1. The respondent Dentu Bhaskara Rao was returned to the Andhra PradeshLegislative Assembly from Kakinada constituency at the last general election.The appellant C. V. K. Rao was his closest competitor. There was two otherscandidates but they obtained very few votes and they have not shown any furtherinterest. The appellant filed an election petition to question the election ofthe respondent on many grounds : one such ground was that the respondent wasdisqualified under s. 7(d) of the Representation of the People Act, 1951 (43 of1951). The respondent had obtained a mining lease from the State of AndhraPradesh on April 13, 1960, though on the date he filed his nomination paper hehad not begun operations under that lease. The appellant took objection to thenomination of the respondent on the ground that he held a contract from theAndhra Pradesh Government within the prohibition of s. 7(d) of the Act, but theReturning Officer over-ruled his objection. The Election Tribunal later heldthat he was disqualified under s. 7(d) of Act 43 of 1951 and declared theelection void. On appeal, the High Court of Andhra Pradesh reversed thedecision and the present appeal has been filed on a certificate granted by theHigh Court.
2. Section 7(d) reads as follows :-
'7. A person shall bedisqualified for being chosen as, and for being, a member of either House ofParliament or the Legislative Assembly or Legislative Council of a State -
(a) * * *
(b) * * *
(c) * * *
(d) if there subsists acontract entered into in the course of his trade or business by him with theappropriate Government for the supply of goods to, or for the execution of anyworks undertaken by, that Government;'
3. The mining lease was in the standard form and after setting out theconsideration for the lease, it described in Parts I to III, the area of thelease, the description of the area, liberties, powers and privileges to beexercised and enjoyed by the lessee and the restrictions and conditions as totheir exercise. In Part IV it described the liberties, powers and privilegesreserved to the State Government and in Parts V and v. the rents and royaltiesreserved by the lease and certain other provisions relating to them. Part VIIthen dealt with the covenants of the lessee in respect of payment of rents,royalties, taxes etc. One such covenant was in clause 21 and was headed'Right of Pre-emption' and it conferred on the State Government aright of pre-emption of the minerals lying in or upon the land demised orelsewhere under the control of the lessee. That clause was interpreted by theTribunal as a contract entered in the course of trade or business by therespondent with the State Government for the supply of goods to thatGovernment. The High Court held that there was no such contract.
4. The disqualification which results from s. 7(d) is conditioned by anumber of circumstances. First, there must be a subsisting contract (this is tosay in actual existence) between the appropriate Government and the candidate.Then the contract must be in the course of the trade or business of thecandidate and, finally, it must be inter alia for the supply of goods to suchGovernment. The appropriate Government according to the definition of theexpression is the Government of Andhra Pradesh. The High Court in reaching itsconclusion interpreted clause 21 of Part VII of the lease and held that themining lease was not a contract, that clause 21 did not amount to a contractand that clause 21 even if contract was not a contract for the supply of goodsto the Government. This conclusion is assailed by the appellant. It isconvenient to quote the clause at this stage :
'21. (a) The StateGovernment shall from time to time and at all times during the said term havethe right (to be exercised by notice in writing to the lessee) of pre-emptionof the said minerals (and all products thereof) lying in or upon the said landshereby demised or elsewhere under the control of the lessee and the lesseeshall with all possible expedition deliver all minerals or products or mineralspurchased by the State Government under the power conferred by this provisionin the quantities, at the times in the manner and at the place specified in thenotice exercising the said right.
(b) Should the right topre-emption conferred by this present provision be exercised and a vesselchartered to carry the minerals or products thereof procured on behalf of theState Government or the Central Government be detained on demurrage at the portof loading the lessee shall pay the amount due for demurrage according to theterms of the charter party of such vessel unless the State Government shall besatisfied that the delay is due to causes beyond the control of the lessee.
(c) The price to be paid for allminerals or products of minerals taken in pre-emption by the State Governmentin exercise of the right hereby cornered shall be the fair market priceprevailing at the time of pre-emption provided that in order to assist inarriving at the said fair market price the lessee shall, if so required,furnish to the State Government for the confidential information of theGovernment particulars of quantities, descriptions and prices of the saidminerals or products for carriage of the same and shall produce to such officeror officers as may be directed by the State Government original orauthenticated copies of contracts and charter parties entered into for the saleof freightage of such minerals or products.
(d) * * * *'
5. Mr. K. R. Chaudhury contended that under this clause there was a standingcontract for the supply of goods and all that Government had to do was to senda notice to the respondent and he was compelled to supply the goods toGovernment. He pointed out that from the time the lease was granted Governmentwas asking the respondent to commence operations to raise the minerals but therespondent avoided working the mine probably to save himself from thedisqualification. According to Mr. Chaudhury, it mattered not whether the minewas worked or not, but what mattered was that there was a subsisting contractfor the supply of minerals to the appropriate Government. Mr. A. VishwanathaSastri, in reply, contended that the mining lease could not be regarded as acontract and further that it was not 'in the course of' the trade or businessof the respondent, and finally that, in any event, it was not a contract forthe supply of goods. That it was in the course of business of the respondentalmost goes without saying. It is not necessary, as Mr. Sastri suggested, thata course of business based upon other transactions must first exist before theoffending contract can be said to be in the course of business. That contractmay itself be the start of the business and the words 'in the course of thebusiness' would still be apt. As the mining lease was subsisting, the contract,if any there be, was also subsisting and there is no doubt on that aspect ofthe matter. The question is whether the provisions of clause 21 bring about acontract for the supply of goods. This question can be broken into two whichare : (a) whether clause 21 can be regarded as a contract and (b) whether itcan be regarded as a contract for supply of goods. Clause 21 is invariablyinserted in every mining lease. It reserves to the Government the right to theminerals which vest in Government but which are allowed to be raised by thelessee holding the lease. The lease is, in one sense, a contract between the Governmentand the lessee because there is consideration on both sides and an offer andacceptance. There are obligations created by it, some of which are contractualeven though some may be regarded as arising from the conditions of the grant.The mining lease without clause 21 cannot possibly be described as a contractfor the supply of goods. Without that clause there would neither be a mentionof goods nor of their supply. If the lease is to be read as satisfying thedisqualification in s. 7(d), clause 21 alone can satisfy it. Clause 21 speaksof a right of the Government to pre-empt the minerals and all products thereoflying in or around the land demised or elsewhere under the control of thelessee. There is, however, no concluded contract in respect of any goodsbecause it hardly needs to be said that relying upon this clause the lesseecannot begin delivery of the ore to the Government. He can do so only if theGovernment serves a notice on him stating the quantity pre-empted and the timewithin which the supply is to be made. The clause, however, does not make itobligatory on Government to pre-empt any quantity of mineral or at all. Thereis no obligation to buy nor is there any compulsion on the part of the lesseeto sell unless asked. In these circumstances, the clause does no more than tokeep intact a right of the Government to obtain the minerals or their productsas and when Government requires in preference to others. Till Government makesup its mind and serves a notice there is no obligation to make any deliveriesand even though the word 'subsists' is a word of wide import, it cannot be saidthat a contact for the sale of goods subsists because a contract requires anoffer and its acceptance and is not a mere reservation of a right.
6. Taking the most liberal view of the matter it is clear that clause 21 didnot bring into being a contract for the supply of goods. All that it did was toreserve to the Government the right to prior purchase of the minerals raised bythe respondent. The reservation of such rights does not amount to a contractfor the supply of goods which can be said to subsist between the parties. TheHigh Court was, therefore, right in reversing the decision of the ElectionTribunal. The appeal fails and is dismissed with costs.
7. Appeal dismissed.