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U.P. State Electricity Board and anr. Vs. Goel Electric Stores, Chandigarh - Court Judgment

LegalCrystal Citation
CourtAllahabad High Court
Decided On
Case NumberFirst Appeal No. 51 of 1976
Reported inAIR1977All494
ActsContract Act, 1872 - Sections 2, 7 and 7(1); Allahabad High Court General (Civil) Rules - Rule 585
AppellantU.P. State Electricity Board and anr.
RespondentGoel Electric Stores, Chandigarh
Appellant AdvocateS.N. Kakkar and ;K.B. Sinha, Advs.
Respondent AdvocateH.D. Srivastava and ;A.K. Sen, Advs.
DispositionAppeal allowed
.....(b) of contract act, 1872 - asking for any explanation of offer - no implication of acceptance or counter offer. (ii) modification of offer - section 2 (b) of contract act, 1872 - condition of offer modified by offeror - change not accepted by offeree - non acceptance of change not amounting to rejection of whole offer. (iii) rectification of offer - sections 2 (b) and 7 of contract act, 1872 - suggestion by offeree to rectify part of offer - does not imply counter offer. (iv) acceptance of offer - section 7(1) and (2) of contract act, 1872 - acceptance of offer must be explicit and specific - not implied. (v) suit for costs - rule 585 of allahabad high court general rules (civil) - rule 585 not applied for calculation of costs of suit. - - the plaintiff did not submit any revised..........implied acceptance by the defendants through the letter dated 22-10-1973 that letter amounted to a counter offer by the defendants to the plaintiff and the plaintiff having accepted the same by its letter dated 1-11-1973 the contract had become complete.5. the relevant document on the basis of which the implied acceptance and the making of counter offer are pleaded by the plaintiff is the letter of 22-10-1973 which may be quoted;'m/s. goel electric stores1756, bhagirath palacechandni chowkdelhi-6.dear sir, please refer to the tender submitted by you against tender specification no, ceh (sale) 17/73, on going through the tender submitted by you, it has been observed that:-- 1. you have quoted different rates for individual lots in your tender but it is not clear that to which places the.....

Hari Swarup, J.

1. This is a defendants' appeal arising out of a suit for an injunction to require the defendant U. P. State Electricity Board to sell to the plaintiff the goods for which tenders were invited and the plaintiff had made the tender. Further injunction was sought to restrain the defendants from considering and accepting fresh revised offers in respect of the goods in dispute in the present suit.

2. This case, in brief, was that defendant No. 2, the Superintendent Engineer, Electricity Stores Inspection Circle, on behalf of U. P. State Electricity Board, invited tenders for the sale of goods mentioned in the invitation to purchase the goods. Last date for the submission of the tenders was 13th Sept., 1973. On that date the tender filed by the plaintiff was returned as the date had extended to Oct. 16, 1973. The plaintiff filed the tender again along with a correction slip offering higher price than it quoted earlier. The tenders were opened on Kith Oct., 1973. On that date neither any tender was accepted nor rejected. The plaintiff received a letter from the Superintending Engineer dated Oct. 22, 1973. Through this letter the plaintiff was required to clarify the places for which different rates had been quoted by the plaintiff. It was also stated that condition No. 7 of tender specification as stated by the plaintiff was not acceptable to the Board. It was further stated in the letter that the guarantee for earnest money for Rs. 1,50,000 on non-judicial stamp paper of Rs. 15 was insufficient as the earnest money guarantee should have been for Rs. 2,04,000 and bank guarantee should have been on non-judicial stamp paper of Rs. 22.50. In reply to this letter the plaintiff sent a letter on 1-11-1973. The plaintiff clarified the places for which the quotations had been made. The condition No. 7 in the original tender was withdrawn and an additional bank guarantee for Rs. 54,000 on non-judicial stamp paper of Rs. 22.50 was enclosed. Thereafter the plaintiff received a telegram dated 30-11-1973 inviting revised highest offers for all categories of goods from those persons who had already submitted tenders. The revised offers were to be received by 14 hours on 14-12-1973 and were to be opened at 15 hour the same day. The plaintiff did not submit any revised offer, but on 5-12-1973 made a representation to the Chief Minister requesting that his good offices toe utilized and goods be delivered to it after acceptance of the plaintiffs' tender. A request was also made on 13-12-1973 by the plaintiff for the postponement of the consideration of the revised tenders. On 14-12-1973, however, the tenders wore opened but before any decision could be taken the suit giving rise to the present appeal was filed by the plaintiff and an ad interim injunction was obtained. The interim injunction was ultimately confirmed and the suit was finally decreed. The trial court has directed the defendants to deliver the goods to the plaintiff at the rates quoted by the plaintiff. The defendants were further restrained from considering and accepting the fresh highest revised offers which were opened on 14-12-1973. They were also directed not to receive .any payment as price for the goods from any person except the plaintiff.

