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M.C. Manickam Chettiar Vs. the Madras City Municipal Corporation by Its Commissioner - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai High Court
Decided On
Reported in(1978)1MLJ371
AppellantM.C. Manickam Chettiar
RespondentThe Madras City Municipal Corporation by Its Commissioner
Cases ReferredLtd. v. Nestle Co.
Excerpt:
- m.m. ismail, j.1. the defendant in o.s. no. 4133 of 1969 on the file of the city civil court, madras, is the appellant herein. the suit was instituted by the respondent for recovery of a sum of rs. 9,450, as damages under the following circumstances. the respondent, namely, the madras city municipal corporation by its commissioner, hereinafter called the corporation, is the owner of the swimming pool known as the 'royal swimming bath' at peoples park. the right to collect the fees from the persons using the pool was auctioned for the period of one year from 1st april, 1968 to 31st march, 1969 on 17th january, 1968. the appellant was the highest bidder for rs. 20,000. according to the respondent, the same was accepted by the commissioner by his letter dated 18th march, 1968, addressed to.....
Judgment:

M.M. Ismail, J.

1. The defendant in O.S. No. 4133 of 1969 on the file of the City Civil Court, Madras, is the appellant herein. The suit was instituted by the respondent for recovery of a sum of Rs. 9,450, as damages under the following circumstances. The respondent, namely, the Madras City Municipal Corporation by its Commissioner, hereinafter called the Corporation, is the owner of the swimming pool known as the 'Royal Swimming bath' at Peoples Park. The right to collect the fees from the persons using the pool was auctioned for the period of one year from 1st April, 1968 to 31st March, 1969 on 17th January, 1968. The appellant was the highest bidder for Rs. 20,000. According to the respondent, the same was accepted by the Commissioner by his letter dated 18th March, 1968, addressed to the appellant. The plaint proceeded to state that one of the conditions in the auction notice is that if the officer conducting the auction does not return the bid deposit, the bidder must keep the bid open for acceptance and the bid will be irrevocable, and if the bidder withdraws his bid before acceptance by the Commissioner or if his bid is accepted and he fails to furnish the security or execute the agreement, then in each and every such case his bid deposit will be forfeited to the Corporation and the right resold in public auction and the bidder will be liable to pay the damages suffered by the plaintiff-Corporation on account of such resale of the collection of fees departmentally. According to the respondent-Corporation, the appellant declined to take up the contract and requested for the refund of deposit by his letter dated 19th March, 1968 and the respondent had to re-auction the right by public auction at the risk and cost of the appellant. The respondent further stated that on 28th March, 1968 the auction was held and one Thiagaraja Chettiar made the highest bid for Rs. 9,550, that the said bid was accepted by the Commissioner of the Corporation and that the amount was also realised. The case of the Corporation was that as a result of the default committed by the appellant, the Corporation suffered a loss of Rs. 10,450. After adjusting the bid deposit of Rs. 1,000, paid by the appellant, for recovery of the balance the suit was instituted.

2. The case of the appellant in the written statement was that it was true that he bid at the auction and that his highest bid was Rs. 20,000. But, according to him, he was not liable to pay any damages to the respondent-Corporation. He contended that after the auction was held on 17th January, 1968, nothing was heard from the Corporation regarding the acceptance of the bid for two months, that he called upon the Corporation to refund the bid deposit by his letter dated 16th March, 1968, and that thereby he validly revoked the bid by saying that he was not prepared to wait any longer and that his bid deposit must be refunded. His further case was that he sent another letter dated 19th March, 1968, revoking his bid, that the respondent purported to accept the appellant's bid in the letter dated 19th March, 1968, only after the appellant asked for the refund of bid amount by his letter dated 16th March, 1968 and made known to the respondent that he revoked his bid; that there was no obligation on the part of the appellant to keep his bid open; and that there was no consideration for keeping his offer open indefinitely. He also contended that his bid had lapsed on account of the undue delay in acceptance on the part of the respondent, that no contract came into existence and the appellant was entitled to refund the bid deposit of Rs. 1,000, and that the respondent was not entitled to forfeit that amount. He also alleged mala fides against the Corporation stating that instead of accepting the bid of the appellant, the Corporation entered into negotiations with one M. Koteeswaran for a higher bid of Rs. 21,000, and thereby the Corporation itself had given a go-by to the auction held on 17th January, 1968. He further stated that the attempt of Koteeswaran to get the contract was frustrated and that the Corporation cannot claim damages on the foot of short-fall, in re-auction. He also challenged the validity of re-auction. He paid Court-fee for the refund of the bid deposit of Rs. 1,000 with interest of Rs. 100.

