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Punuganti Jalpath Rao Vs. the Government of Andhra Pradesh and ors. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal No. 218 of 1971
Judge
Reported inAIR1975AP105
ActsConstitution of India - Article 299
AppellantPunuganti Jalpath Rao
RespondentThe Government of Andhra Pradesh and ors.
Appellant AdvocateP. Babul Reddy and ;A. Ananda Reddy, Advs.
Respondent AdvocatePrincipal Government Pleader
DispositionAppeal dismissed
Excerpt:
.....- government contract - article 299 of constitution of india - whether auction bid confirmed by chief conservator of forest valid - chief conservator had authority to accept bid and conclude contract - acceptance of bid by chief conservator resulted in final contract - held, contract valid as no formal agreement required. - - a-14 dated 2-12-1967 informing the plaintiff that he should pay the amounts due to the government and execute the agreement by 26-12-1967 without fail he was told that, otherwise, the sale would be cancelled and the plot resold at the risk and loss of the plaintiff. the plaintiff having failed to comply with the demand of the divisional forest officer an order was passed on 29-12-1967 by the divisional forest officer cancelling the sale and forfeiting the..........(e. m. d.) of rs. 10,000/- as soon as the bid was knocked down in his favour. on 19-12-1966, the chief conservator of forests confirmed the auction in accordance with condition no. 21. condition no. 23 required the auction purchaser to deposit the balance of the first instalment and security deposit of 6 1/4% of bid amount within 10 days of the date of confirmation to the chief conservator. the plaintiff did not deposit the prescribed amounts. instead, on 1-3-1967, the plaintiff issued a registered notice (exhibit a-2) through his advocates claiming that the period of lease should be two years and not one year and that the special condition restricting the lease to one year was ultra vires of the powers of the divisional forest officer. the plaintiff purported to revoke his bid and.....
Judgment:

Chinnappa Reddy, J.

1. On 6-12-1966, the right to cut, collect and remove forest produce from Beroon Plot No. 4 in Karimnagar East forest division was sold by public auction by the Divisional Forest Officer. The plaintiff was the highest bidder for Rs. 1,33,500/-. Though according to condition No. 55 of Ex. B-l the Sale Notice generally applicable to auctions of forest produce in forest coupes, plantations and Beroon areas i. e. areas falling outside a reserve forest) the period of lease would be two vears if the auction fetched a price of Rs. 60,000/- or more, according to Ex. B-3 the Special Conditions for Beroon Plots attached to Exhibit B-1, the period of lease was only one year. The signatures of the plaintiff were taken in Exhibits B-l and B-3. Pursuant to condition No. 20 of the sale notice the plaintiff forthwith made Earnest Money Deposit (E. M. D.) of Rs. 10,000/- as soon as the bid was knocked down in his favour. On 19-12-1966, the Chief Conservator of Forests confirmed the auction in accordance with condition No. 21. Condition No. 23 required the auction purchaser to deposit the balance of the first instalment and security deposit of 6 1/4% of bid amount within 10 days of the date of confirmation to the Chief Conservator. The plaintiff did not deposit the prescribed amounts. Instead, on 1-3-1967, the plaintiff issued a registered notice (Exhibit A-2) through his advocates claiming that the period of lease should be two years and not one year and that the special condition restricting the lease to one year was ultra vires of the powers of the Divisional Forest Officer. The plaintiff purported to revoke his bid and demanded that if the Government was not willing to grant him a lease for two years, the sum of Rs. 10,000/- deposited by him should be refunded. The plaintiff did not state in the notice that he was not aware, at the time of auction, of the special condition that the period of lease was only for a year. No reply to Exhibit A-2 wasreceived by the plaintiff. However, he appears to have made representations to the Government that he might be granted a lease for a period of two years instead of one year. In fact, even before the auction, several contractors appeared to have made representations to the Government that in the case of sale of Beroon plots in Karimnasar East Division governed by Special Conditions the clots might be leased for two years instead of one year, The Government rejected the representations and according to the Divisional Forest Officer the reply of the Government was read over to the bidders present before the commencement of the auction proceedings. The representations of the plaintiff subsequent to the auction also did not evoke a sympathetic reply The Govt. by G. O. Ms. No. 616-F & A dated 11-12-1967 (Ex. B-15) negatived the request of the plaintiff and directed the Chief Conservator of Forests to take further action. The G. O. itself shows that the Government had earlier granted a stay at the instance of the plaintiff. Pursuant to the G. O. the Divisional Forest Officer issued a notice Ex. A-14 dated 2-12-1967 informing the plaintiff that he should pay the amounts due to the Government and execute the agreement by 26-12-1967 without fail He was told that, otherwise, the sale would be cancelled and the plot resold at the risk and loss of the plaintiff. The plaintiff having failed to comply with the demand of the Divisional Forest Officer an order was passed on 29-12-1967 by the Divisional Forest Officer cancelling the sale and forfeiting the Earnest Money Deposit of Rs. 10,000/-. It was also ordered that the lease of the plot should be put to resale at the risk and loss of the plaintiff. A reference was made in the order to several notices dated 30-3-1987, 10-5-1967. 24-6-1967 and 23-12-1967 which had been issued to the plaintiff but returned un-served though sent to the correct address. This order was subsequently modified and instead of the sum of Rs. 10,000/- a sum of Rs. 1,000/- only was forfeited. The lease of the plot was subsequently sold by public auction for a sum of Rs. 51,000/-. Thereafter the Divisional Forest Officer called upon the plaintiff to pay the amount of Rs. 73,500/- representing the loss suffered by the Government consequent on the re-auction. Credit was given to a sum of Rs. 9,000/- out of the Earnest Money Deposit which was not forfeited. The plaintiff thereupon filed the suit out of which the present appeal arises for a declaration that the defendants were not entitled to collect this amount. It was pleaded that there was no valid contract between the plaintiff and the Government as the plaintiff did not execute any agreement in favour of the Government. Inthe absence of a concluded agreement It was not open to the Government either to forfeit any Part of the amount of Rupees 10,000/- or to demand to be compensated for any alleged loss suffered by the Government. It was alleged that the refusal Of the Government to grant a lease for two years was unreasonable and contrary to law. The learned District Judge of Karimnagar dismissed the suit and the plaintiff has preferred this appeal,