3. Aggrieved by the decree of the trial court the defendants have filed this appeal. The case of the appellants is that there was no completed contract and the plaintiff had no right to sue for the injunction which the Court had granted. The contention of the learned counsel for the respondent, on the other hand, is that there was a completed contract and the injunction was rightly granted. It was further contended that so long as the offer made by the plaintiff had not been rejected the defendants had no right to invite revised offers from persons who had filed the tenders on the basis of the earlier invitation.

4. The first question that arises gwhether there was a completed contract in the case or not. According to the plaint allegations there was an implied acceptance of the plaintiffs' offer by the letter written toy the Superintending Engineer to the plaintiff on 22-10-1973, Further strength to the implied acceptance of the tender was sought to be drawn from the fact that the money alleged to be tendered as earnest money was not refunded. The alternative contention raised in the plaint is that if there was no implied acceptance by the defendants through the letter dated 22-10-1973 that letter amounted to a counter offer by the defendants to the plaintiff and the plaintiff having accepted the same by its letter dated 1-11-1973 the contract had become complete.

5. The relevant document on the basis of which the implied acceptance and the making of counter offer are pleaded by the plaintiff is the letter of 22-10-1973 which may be quoted;

'M/s. Goel Electric Stores

1756, Bhagirath Palace

Chandni Chowk


Dear Sir,

Please refer to the tender submitted by you against tender specification No, CEH (Sale) 17/73, on going through the tender submitted by you, it has been observed that:--

1. You have quoted different rates for individual lots in your tender but it is not clear that to which places the individual lots pertain. Please clarify places tor which you have quoted the different rates.

2. That modification in condition 7 of tender specification as stated by you, is not acceptable to the Board.

3. You have submitted earnest money for Rs. 1.50,000 only on non-judicial stamp paper of Rs. 15.00 only the earnest money for Rs. 2,04,000.00 being 1 per cent, value of the tender has to be submitted in the shape of Bank guarantee on non-judicial stamp paper of Rupees 22.50 P, only. The same may be sent at once.

Please submit the above required information/document latest by 22nd Nov., 1973 positively failing which your tender may not be considered.

Yours faithfully

Sd/- Illegible

Superintending Engineer,'

The letter opens by making reference to the tender already submitted by the plaintiff. It then mentions the three items which had been found on scrutiny made by the defendants. Paragraph No. 1 only requires a clarification of the items mentioned in the tender submitted by the plaintiff, 'whether a communication amounts to a counter offer or not is sometimes difficult to determine. The offeree, for example, may reply to the offer in terms which leave it uncertain whether he is making a counter offer or merely seeking further information before making up his mind. A mere request for information obviously does not destroy the offer'. (Cheshire and Fifoots Law of Contract, ninth Edition, p. 34), The seeking clarification of an offer cannot amount either to the acceptance of the offer or to the making of a counter offer.

6. Paragraph numbered as 2 is about condition No, 7 attached to the original tender. The condition related to the increase in the stipulated delivery period if delay was caused by the Board in effecting delivery. It was in reply to question No. 8 in the tender form which was in the following terms:--

'8. Do you agree to all the conditions of the tender specification and if not state the modifications clearly which you would desire in these terms and conditions (It may please be noted that it shall be entirely at the discretion of the seller to accept or reject the modification proposed).'