3. The Corporation filed a reply statement controverting the allegations of the appellant in his written statement and reiterating its earlier claim. On the basis of these pleadings, the following issues were framed for trial:

1. Is the plaintiff entitled to forfeit the deposit?

2. Was there an obligation on the defendant to keep his bid open?

3. Is the plaintiff entitled to any damages, and if so, what amount?

4. Has the defendant's bid lapsed on account of non-acceptance within a reasonable time and by plaintiff negotiating with non-bidders subsequent to the auctions?

5. Was there a valid revocation of the defendant's bid prior to the plaintiff's acceptance?

6. Was the re-auction vitiated by absence of the publicity and the defendant not liable for any loss on such re-auction?

7. Is the defendant entitled to the refund of the deposit of Rs. 1,000 with interest thereon?

8. To what reliefs, if any, are the parties entitled?

The learned VII Asst. Judge, City Civil Court, Madras, by his judgment and decree dated 25th November, 1971, held that the appellant was under an obligation to keep his bid open for acceptance, and therefore, he had no right to revoke his bid before the acceptance of the same by the Commissioner on 18th March, 1968. He also held that the re-auction was not vitiated by any factor and that the offer of the appellant did not lapse on account of non-acceptance of the bid within a reasonable time and by the Corporation negotiating with non-bidders subsequent to the auction. According to his finding, there was necessity to verify the solvency of the appellant which took time and that was the reason for the delay in accepting the bid of the appellant and the delay would not enable the appellant to revoke his bid. The learned trial Judge went to the extent of holding that the revocation of the offer by the appellant was not bona fide since he revoked the offer knowing that the Commissioner had accepted his offer on 15th March, 1968 and that as a matter of fact even the subsequent highest bidder Thiagaraja Chettiar was set up by the appellant only. On these findings, the learned trial Judge decreed the suit of the Corporation as prayed for with costs and the counter-claim of the appellant was dismissed, but without costs. It is against this judgment and decree that the defendant in the suit has preferred this appeal contending that he was not liable to pay any damages to the Corporation and that he was entitled to get refund of the bid deposit made by him.

4. Having regard to the facts and circumstances of this case, it is unnecessary to consider whether the appellant purported to revoke his bid after having come to know that the Commissioner has accepted the offer on 15th March, 1968 or whether the subsequent highest bidder, Thyagaraja Chettiar was set up by the appellant or not. The sole question that arises for consideration is, whether the appellant validly revoked his offer or not. That again turns upon two questions, namely: (1) whether the appellant did revoke his offer or not; and (2) whether the appellant was under an obligation to keep his bid open without revoking the same, till it was accepted by the Commissioner. I shall now consider these questions, and for considering these questions, it is necessary to refer to certain facts.

5. The first thing I want to refer to is Exhibit B-2, conditions of the auction itself conducted on 17th January, 1968. Clause (1) of Exhibit B-2, dated 12th December, 1967, states that it must be clearly understood that a bid made by any person is an offer and the Commissioner is not bound to accept the highest or any other bid. It is this clause which provides for making of the bid deposit in cash before any person takes part in the bid, and it is stated that the said security deposit will not carry any interest. Clauses 2 and 3 are important and they are as follows:

2. If the Officer conducting the auction returns the bid deposit it is to be understood that the bid or the offer is not accepted. If the officer does not return the bid deposit, the bidder must keep his bid open for acceptance, and the bid will be irrevocable and as consideration for keeping the bid irrevocable he will be furnished with a copy of the agreement which is to be entered into by the bidder whose bid is accepted.