2. Sri P. Babul Reddy, learned counsel for the appellant raised the following five contentions (1) There was no enforceable contract between the plaintiff and the Government as there was no Compliance with the requirements of Article 299 of the Constitution. (2) Condition No. 29 did not provide that the plaintiff should pay the difference between the plaintiffs bid and the amount for which the plot was subsequently auctioned. (3) The Government was under a duty to minimise the damages, but the Government failed to do so by holding the auction almost at the end of the year. (4) Condition No. 27 if it was to be construed as empowering the Government to realise the difference between the plaintiffs bid and the amount for which it was sold at the reauction, was penal in nature and, therefore, the plaintiff should be relieved against the penal Clause (5) No proceedings could be taken under the Revenue Recovery Act to realise the amounts said to be due from the plaintiff.

3. In the plaint there is no reference to Article 299 of the Constitution. All that is said that there was no valid contract between the plaintiff and the Government as the plaintiff did not execute an agreement in favour of the Government Apparently what the plaintiff had in mind was the execution of the agreement as contemplated by Condition No. 26 of the Sale Notice. However, the question raised by Sri Babul Reddy that there was non-compliance with requirements of Article 299 of the Constitution was considered by the lower Court and we will, therefore proceed to consider that question. It is now well settled as pointed out in Union of India v. N. K. Private Ltd.. : [1972]3SCR437 that 'though the words expressed and executed in Article 299(1) might suggest that it should be by a deed or by a formal written contract, a binding contract by tender and acceptance can also come into existence if the acceptance is by a person duly authorised on this behalf by the President of India'. Earlier in Union of India v. A. L. Rallia Ram, : [1964]3SCR164 it was held by the Supreme Court that the correspondence between the Chief Director of Purchases and the contractor was sufficient compliance with the provisionsof Section 175(3) of the Government of India Act which correspond to Article 299 of the Constitution having regard to the fact that the authority of Chief Director of Purchases to contract for sale of certain goods was not denied. It was also held that the failure of the Chief Director of Purchases to mention that he was signing on behalf of the Governor General of India did not mean that there was a failure to conform to the requirements of Section 175(3) of the Government of India Act if on a fair reading of the contents of the letter it would be reasonable to hold that he was signing the letter on behalf of the Governor General, Shah, J. observed:

'Section 175(3) of the Government of India Act does not in terms require that a formal document executed on behalf of the Dominion of India, and the other contracting party, alone is effective. In the absence of any direction by the Governor General under Section 175(3) prescribing the manner, a valid contract may result from correspondence if the requisite conditions are fulfilled. The contracts for sale of 'war disposal' goods were not directed by the Governor General to be made by a formal document executed on behalf of the Governor General as well as by the purchasing party. It is true that Section 175(3) uses the expression 'executed' but that does not by itself contemplate execution of a formal contract by the contracting parties. A tender for purchase goods in pursuance of an invitation issued by or on behalf of the Governor-General of India and acceptance in writing which is expressed to be made in the name of the Governor-General and is executed on his behalf by a person authorised in that behalf would conform to the requirements of Section 175(3).....The authority of the Chief Director of Purchases to contract for sale of 'War disposal' goods and sign the contract is not denied. The Chief Director of Purchases has subscribed his signature in his official designation and he has not stated in the description that the contract was executed on behalf of the Governor-General, but on a fair reading of the contents of the letter, in the light of the obligations undertaken thereunder it would be reasonable to hold that the contract was executed on behalf of the Governor-General. No rules made by the Governor-General have been placed before the Court showing that in executing a contract for the sale of 'war disposal' goods, the officer authorised in that behalf must describe himself as signing on behalf of file Governor-General of India.'

4. In the present case, condition No. 21 of the Sale Notice provide that allsales are subject to confirmation by the Divisional Forest Officer or the Conservator of Forests or the Chief Conservator of Forests as the case may be according to the bid amount. Condition No. 20 also provides that the authority competent to confirm has the right to refect a bid without assigning any reason for doing so. Condition No. 21 expressly warns bidder that knocking down their bids is not an acceptance of the bids till the competent authority serves a written confirmation order on them. It is not disputed that the Governor of Andhra Pradesh has authorised the Chief Conservator of Forest? is the authority to confirm bids of the value of the plaintiff's bid in the present case. The plaintiff offered his bid at the auction held on 6-12-1966 and as soon as the bid was accepted by the Chief Conservator of Forests by the issuance of an order of confirmation there sprung into existence a valid contract between the plaintiff and the Government. The Chief Conservator of Forests was the authority competent to accept the plaintiff's bid and conclude the contract and no further formal agreement was necessary. This conclusion is Inevitable from the decisions of the Supreme Court in : [1964]3SCR164 and : [1972]3SCR437 .

5. The learned counsel for the appellant placed very great reliance on the decision of the Supreme Court in K. P. Choudary v. State of Madhya Pradesh, : [1966]3SCR919 reversing the decision of the Full Bench of the Madhya Pradesh High Court in K. P. Choudary v. State of Madhya Pradesh. : AIR1962MP102 . In that case, the appellant was the highest bidder at a forest auction. As the amount of his bid was more than what the Divisional Forest Officer could accept, the matter was referred to the Chief Conservator of Forests who was the competent authority to accept the bid. But before the Chief Conservator of Forests could accept the bid the appellant raised a dispute and as the dispute was not settled to the satisfaction of the appellant he refused to complete the contract. Eventually the sale was cancelled by the Chief Conservator of Forests and the earnest money was forfeited. There was a re-auction and the appellant was asked to make good the loss suffered by the Government consequent on the reauction. The Full Bench of the Madhya Pradesh High Court was of the view that Art, 299 of the Constitution applied only to contracts which were required to be reduced to writing but not to implied contracts. The Full Bench held that there was an implied contract between the appellant and the Government when the petitioner was allowed to offer his bids at the auction. They said;

'When, therefore, the petitioner was allowed to offer his bids at the auction, there was an implied contract between him and the Department conducting the auction that he would be bound by those conditions. It follows therefore, that there was an implied contract between the petitioner and the opponents that he would pay the deficit on a re-auction of the coupe and the said amount would be recoverable from him as arrears of land revenue ............ It must be noted thatthe implied contract of being bound by the conditions of auction that results when a person is allowed to bid at the auction subiect to those conditions is not a contract to which Article 299 of the Constitution can be made applicable. That Article plainly applies to contracts which are required to be in writing. An implied contract in its very nature is not such a contract.'

