time before acceptance. Upto this moment ex hypothesi no legal obligation exists, as no contract of sale can be said to have been concluded with the buyer. What follows therefore is that the law relating to the revocation of an offer can be summed up into two rules : (1) An offer may be revoked at any time before acceptance. (2) An offer is made irrevocable by acceptance.

15. Now in some cases it is the auctioning authority which has the power to accept the bid by knocking it down on the spot. In such cases it is obvious that the contract between the parties would be deemed to have been concluded the moment hammer falls down and an announcement to that effect is made by the auctioning authority.

16. There are, however, cases where final bids in the auction are made subject to the confirmation by another superior authority. In other words, unless the superior authority approves or confirms the final bid the offer would not deemed to have been accepted. In such cases, the auctioning authority acts as a conduit pipe. As agent of the superior authority he receives the offer and transmits to the confirming or approving authority. It is only when the bid in such a case is approved or confirmed by the higher authority that the contract of sale would be deemed to be complete, and until such confirmation or approval is made, the person whose bid has been sent for confirmation to such higher authority is entitled to withdraw his bid. When the bid is so withdrawn before it is accepted by such authority, there would be no concluded contract and as a result, the bidder will not be liable for damages on account of any breach of contract or for the shortfall on the resale.

17. The contention of he learned Advocate for the appellant naturally is that the auction sale held under condition No. 8 falls within the ambit of the second class of cases and not the first. On the other hand, it was argued by the learned Government Pleader that the instant case squarely comes within the purview of the first class of cases. Therefore any answer to these rival contentions depends upon the true construction of condition No. 8.

18. Now, the conditions of the auction of the privilege of sale of Hyderabad Made Foreign Liquor Shops are in Urdu originally. Two translations of the same have been filed, one by the appellant and the other by the Government. Since one of us ( The Chief Justice ) is well acquainted with Urdu Language, the original translation supplied by the Government does not materially differ from the translation filed by the appellant and as it seems to us to be correct, we will reproduce that translation here.

'8. It shall be within the competence of the auctioning authority viz., the Collector in the Districts and Deputy Excise Commissioner, Hyderabad Division in the case of Hyderabad District and twin cities of Hyderabad and Secunderabad to knock down bids. However, within one month from the date of the finalisation of the auction the Excise Commissioner shall be competent to stay or cancel the original auction of any shop irrespective of the possession given to the auction purchaser, and to order the re-auction of the shop or make any other arrangement of the shop. The decision of the Excise Commissioner in the matter shall be final and no appeal shall lie against the decision of the Excise Commissioner. In the case the Excise Commissioner does not pass any orders regarding stay or cancellation within one month of the auction of shops the auction shall be final.

19. A careful and analytical reading of this condition would indicate that the condition consists of three parts. In the first part, the Collector in the District and the Deputy Excise Commissioner in the case of Hyderabad District and twin cities of Hyderabad and Secunderabad are empowered as auctioning authorities to knock down bids.

The second part, authorises the Excise Commissioner to stay or cancel the original auction within one month from the date of finalisation of auction. He is also empowered to order re-auction or make any other arrangement of the shop. Order of the Commissioner is clothed with finality.

The third part indicates the result which would follow if no order is passed by the Excise Commissioner within one month in regard to stay or cancellation of the auction of shops. The result shown is that ' The Auction shall be final. '

The last few words placed in the question have given rise to conflicting interpretations of the said condition. It is contended by the appellant that these words make the acceptance of auctioning authority provisional or tentative becoming final at the conclusion of thirty days when no order contra is passed by the Commissioner ; until then there is an inchoate contract and therefore the bidder is entitled to revoke his offer without being made liable to any damages whatsoever.

20. Before we analyse and construe condition 8, we would like to bear in mind some principles governing construction of a rule in such cases. It is an elementary rule of construction that effect must be given, if possible, to every word, part, clause and sentence of a section or a rule. A statute therefore should be construed so that effect is given to all its provisions. The same rule applies to a section or condition of sale, so that no part will be inoperative or superfluous, void or insignificant and one part will not destroy another unless the provision is the result, or obvious mistake in using language loosely or of an error.

It must be borne in mind that when some of the words of a provision are not explicit, the intention is to be collected from the context. And the intention shall be taken or presumed according to what is consistent with reason and good discretion.

It cannot be ignored that the presumption always is that a law maker has a definite purpose in enacting every provision and has adapted and formulated the subsidiary provisions in harmony with that purpose, that these are needful to accomplish it ; and that, if that is the intended effect, they will, at least, conduce to effectuate it.