3. The Commissioner is entitled to call on any bidder whose bid deposit is not returned, to pay the balance of the amount to make up the security deposit or such sum as the Commissioner may fix within a time to be fixed by him as a condition precedent to the acceptance of the bid. Indefault, the bid will stand rejected at the risk and cost of the bidder. The person whose bid is accepted will have to produce: (1) an Income-tax Verification certificate; (2) a sales tax clearance certificate; and (3) execute a formal agreement of a copy which will be furnished to him.

6. In this case, after the auction was held on 17th January, 1968, the bid deposit of the appellant herein was not returned as contemplated by Clause (2) of Exhibit B-2. Exhibit A-2 is the form of agreement to be entered into between the parties in the event of the appellant's bid being accepted, which was handed over to the appellant herein on 17th January, 1968, namely, the date of auction. Exhibit A-5 is a communication which bears the date '16th March, 1968' sent by the appellant to the Corporation. This reads:

The auction with right of collecting fee from the persons using the Royal Swimming pool for the year 1968-69 was held on 17th January, 1968. Now it is more than two months, and as I cannot wait any longer I request you to refund the bid deposit of Rs. 1,000 paid by me at your earliest.

Though it bears the date '16th March, 1968,' it bears the seal of the Corporation dated 19th March, 1968. Exhibit B-3 is the alleged acceptance sent by the Commissioner to the appellant herein. It bears the date '18th March, 1968,' and it is unsigned. This communication states that the Commissioner has accepted the appellant's bid for Rs. 20,000 and asks the appellant to arrange to remit: (1) a sum of Rs. 4,000 in cash towards the balance of security deposit fixed by the Commissioner for the due performance of the contract; and (2) to execute an agreement within two days from receipt thereof. It also states that in default, the appellant's bid deposit of Rs. 1,000 will be forfeited. Exhibit A-10 is the acknowledgment for the receipt of Exhibit B-3 which shows that it was served on the appellant on 19th March, 1968 at 4-30 P.M. Exhibit A-9 is the office copy of Exhibit B-3, and that shows that though it was prepared on 18th March, 1968, it should have been despatched only on 19th March, 1968. After the receipt of Exhibit B-3, the appellant sent a further communication, Exhibit A-4, dated 19th March, 1968, which appears to have been received in the Corporation the next day, that is, 20th March, 1968. In that communication, the appellant referred to his letter dated 16th March, 1968 (Exhibit A-3), and stated that he was not prepared to accept the offer which was received after two months. He, therefore, requested in that letter that the deposit amount of Rs. 1,000 might be refunded to him at an early date. Exhibit B-4 is the reply to Exhibit A-4 sent by the Corporation to the appellant herein stating that his request for refund of the bid deposit in respect of the auction in question could not be complied with and that the right had been brought to re-auction at his risk and cost. It is thereafter, after exchange of notices, that the present suit was instituted by the respondent.

7. The first question for consideration is, whether the appellant actually revoked the offer or not. According to the appellant, he presented Exhibit A-3 on 16th March, 1968 itself to the Revenue Officer in person. However, as I have pointed out already, Exhibit A-3 contains the Corporation seal, dated 19th March, 1968. There being no evidence to corroborate the case of the appellant in this behalf, I must proceed on the basis that Exhibit A-3 was received by the Corporation only on 19th March, 1968. The other question for consideration is, whether Exhibit A-3 constitutes revocation of the offer as such. This question arises in view of the doubt expressed by the learned trial Judge that Exhibit A-3 may not amount to revocation of the offer. I am unable to accept the conclusion of the learned trial Judge, because it is not necessary that Exhibit A-3 itself should have used the expression 'Revocation of the offer' and it is enough if Exhibit A-3 made it clear that the appellant was not standing by the offer made by him and that he was withdrawing from the offer. The request contained in Exhibit A-3 which I have extracted in full clearly shows that the appellant herein had manifested his intention not to stand by the offer made by him, in view of the delay involved and that was made amply clear when he requested for the refund of the bid deposit of Rs. 1,000. Therefore, I have no hesistation whatever in coming to the conclusion that Exhibit A-3 received by the Corporation on 19th March, 1968, did constitute revocation of the offer made by the appellant. The evidence of P.W. 1 also shows that even the Corporation understood Exhibit A-3 only as a revocation of the offer made by the appellant.