The view that Article 299 of the Constitution did not apply to implied contracts was not accepted by the Supreme Court when the case went UP in appeal to it. The Supreme Court did not lay down that every contract to which the Government was a party should necessarily be in writing. Having regard to the settled law on that point the Supreme Court would not have laid down any such proposition. The Full Bench of the Madhva Pradesh High Court mentioned at the commencement of their judgment that the petitioner's bids were accepted by the Chief Conservator of Forests. That statement appears to have been the result of an averment in the writ petition. There was apparently no foundation for the averment since it is clear from paragraph (2) of the judgment of the Supreme Court that the Chief Conservator of Forests never accepted the bids. That was why no argument was advanced before the Supreme Court on the basis of a contract which sprung into existence on the acceptance of the bids by the Chief Conservator of Forests. We are therefore, of the view that the decision of the Supreme Court in : [1966]3SCR919 is not of any assistance to the plaintiff. The present case falls directly within the principles laid down in : [1964]3SCR164 and : [1972]3SCR437 .

6. The next submission of Sri Babulu Reddy was that the sale notice and in particular condition No. 27 of the tale notice did not provide that the auction purchaser committing breach would be liable for the difference between the bid amount at the first auction and the bid amount at the second auction. We are unable to agree with this submission. Conditions Nos. 27 and 28 which are relevant may be extracted :

'27. Resale at the risk and loss of defaulter : In the event of failure to fulfil the conditions 23 and 24 within the time-limit prescribed the Divisional Forest Officer shall forfeit the E. M. D. the instalments Paid, the security deposit if any paid, and all other amounts paid by the highest bidder and resell the coupe at the risk and loss of such highest bidder. The highest bidder shall have no right whatsoever on the coupe.

28. Procedure of resale: When resold at the risk and loss of the defaulting contractor whatever amount is offered at the resale will be accepted irrespective of the value of the lease unit out for sale. The balance due to Government will be recovered under Land Revenue Recovery Act from Original contractor.'

The term that 'the coupe will be resold at the risk and loss of the highest bidder' clearly means that the loss occasioned by the second sale will have to be borne by the original highest bidder. Sale at somebody's risk and loss is an expression of common use and we have no doubt about its meaning. If there is any doubt about it the doubt is easily cleared by reading conditions 27 and 28 together. What is to be recovered from the defaulting contractor under condition No. 28 is the balance due to Government, that is to say, the balance of the original bid less the bid at the second auction. Sri Babulu Reddy urged that condition No. 28 related to the mode of recovery and not to the amount to be recovered. We see no reason why it should be read in such a restricted way. It relates to both the amount to be recovered and the mode of recovery.

7. The next submission of Sri Babulu Reddy was that the provisions that the coupe could be sold at the risk and loss of the highest bidder and that the balance due to the Government would be recovered from him was Penal in nature. We are unable to agree with this submission. The provision is nothing more than a fair pre-estimate of damages. What is adopted is the most ordinary measure of damages. It is impossible to treat it as a penal provision.

8. The fourth submission of Sri Babulu Reddy was that the Government made no effort to mitigate the damages. He urged that it wag the duty of the Government to have brought the plot to auction as soon as the plaintiff commuted default or at least as soon as he repudiated the agreement. Instead of doing so the Government waited till December, 1967 to re-auction the plot. Whatever merit there might be in the argument the point was not raised in the plaint nor was it argued in the lower Court. Wehave, therefore, no material to find out whether the delay has caused any prejudice to the plaintiff. On the other hand, from Ex. B-15 the order of the Government it appears as if the plaintiff himself had obtained a stay from the Government. Having obtained a stay from the Government the plaintiff cannot now urge that the Government delayed the re-auction.

9. The last submission of Sri Babulu Reddy was that recourse should not be had to the Revenue Recovery Act. He fairly submitted that this depended on his first submission. Since we have held that there was a valid contract between the plaintiff and the Government and since the notice of sale provides for recovery of dues from the contractor by recourse to the Revenue Recovery Act the submission of Sri Babulu Reddy must be overruled.

10. In the result, the appeal is dismissed with costs.


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