In case there is some inconsistency or repugnancy in various parts of the same provision, one may to avoid it is to harmonise them if possible or by regarding the apparently conflicting provisions as dealing with distinct matters or situations. It is obvious that in such cases one must give the provision such a meaning as will carry out its object.

21. Turning back then to condition 8, we find that the first part is complete in itself. It leaves no one in doubt that the Collector or the Deputy Excise Commissioner, as the case may be, who are the statutory auctioning authorities, have been clothed with unconditional power to knock down bids; in other words, make the hammer fall and accept the bid. The words used in the first part are of emphasis and are clear. They donot disclose even remotely that the acceptance by such auctioning authority is provisional or tentative. It is difficult to assume that higher authorities such as Collector or Deputy Excise Commissioner were intended to be mere conduit pipes. They are clothed with a statutory authority to finally knock down bids. Thus the imperative word ' shall ', the high ranking officers who are clothed the authority and their competence to accept bids are made clear. All that indicates that their acceptance is treated as final and not provisional.

22. It is true that the first part of the condition is made subject to the second part. It is immaterial whether the original Urdu word is translated as ' but ' or ' however '. Both would indicate that notwithstanding the competence of the Collector or the Deputy Excise Commissioner to finally accept the bids, the Commissioner has been empowered to stay or suspend, or even cancel the original auction. It is, however, difficult to read in the second part anything which would have the result of limiting the scope or effect of the first part. There are no words in the second part to make the bids which are knocked down by the Collector or Deputy Excise Commissioner as provisional and not conclusive.

23. The most important aspect of the second part which practically demolished the argument of the appellant is that the second part is an enabling provision. The words ' The Excise Commissioner shall be competent ' or shall have power ( for the words Ahitabari ) denote the permissive nature of the power. See In the Matter of A. Rasul, 24 Ind Cas 404 = ( AIR 1915 Cal 91 ). Ex facie these words import a discretion and they must be construed as discretionary unless there be anything in the subject-matter to which they are applied, or in any other part of the rule or statute, to show that they are meant to the imperative. The words ' shall have power ' or ' It shall be within the competence. ' are words making that legal and possible which there would otherwise be no right or authority to do. They confer a faculty or power, and they donot of themselves do more than confer a faculty or power. These words being, according to their natural meaning, permissive or enabling words only, it lies upon those who contend that an obligation exists to exercise this power to show in the circumstances of the case something which creates an obligation.

24. If these words are permissive and the power conferred is discretionary and the exercise of the discretion is meant only for the purpose of suspending or cancelling the finalised auction, we fail to see how it would be compatible with the contention that the second part confers power on the Commissioner to approve or confirm the bid or the offer which is alleged to have been accepted provisionally. The power to stay or cancel the auction cannot be read as a power to accept or refuse the offer. The very words ' stay ' or 'cancel' unequivocally connote a completed auction. We donot say that we stay an unconcluded contract or sale or auction. Nor do we say that we cancel the inchoate or incomplete contract.

25. The words ' within one month from the date of finalisation of auction ' leave practically no room for any contention that the result of knocking down the bid referred to in part I does not amount to ' finalisation of auction. '

One more thing which should not be overlooked is that the second part also refers to the possibility of giving possession of the shop to the auction purchaser. It is difficult to postulate that unless the auction sale is concluded the possession could be given to an auction purchaser.

It is also important to note that the Commissioner is endowed with power to reauction the shop or make any other arrangement. Now there cannot be a re-auction unless there has been an auction first.

26. What follows therefore is that the second part expressly treats the acceptance by knocking down the bid mentioned in first part as a completed auction and therefore a concluded contract. The acceptance thus made is not made subject to any approval or confirmation of the Excise Commissioner. On the other hand, a power is conferred on the Commissioner to stay or cancel the concluded auction. The interpretation of first part therefore is fully supported by the second part. These two parts do not even remotely suggest that part I speaks of a provisional acceptance and party II of the final acceptance. Both the parts read together bring out prominently the intention of the law maker that acceptance by the auctioning authority makes the contract of sale complete and irrevocable.

27. We then turn t the third part, a few words of which have given rise to the controversy. What was contended was that the last few words of this part bring out in bold relief the intention of the law maker that the acceptance, which is provisional, ripens into a full contract only after the expiry of 30 days during which period if the Excise Commissioner does not pass any order regarding stay or cancellation of the auction.