8. The question that arises for consideration in this context, is whether this revocation of the offer was effective or not, Section 4 of the Indian Contract Act, deals with communication of the proposal, acceptance and revocation. Section 5 deals with revocation of proposals and acceptance, and Section 6 provides how a revocation should be made. According to Section 4, the communication of an acceptance is complete, as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; as against the acceptor, when it comes to the knowledge of the proposer. The communication of a revocation is complete-as against the person who makes it, when it is put into a course of transmission to the person to whom it is made so as to be out of the power of the person who makes it; as against the person to whom it is made, when it comes to his knowledge. The question for consideration is, whether the communication of the revocation of the offer of the appellant herein became ineffective within the terms of Section 4 of the Indian Contract Act. As I have pointed out already, Exhibit A-3 was received at the office of the Corporation on 19th March, 1968. The evidence of P.W. 1 shows that it was received by post, and he stated that the postal cover which contained Exhibit A-3 was not preserved. As against this, Exhibit B-3 was served on the appellant by a special messenger at 4-30 P.M. on 19th March, 1968. There is no evidence to show that Exhibit A-3 was received by the Corporation after Exhibit B-3 was served on the appellant herein. On the other hand, the evidence of P.W. 1 would show that Exhibit B-3 itself was sent from the office of the Corporation only on receipt of Exhibit A-3. The evidence of P.W. 1 is this behalf is as follows:

The defendant sent a letter (Exhibit A-3) dated 16th March, 1968, and it was received in my office on 19th March, 1968. He stated that the contract was revoked by him due to delay in acceptance. On the same day (19th March, 1968), Exhibit B-3 letter of the plaintiff was sent to defendant stating that the contract was accepted even on 15th March, 1968.

The tenor of the above evidence of P.W. 1 will show that Exhibit B-3 was despatched from the office of the Corporation only after the receipt of Exhibit. A-3. As a matter of fact, the statement of P.W. 1 that Exhibit B-3 was sent to the defendant stating that the contract was accepted even on 15th March, 1968 will confirm this. However, Exhibit B-3 does not contain any statement that the offer of the appellant was accepted by the Commissioner on 15th March, 1968. Therefore, these circumstances taken along with the tenor of the above evidence of P.W. 1, will clearly show that Exhibit B-3 should have been despatched from the office of the Corporation through a special messenger on 19th March, 1968: after the receipt of Exhibit A-3 only. But P.W. 1, immediately after making the above statement, went on to state-

Before the receipt of Exhibit A-3 in my office, Exhibit B-3 was despatched to the defendant though on one and the same date.

Obviously, this statement was not acceptable. As far as the communication of the said acceptance is concerned, it was complete as against the person who made it only when it was served on the appellant herein at 4-30 P.M. on 19th March, 1968; because, it was sent through a special messenger, the special messenger could have been countermanded not to deliver Exhibit B-3 to the appellant herein at any time before he actually delivered the same to him. On the other hand, P.W. 1, as I have pointed out already, admitted that Exhibit A-3 was received through post, and therefore., it must have been received by the Corporation on 19th March, 1968 before Exhibit B-3 was despatched from the office of the Corporation. Hence, my conclusion on this part of the case is that the communication of the revocation of the offer was complete before the communication of the acceptance of the Corporation, and consequently, the revocation of the offer became effective.