Querry No. 9 was in the following terms and the answer was 'Yes':--

'9. Please state clearly (answer Yes/ No) if you would accept the order it these modifications in terms and conditions (Sl. 8) are not acceptable to the Board without imposing any further condition/conditions from your side.'

The proposed modification read along with the reply to querry No. 9 makes it evident that conditions attached by way of modification were not such which the plaintiff was thinking as vital to the contract or which he might be insisting upon. They cannot therefore, be deemed integral conditions to the tender made by the plaintiff. By stating in the letter dated 22-10-1973 that the Board was not agreeable to the modification, it had only exercised the option which the terms of the tender had provided. Non-acceptance of the proposed modification in these circumstances cannot lead to the inference that the defendants had rejected the plaintiff's original tender,

7. Paragraph numbered as 3 in the letter had only informed the plaintiff that the tender of earnest money made by it was not in accordance with the invitation of offers. It has been argued that the plaintiffs' tendering smaller amount than required by the invitation as earnest money was an independent offer made by him and the defendants' demanding from the plaintiff the furnishing of earnest money in addition to what he had already tendered, amounted to rejection of the plaintiff's offer and making of a counter offer fey the defendants to the plaintiff. Reliance in this connection has been placed on the following passage from Halsbury's Laws of England, Third Edition, Volume 8. page 75 paragraph 129:--

'If the acceptance is conditional, or any fresh term is introduced by the person to whom the offer is made, his expression of assent amounts to a counter offer, which in term requires to be accepted by the person who made the original offer. We are unable to find any such counter offer in the present case. Only an opportunity was given to the plaintiff to make good the deficiency. As it was a condition pre-requisite for the entertainment of the offer itself, the demand of compliance of such a condition cannot amount to the making of a counter offer of sale by the defendants. It can in no manner be acceptance of the offer.

8. The last paragraph of the letter also shows that the (purports and intent of the letter was to give the plaintiff opportunity to bring his tender in time with the invitation so that the offer made by the plaintiff could be considered. The letter was in continuation of the invitation made by the defendants on the basis of which the offer was made by the plaintiff. Read in the context in which this letter was written, its wordings cannot amount to the making of any counter offer. What the defendants had done was only to require the plaintiff to remove the defects in the tender made on the basis of the invitation issued by the defendants for the sale of the goods. There could have been a counter offer only if on some terms other than those the plaintiff had offered, the defendants had proposed to sell the goods. There was no such offer made through the letter.

9. Further, the plaintiff had himself never treated the defendants' letter as containing a counter offer. This is evident from that the plaintiff wrote in the letter sent in reply to this letter. The ultimate paragraph in the letter of the plaintiff dated 1-11-1973 reads as under:--

'As we have now completed all the formalities in reply to your letter under reference, we shall request you to please accept our tender and favour us with your sale order at an early date.'

In face of this statement it cannot be reasonably urged by the plaintiff that the defendants' letter contained ,a counter offer which the plaintiff had accepted. We accordingly reverse the vague finding of the trial court that the defendants had made a counter offer and the plaintiff had accepted the same.

10. There is also not a single word !n the defendants' letter from which it may be presumed that the defendants had accepted the plaintiffs' offer. This letter was issued at a time when the tenders were being processed and deficiencies were found. It was open to the defendants to reject the plaintiffs' tender without affording even an opportunity to making good the deficiencies. The giving of such an opportunity cannot mean that the tender had been accepted. Unless the deficiencies had been made good the question of accepting the tender did not arise. The deficiencies had been made good only as per letter of the plaintiff dated 1-11-1973 and there could not have been any acceptance of the plaintiffs' tender prior to that date, there is no evidence of any circumstances or conduct of the defendants subsequent to this letter, which might show that the defendants had by implication accepted the plaintiffs' tender.

11. The other ground on which the implied acceptance of the tender has been pleaded and has been accepted by the court below is the non-refund of the alleged deposit toy the plaintiff of earnest money. Reliance was placed on the decision of this Court in Bishun Padu Haldar v. Chandi Prasad & Co., ILR 42 All 187 : (AIR 1919 All 7). Appropriation of price by the dealer was deemed in this judgment to establish acceptance of offer by conduct. In the present case, however, it is clear from the evidence that no money was tendered or deposited. What was given only a bank guarantee, there was no question of refund of the bank guarantee. Hence no inference of acceptance of the offer by conduct can be drawn.