28. At first, flush the argument may appear to be somewhat attractive, but on a close examination, in our judgment, it must fail as it does not stand any scrutiny. We must confess that that argument, if accepted, to our mind, would lead to most extraordinary results.

29. Let us look at these words carefully in the face. They declare that the auction shall be final. We donot consider these words to be inconsistent with either the first or second part. They donot necessarily mean that before the expiry of 30 days the auction was not final. Any such reading would amount to directly flying in the face of the express words treating the auction as final used in Part II. They will also go contrary to the plain language of part I. It is the first principle of construction that when the first part of the condition confers an express power to accept the bid, which contract is made subject to stay or cancellation by the Commissioner in the second part, a power inconsistent with that cannot be implied because of the said words used in part III. These words, in our opinion, clearly mean that the power of the Commissioner, if not exercised within the stipulated time, gets exhausted and thereafter he shall have no power to stay or cancel the auction. In so far as he is concerned it shall be final. It would be an extraordinary feat of interpretation if because of these words, the whole scheme of the condition is overlooked. The express language used in part I and part II will have to be ignored, twisted or distorted for the purpose of making them fit within the supposed meaning of the last few words:

30. The general principle of construction is not to attach any exaggerated importance to a few words of the provision and ignore or misread the other part of the rule. The condition must be read as a whole. If there appears to be any inconsistency in different parts of the same condition, then every effort must be made to harmonise them. If the construction sought to be placed on the condition because of these few words is accepted, it would produce not only an anomaly but also an absurdity which in any case we must try to avoid. If these words are read in the context in which they are used and if the plain meaning of the first two parts is kept in view, there would be no difficulty in understanding these words only to mean that the auction shall be final as against the Excise Commissioner who has a discretion to stay or cancel it within a certain time. It is only on such construction that we can make all the three parts harmonious and in accord with the clear intention of the law maker.

31. We are, therefore, satisfied that condition No. 8 makes the contract of auction sale final and irrevocable the moment bid is accepted, only subject to stay or cancellation by the Commissioner within 30 days.

32. This conclusion is well supported by the entire set of conditions of the auction. Condition No. 2 expressly states that the person in whose name the right to vend foreign liquor is knocked down, shall remit the annual rental within seven days from the date of auction.

Condition No. 5 by using the words ' finally auctioned ' lends strength to this construction.

Condition No. 12 brings out this very idea.

Condition No. 15 removes any doubt if it still lingers. It states that in case the annual rental is not paid within the prescribed time, the privilege of sale shall be reauctioned holding the auction purchaser responsible for the loss.

Condition No. 18 simply uses the words ' knocked down ' pointing out to the same destination.

33. That this construction of Condition No. 8 is right can also be seen from Rules 10 and 17, which replace the 8th condition of ' The Andhra Pradesh Excise ( Lease of Right to sell liquor in Retail ), Rules, 1969'. Rule 10 is the substitute for Part I of Condition 8. It uses the words ' accepted ' in the place of ' knock down of bid ' . The rule thus is identical but more explicit. Similarly Rule 17 is the substitute for the second and third parts of Condition No. 8. Rule 17 is couched substantially in a similar language but makes the intention comparatively clearer. What was a little ambiguous in Condition No. 8 is made explicit, but the intention of the law maker and the purpose of the rule remain the same. And it is plain that subsequent legislation, on the same subject can be looked into to see what is the proper construction to be put upon an earlier provision which is ambiguous.

What is therefore plain is that the construction which we have put on Condition No. 8 seems to us to be inescapable.

34. It is no doubt true that a Bench of this Court took a contrary view in : AIR1963AP110 . We have gone through the judgment with the utmost care. The whole judgment turned upon the last few words of condition No. 8 referred to above. These words have been first kept in view and it is in view of these words that Condition No. 8 was construed. The attention of the learned Judges was obviously not drawn to the various aspects of the condition which we have considered above.

35. The contention before the Court was merely based on the last portion of the condition and it is only because of that it was argued that the third part is provisional till the period of one month. Unfortunately, the learned Government Pleader without drawing attention of the Court to condition No. 8 as a whole preferred to argue that the power of the Excise Commissioner to stay or suspend the auction was the condition subsequent and therefore did not affect the contract which became final between the parties.