9. There is one other circumstance also to which I would 1ike to draw attention in this behalf. As I have pointed out already, Exhibit B-3 is the acceptance sent by the Corporation to the appellant herein, and Exhibit A-9 is the office copy of Exhibit B-3. As far as Exhibit B-3 is concerned, it is a cyclostyled communication purporting to have been prepared on 18th March, 1968. But, it contains nobody's signature. On the other hand, Exhibit A-9 the office copy contains the initials of the Revenue Officer under date 19th March, 1968, though there are some endorsements to indicate that it might have been prepared on 18th March, 1968. So far as Exhibit B-3 remains unsigned, it cannot be said that there has been a valid acceptance communicated to the appellant herein of his offer. It should not be forgotten that the respondent is a statutory Corporation, namely, Municipal Corporation of Madras, and any action taken on behalf of that Corporation must be in writing signed by a competent officer, who has the capacity to bind the Corporation by his action. So long as Exhibit B-3 remains unsigned, it can be said that there has been no acceptance of the offer of the appellant at all, and therefore, the revocation of the offer made by the appellant by his communication, Exhibit A-3 received by the Corporation on 19th March, 1968 has become completely effective.

10. One argument that was st enuously addressed before me and which found favour with the trial Court was that the appellant had no right to revoke the offer at all. For this purpose reliance was placed on Clause (2) of Exhibit B-2, which I have already extracted. According to that clause, a bidder whose bid deposit is not returned must keep his bid open till acceptance by the Commissioner, and as, consideration for keeping that offer open, he would be given a copy of the agreement to be entered into between the parties, and in this particular case Exhibit A-2 is the copy of that agreement, and such a copy of the agreement having been given to the appellant herein, the appellant was not entitled to revoke his offer. Even if this argument is valid, we are left with a curious situation in this case, namely, there being no valid acceptance of the offer at all, because, Exhibit. B-3 was an unsigned cyclostyled communication, the appellant must be deemed to have kept his offer open indefinitely irrespective of any other consideration. On the face of it, such a contention is not tenable.

11. I am now proceeding to consider this question on the basis that Exhibit B-3 was a valid acceptance. The question in this behalf is whether the appellant herein was under an obligation to keep his offer open. The legal position in this behalf is settled, and is not challenged before me.

12. This Court in T. Linga Gowder v. State of Madras, represented by the Dt. Forest Officer, Ootacamaund : (1970)1MLJ503 , following an earlier judgment of this Court in Somasundaram Pillai v. Provincial Government of Madras : AIR1947Mad366 , held that in an auction sale a condition stipulating that the bid shall not be retracted, has no force unless it is supported by consideration or is founded on statutory authority, because every bid is an offer and it binds both parties only when the offer is accepted, and that a person who made the offer has a right to withdraw the offer before its acceptance. In the present case, it is not the case of either party that Exhibit B-2 and in particular Clause (2) thereof was pursuant to any statutory power. Therefore, the only other question that remains to be considered is whether the provision contained in Exhibit B-2 that a bidder whose bid deposit was not returned should keep his offer open and it is irrevocable, is supported by any consideration or not.

The argument of the learned Counsel for the Corporation is that the handing of the form of agreement to be entered into between the parties, namely, Exhibit A-2 in the present case, would constitute consideration, and this argument has found favour with the learned trial Judge. The correctness of the above submission as well as the conclusion of the learned trial Judge has now to be considered. I am clearly of the opinion that the argument as well as the conclusion of the trial Court in this behalf is not sound. Section 2(d) of the Indian Contract Act defines 'consideration' as follows:

When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something such act or abstinence or promise is called a consideration for the promise.

Various decisions and text books writers have dealt with the 'conception of consideration.' In Anson's ' Principles of the English Law of Contract', 22nd Edn., it isstated-

It will be well, therefore, to start with a definition of consideration, and we may take that which is given by Lush, J. in the case of Currie v. Misa (1875) L.R. 10 Ex. 153. A valuable consideration in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other.' Gratuitous promises are thus unenforceable in English Law; reciprocity is required by the presence of consideration. It will be seen from this definition that consideration either is some benefit to the promisor or some detriment to the promisee; but there is considerable controversy as to the relative importance of these two factors. It is universally conceded that detriment to the promisee is a good consideration since detriment is, as one learned writer has succinctly stated, the price for which the prmise of the other is bought (pages 80-81).

In each case we must ask: Does the promisor get any benefit or the promisee sustain any detriment, present or future, in respect of the promise? if no, the promise is gratuitous, and is not binding. In working out this doctrine to its logical results it has, no doubt, happened from time to time that the Courts have been compelled to hold a promise to be invalid which the parties intended to be binding, or that the slightness of the benefit or detriment which may constitute a consideration has tended to bring the requirement into ridicule (page 85).