12. under Section 7(1) of the Indian Contract Act. for a proposal to get converted into a promise the acceptance has to be absolute and unqualified. Further Sub-section (2) of Section 7 provides:--

'The acceptance must be expressed in some usual and reasonable manner, un-less the proposal prescribes the manner in which it is to be accepted.....'

13. In the present case the tenders had been invited on behalf of a corporate body and anyone of them could have been accepted only by a definite statement on that behalf by the defendants. The wordings of the letter written by defendant No. 2 are not such from which even the implied acceptance can be inferred. The contents of the letter continue to have the character of 'Invitation to treat'. The finding of the court below has accordingly to be reversed.

14. We hold that there was no completed contract and the plaintiff had acquired no right to seek the injunction.

15. The next contention of the learned counsel was that unless there was rejection of the plaintiffs' offer there could not have been a fresh invitation of offers through the telegram dated 30-11-1973. Reliance has been placed on condition 13 which is in the following terms:--

'The undersigned may revise or amend the conditions, specifications, date of closing and opening of this tender prior to the date notified for opening of thetenders, such revision and amendment, if any, will be communicated to all tenderers as amendment or addenda to this invitation of the tenders.'

The argument is that the power to change the date of furnishing tenders could be exercised only before the tenders had been opened, and not after 16th October, 1973 when the tenders had been opened. It is urged that the only option was either to accept one of the tenders or to reject them. The plaintiffs' tender, being the highest according to the learned counsel, should have been accepted. Whether the revised offers could be invited or not is however, not very material for the decision of this appeal because even if the revised offers could not be invited, the mere calling of revised offers could not give any right to the plaintiff to' claim the relief of injunction on the basis of its tender. That tender had never been accepted by the defendants and in the invitation the rights to reject a tender had been reserved. The mere fact that the plaintiff's tender was highest could vest in it no right to compel its acceptance. Moreover, in the circumstance of the case the invitation of revised tenders could amount to nothing but a rejection of all the tenders. There is thus no merit in this contention also.

16. It was then contended that the plaintiff had not filed a revised tender because the trial court had accepted his plea and had granted a temporary injunction and that if the defendants will not sell the goods on the basis of the revised tenders, if any had been filed by the prospective buyers, the plaintiff will be deprived of his chance to purchase the goods. In reply it has been stated tey the learned Solicitor General, appearing on behalf of the appellants, that the tenders which had been given on the basis of the earlier invitation have all lapsed as they were to be valid only for four months from the date of their opening. He has further stated that the goods which were the subject-matter of dispute in the present suit are still available and will have to be sold by inviting fresh tenders and when fresh tenders are invited even the plaintiff can make the offer. In view of this statement it is not necessary for us to examine the legal value of the plaintiffs' contention.

17. In the result, the appeal is allowed, the decree of the court below is set aside and the plaintiff's suit is dismissedwith costs.

18. The learned counsel for the respondent drew our attention to the decree prepared by the trial court. In that decree the fees of the counsel for the defendants has been shown as Rs. 70,912.50. This has been calculated according to the learned counsel for the appellant, in accordance with Rule 585 of the General Rules (Civil). That rule, however, is not applicable to a suit of the present nature. The rule provides:--

'In suits, or in appeals from original or appellate decrees in suits for money, effects or other personal property or for land or other immovable property of any description when such suits or appealsare decided on the merits after contest.....'

This rule applies only to suits which are in respect of some property and in which some property is claimed and not to suits of other character. A suit for injunction is not a suit for money or other property, Rule 585 will accordingly not apply. Costs have, therefore, to be assessed in the present case.

19. Learned counsel for the appellant stated that there were more than 40 hearings of the suit in the court below. We, accordingly assess Rs. 5,000 as counsel's fee in the trial court for calculating costs in the suit and a similar amount is assessed as counsel's fee in this appeal for calculating costs of the appeal. The defendants-appellants will be entitled to their costs of both the courts from the plaintiff.

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