36. The result of such argument was that it was almost assumed that there was no concluded contract without going into the details of the condition. The appellant's contention on the strength, particularly of the last portion of Condition No. 8 that the approval by the Deputy Commissioner is provisional almost went unchallenged. There was no attempt to interpret seriously Condition No. 8. The whole emphasis in the argument was placed on the Commissioner's power being a condition subsequent. The learned Judges consequently considered the condition in the light of only the last few words as is apparent from the following observation :'

'The clue to the intention of that clause is, in our view, found in the last stipulation where the auction is said to become final only after the expiration of one month. '

The further observation ' that the auction is not final is also evident from the fact that even where the successful bidder is put in possession, he can be ousted if the auction is not finally approved and it is reauctioned or suspended. Such a unilateral reservation of power makes the acceptance a provisional one ' also shows that the consideration was confined only to the last few words. The other features of the rule were completely omitted from consideration.

37. We have the greatest respect for the learned Judges who decided the said case. We are, however, bound to say that we find ourselves unable to accept the view expressed in regard to Condition No. 8 which is identical with Clause 10 which fell for their Lordships' consideration. We do not consider that the last few words are the heart of the condition. Nor do they provide any real clue to the understanding of the whole condition. For the reasons which we have elaborately given, we do not think that there is any reason for saying that the acceptance of the bid by the auctioning authority is provisional and becomes final only at the end of 30 days because of inaction on the part of the Commissioner.

38. Another decision of Kumarayya, J., reported in the State of Andhra Pradesh v. Mohd. Ishaq, ( 1969 ) 2 Andh LJ 53 was also cited. In that case the rules which govern the auction sale were not produced. Proclamation of sale containing the terms was also not produced. The learned Judge hearing the second appeal accepted the finding of the Court below that there was no concluded contract and therefore held that the plaintiff was at liberty to revoke his bid before the auction was confirmed. The learned Judge followed the decision reported in : AIR1963AP110 referred to above.

39. For the reasons already mentioned, we do not think this decision can be said to have interpreted any condition of sale similar to Condition No. 8. The said decision, therefore, is not an authority on the meaning of Condition No. 8. It is confined to the facts of the case in view of the finding accepted by the learned Judge.

40. The result of the foregoing discussion is that the offer in the form of final bid was accepted by the auctioning authority when the bid was knocked down. There was, therefore, a concluded contract which became thereafter irrevocable. The objection and subsequent legal notice attempting to withdraw the offer cannot have any legal force and the petitioner was not competent to revoke the concluded contract. He was thus guilty of the breach of the contract. The re-auction was valid. The petitioner, therefore, was rightly held liable for the losses caused in the re-auction of these shops.

41. The next contention of the learned advocate for the appellant was that Condition No. 8 is not statutory and therefore is not binding. We find no substance in this contention. Section 3, clause ( Jim ) and ( lam ) empower the Government to frame rules relating to Hyderabad Made Foreign Liquors. It is in pursuance of this power that rules were made and issued on 8th Dai. 1345 Fasli.

42. Rule 9, which falls under the Chapter entitled ' sale ' authorises the Excise Commissioner to issue conditions relating to licences for sale of foreign liquors. The issue of proclamation containing conditions of sale therefore was authorised under this rule. The conditions were accordingly prescribed by the Excise Commissioner in exercise of this power. Condition No. 8 forms part of the said set of conditions. These conditions, therefore, are statutory in their nature and have binding force. They are enforceable also.

43. A feeble attempt was then made to argue that these conditions are made by the Excise Commissioner to whom the power was sub-delegated. The sub-delegation being impermissible is bad.

44. It is seen that Section 3 empowers the Government to make rules. Under Section 3 (1) (d) the Government is also empowered to delegate the powers and duties under the Act. In view of this provision the argument was not further pressed.

45. Even otherwise, the conditions in any case as terms of contract entered into between the appellant and the Government would be binding upon the appellant. Even in such a case the result of the acceptance of offer by the auctioning authority making the contract of the sale completed and irrevocable remains unalterable.

46. In view of our opinion that the rules and conditions of sale are statutory and in view of a decision of this court in W. P. No. 1502 of 1963 D /- 9-9-1965 ( Andh Pra ) the argument that since formal contract was not drawn under Article 299 of the Constitution it is not valid was also not pressed.

47. The last contention was that as the appellant revoked the offer keeping in view Ragunadha Reddy v. State of Hyderabad. : AIR1963AP110 , therefore, we should absolve the appellant of the liability for damages. We do not think we are entitled to do anything of that kind. Our duty is to interpret and declare the law. The result in each case would flow from the law thus declared.

48. For the foregoing reasons, we agree with the conclusion of the learned Single Judge although we reached the conclusion through a different route.

49. Accordingly we dismiss the appeal with costs. Advocate's fee Rs. 100 /-.

50. Appeal dismissed.

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