Consideration need not be adequate to the promise but it must be of some value in the eye of the law. The Courts will not make bargains for the parties to a suit, and, if a man gets what he contracted for, will not inquire whether it was an equivalent to the promise which he gave in return. The consideration may be of benefit to the promisor, or to a third party, or may be of no apparent benefit to anybody, but merely a detriment to the promisee; in any case the adequacy of the consideration is for the parties to consider at the time of making the agreement, not for the Court when it is sought to be enforced'. The most trifling detriment or benefit will suffice (page 91).

Though consideration need not be adequate it must be real. It must be something which is of some value in the eye of the law. (page 92).

13. To the same effect were the statements of law contained in other text books as well. In Chitty on Contracts'-23rd Edn. Vol. 1 it is stated-

The general rule both at common law and in equity is that the Courts do not concern themselves with the adequacy of the consideration. They leave the parties free to make their own bargain, and they refuse, generally speaking, to invalidate a contract on the ground that it is 'unfair'. The fact that a contracting party pays 'too much' or 'too little' may be evidence of fraud or mistake, or may induce the Court to imply a warranty. But it does not affect the validity of the contract at common law-though gross undervalue may sometimes be a ground for equitable relief (paragraph 119, pages 59-60). Although consideration need not be adequate, it must be real, that is capable of estimation in terms of value; of some value in the eye of law (paragraph 120, page 61).

In Cheshire and Fifoot's 'Law of Contract', 8th Edn. at page 59, the following definitions culled out from certain decisions have been given-

A consideration of loss or inconvenience sustained by one party at the request of another is as good a consideration in law for a promise by such other as a consideration of profit or convenience to himself-Lord Ellenborough in Bunn v. Guy (1803) 4 East. 190.

'Consideration means something which is of value in the eye of the law, moving from the plaintiff; it may be some detriment to the plaintiff or some benefit to the defendant-Patteson, J., in Thomas v. Thomas (1842) 2 Q.B. 851.

The general rule is that an executory agreement by which the plaintiff agrees to do something on the terms that the defendant agrees to do something else, may be enforced, if what the plaintiff has agreed to do is either for the benefit of the defendant or to the trouble or prejudice of the plaintiff- Per Lord Blackburn in Bolton v. Madden (1873) L.R. 9 Q.B. 55. 4. (1915) A.C. 847.

In Dunlop Pneumatic Tyre Co., Ltd. v. Selfridge and Co., Ltd.4, Lord Dunedin adopted the following definition of 'consideration' contained in Pollock on Contracts, 8th Edn., Page 175-

An act or forbearance of one party; or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.

Dealing with the adequacy of consideration, the same text book (Cheshire and Fifoot's Law of Contract, 8th Edn.) states at page 69 thus-

It has been settled for well over three hundred years that the Courts will not inquire into the adequacy of consideration. By this is meant that that they will not seek to measure the comparative value of the defendant's promise and of the act or promise given by the plaintiff in exchange for it, nor will they denounce an agreement merely because it seems to be unfair. The promise must, indeed, have been procured by the offer of some return capable of expression in terms of value.

In the light of these statements contained in the various text books, the question for consideration is, whether the handing over of Exhibit A-2, a copy of the agreement to be entered into between the parties in the event of the offer being ultimately accepted by the Corporation, can be said to constitute consideration for the offer or keeping the offer open and irrevocable till its acceptance. I am clearly of the opinion that this cannot be said to be consideration in the eye of law. Notwithstanding the handing over of a copy of the agreement to the appellant, the Commissioner of the Corporation has retained the undoubted power to reject the offer of the appellant herein. Therefore, by the handing over of Exhibit A-2, the Corporation had not suffered any detriment and had not undertaken any obligation which it did not have previously. As against this, by receiving the copy of the agreement, the appellant had not gained any advantage or benefit. His bid deposit remained with the Corporation without earning any interest, and if and when his offer was rejected by the Commissioner' which he was entitled to do, the appellant would merely get back the bid deposit, and he does not get anything more than what he had previously, by (sic) receiving the copy of the agreement from the Corporation. Hence, this handing over by the Corporation and receiving by the appellant of Exhibit A-2 does not have any value in the eye of law, which can be only in terms of acquisition of some right or benefit by the appellant or incurring of some obligation or suffering of some detriment by the Corporation, neither of which is present in the present case.

14. Apart from this, there are certain other things also to be noticed in this con. text. It is not as if Exhibit B-2 provides for the handing over of such copy only to the highest bidder. I have already extracted Clauses (2) and (3) of Exhibit B-2, and they give complete discretion to the officer conducting the auction to return or not to return the bid deposit of any person. It may be in a particular case, the officer conducting the auction does not return the bid amount of any of the persons and places the entire matter before the Commissioner for consideration, and in the process hands over a copy of the agreement to every one of the persons who participates in the bid. Can it be contended from this fact that every one of the persons who participated in the bid was under an obligation not to revoke the bid and to keep the bid irrevocable? As a matter of fact, it may happen in a particular case that the difference between the highest bid and the next lower bid or even further lower bids may not be very much, and such difference may not be sufficient to justify the Commissioner accepting the highest bid, irrespective of the relative solvency and status of the parties concerned. Therefore, in order to avoid the necessity of conducting a re-auction, the officer conducting the auction may place the offers of a few in the top before the Commissioner for consideration and with regard to those people, their bid deposits may not be returned, and each one of them may be given a copy of the agreement as contemplated in Exhibit B-2. If the argument of the learned Counsel for the respondent is to be accepted, in the case of every one of those persons the offer remained irrevocable, and the only consideration for keeping them open and irrevocable was the receiving of a copy of the agreement to be entered into later. From the very nature of the case, though several persons have been given copies of the agreement, the offer of one of them only can be ultimately accepted, and with regard to others, they will be merely getting back the bid deposit which itself does not carry any interest. Can it be said, in such a context, that in the case of every one of them, there was consideration for their not revoking the offer- a consideration which has some value in the eye of law? That the copy of the agreement handed over to the bidder is worthless to the bidder is apparent from Clause (2) itself. Under that clause, after the Commissioner has accepted the bid, a copy of the formal agreement to be executed by the bidder will be furnished to him. This itself will make the copy handed over earlier useless and worthless.

15. Under these circumstances, I am clearly of the opinion that the mere handing over of a copy of the agreement will not constitute consideration to support the promise or undertaking of the bidder to keep his bid open till final acceptance or to make it irrevocable.

16. The learned Counsel for the respondent contended that even if it be so, the appellant having participated in the auction with the knowledge of Clause (2) in Exhibit B-2, he must be held to be bound by it. I am unable to accept that argument. Even when a person enters into an agreement with somebody else, if ultimately it is found that the agreement is not supported by consideration, certainly the agreement cannot be enforced in law and it is no answer to say that the person entered into the agreement with the knowledge that it did not provide for any consideration. It is the mandate of the law that an agreement not supported by consideration is unenforceable, and this mandate cannot be defeated by contending that the party against whom the agreement is sought to be enforced, entered into the same with the knowledge that there is no consideration or that the consideration provided for is unreal or illusory. Therefore, simply because the appellant participated in the auction with the knowledge of Clauses (2) and (3) of Exhibit B-2, it cannot be contended that even if there is no consideration, be must be bound to keep his offer open or irrevocable till its acceptance.

17. The learned Counsel for the respondent-Corporation drew my attention to a decision of the House of Lords in Chappel & Co., Ltd. v. Nestle Co., Ltd. (1960) A.C. 8... The facts of this case are somewhat interesting and peculiar. The facts as gathered from the headnote are as follows:

The Hardy Record ., had advertised as follows:

Here's how to get each new star's record. Collect three six penny wrappers from Nestle's milk chocolate. Fill in the coupon and sen it with a postal order for 1s. 6ds. the price of the record, and your three wrappers. You may order as many record as you like on this coupon, but for each record you must send three wrappers and 1s. 6d., P.O. crossed, payable to the Nestle Co. Ltd.

The question for consideration was whether the three wrappers of Nestle's milk chocolate could be said to form part of the retail price in addition to ls. 6d., which the purchaser was required to pay. Lord Reid stated-

The requirement that wrappers should be sent was of great importance to the Nestle Co.; there would have been no point in their simply offering records for 1s 6d. each. It seems to me quite unrealistic to divorce the buying of the chocolate from the supplying of the records. It is a perfectly good contract if a person accepts an offer to supply goods if he (a) does something of value to the supplier, and (b) pays money the consideration in both (a) and (b). There may have been cases where the acquisition of the wrappers conferred, no direct benefit on the Nestle Co., but there must have been many cases where it did. I do not see why the possibility that in some cases the acquisition of the wrappers did not directly benefit the Nestle Co., should require us to exclude from consideration the cases where it did. And even where there was no direct benefit from the acquisition of the wrappers there may have been an indirect benefit by way of advertisement.

Lord Somervell of Harrow stated-

The question then is whether the three wrappers were part of the consideration or, as Jenkins, L.J. held, a condition of making the purchase, like a ticket entitling a member to buy at a co-operative store.

I think they are part of the consideration. They are so described in the offer. 'They' the wrappers, will help you to get smash his recordings. They are so described in the record itself-' all you have to do to get such new record is to send three wrappers from Nestle 6d milk chocolate bars, together with postal order for 1s 6d. This is not conclusive but, however described, they are in my view, in law part of the consideration. It is said that when received the wrappers are of no value to Nestle's. This I would have thought irrelevant. A contracting party can stipulate for what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw way the corn. As the whole object of selling the record, if it was a sale, was to increase the sales of chocolate, it seems, to me wrong not to treat the stipulated evidence of such sales as part of the consideration.

18. With regard to this case, it is stated in Anson's Principles of the English Law of Contract-22nd Edn., as follows:

The question for decision was: Did the wrappers form part of the selling price (consideration)? Or was their acquisition simply a condition limiting the class of persons qualified to purchase records? The House of Lords, by a bare majority, held that they were part of the consideration for the record. Since the object of selling the record was to increase the sales of chocolate the stipulated evidence of such sales formed part of the consideration. The wrappers were of benefit to the promisors (page 83).

In my opinion, there is no comparison between the wrappers of the three chocolate bars considered in the decision referred to above, and the handing over of a copy of the agreement to be entered into between the parties in the event of the Commissioner of the Corporation ultimately accepting the offer of the person concerned in the present case. In the decision referred to above, if a person were to send three wrappers of chocolate bars, he should have purchased three bars of chocolate, and therefore, even if the wrappers themselves were not of any value to Nestle and Co., the purchase of three bars of chocolate which was evidenced by the three wrappers was certainly of value to Nestle and Co., while in the present case, the handing over of a copy of the agreement to the appellant herein was not of any value whatever because, it did not add a whit to his prior existing right or obligation and has not in any way altered his position in law with regard to his offer, the acceptance or rejection of his offer being exclusively at the discretion of the Commissioner of the Corporation. Therefore, I am clearly of the opinion that the undertaking on the part of a bidder as contained in Clause (2) of Exhibit B-2, to keep open the after till its acceptance or to make it irrevocable is not supported by consideration, as understood in the law of contract, and hence the appellant herein is not bound to keep his offer open till acceptance and was entitled to revoke the same before acceptance on the part of the Corporation. As I have held already that the appellant had revoked the offer before its acceptance, he cannot be mulcted with any damages on account of any short fall in the re-auction conducted by the Corporation. On the other hand, he is entitled to the refund of the bid deposit made by him.

19. Under these circumstances, the appeal is allowed, and the judgment and decree of the trial Court are set aside, and the suit instituted by the respondent Corporation will stand dismissed, and the appellant will be entitled to the refund of Rs. 1,000 with interest at 6 per cent per annum from 19th March, 1968 till date of payment. Having regard to the peculiar circumstances of the case, the parties will bear their respective costs here as well as in the trial Court.


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