S. Muthiah Thevar vs State of Madras

Ramaprasada Rao, J.—The plaintiff in O.S. No. 253 of 1966 on the file of the Court of the Subordinate Judge of Madurai, is the appellant.

He filed a suit for the recovery of the sum of Rs. 8440/- consisting of Rs. 8000/- towards principal and Rs. 440/- being interest at 12 per cent per

annum for 5� months from 27th May 1966 till date of plaint, and in addition for damages said to have been suffered by him end estimated by

him at Rs. 2,000/-. The plaintiff is a Forest Contractor carrying on business at Rajapalayam, Ramanathapuram District. Under Ex. B-1 an auction

for lease of quarrying rights in Parayanmalai quarry of Madurai Taluk, Thirupparankundram Village, for a period of five years from 1st July 1966

to 30th June 1971 was proposed to be held on 26th May 1966. The Tahsildar, Madurai Taluk, conducted the said auction on behalf of the

defendant who is the State of Madras represented by the District Collector, Madurai. Admittedly, the plaintiff was the highest bidder, his offer

being Rs. 79,750/-. It is common ground that under the terms as notified in Ex. B-1, the highest bid provisionally accepted by the Tahsildar would

be subject to the approval by the Collector. It is also not in dispute that under the terms of the auction notice the plaintiff was to pay 1/10th of the

bid amount towards security deposit, which obviously means a deposit for the due performance of the contract. The plaintiff did deposit the said

amount as required on 27th May 1966 as is seen from Ex. A-1 . According to the plaintiff he was expecting the delivery of the quarry site by 1st

July 1966 and contemporaneously anticipated that this highest bid would be accepted by then. It is seen from the record that petitions were

received under Exs. B-3 and B-5 from third parties stating that they were prepared to pay a higher offer towards the lease and wanted the

Collector as the ultimate authority to reconsider the matter and issue necessary orders for a re-auction, if necessary. Consequent upon the receipt

of such petitions from third parties, there was delay in the disposal of the subject by the Collector. The plaintiff reminded the Collector of the

District through the Tahsildar and other Officers of the urgency in the matter and felt that as there was no satisfactory response, there was no

chance of his offer as evidence by his highest bid in the auction being accepted. He, therefore, under Ex. A-4 d . 19th July 1966 followed up by

Ex. A-6 d. 30th July 1966 revoked his offer and called upon the defendant to refund the security deposit of Rs. 8000. The Collector in the

meantime, rejected the petition filed by third parties, and under Ex. B-6, d. 27th July 1966 accepted the plaintiff''s highest bid. The plaintiff''s case

is that he did not receive said communication till 9th August 1966. As the plaintiff felt that the defendant was not inclined to accept his revocation

and refund his deposit, he has come to court claiming the aforesaid amounts, including in his claim a sum of Rs. 2,000 said to be his loss of profits

caused to him by the delay in considering his offer and by reason of the lease site not having been handed over to him on or before 1st July 1966.

He gave the requisite notice under S. 80 of the C.P.C. and filed the suit.

In the written statement the broad facts are admitted. It is claimed that the plaintiff had no right to revoke the contract, because no

communication was necessary informing the plaintiff of the acceptance of the contract. According to the defendant, the provisional acceptance by

the Tahsildar by itself is sufficient to conclude a contract. It is further alleged that time was not the essence of the contract and it was not

understood between the parties that the lease site would be handed over to the successful bidder in the auction before 1st July 1966. It is

submitted that there was some delay in the formal acceptance of the contract by the Collector since there were representations from third parties

that they were willing to pay a higher amount. This could not fructify since the third parties could not deposit the full amount as called for by the

Collector. Now that the District Collector confirmed the auction in favour of the plaintiff, the plaintiff had no right to revoke a concluded contract

and the so called letters of revocation are invalid and unenforceable .In that sense the suit was resisted and the claim of the plaintiff for refund of the

security deposit was sought to be negatived. In any event it was said that the plaintiff''s claim for damages in the sum of Rs. 2000 was utterly

misconceived.

The following issues were framed :--

Whether the Deputy Tahsildar has concluded the auction by accepting the highest bid of the plaintiff?

Whether the communication of the acceptance by the District Collector is necessary in the case of conditional acceptance by the sale officer,

and if so whether it must be prior to 1st July 19667

Whether the time is essence of the contract?

Whether the letter of the plaintiff dated 9th July 1966 is a letter of revocation?

Whether the contract was concluded prior to the letter of revocation dated 30th July 1966 sent by the plaintiff?

Whether the District Collector''s communication dated 27th July 1966 concluding the contract is not valid and binding on the plaintiff?

Whether the District Collector''s communication dated 27th July 1966 is a counter offer?

Whether the plaintiff has not committed any breach of contract?

Whether the plaintiff is entitled to recover Rs. 8000 from the defendant?

Whether the plaintiff is entitled to recover interest?

Whether the plaintiff is entitled to any damages?

To what relief, if any is the plaintiff entitled?

The trial court rightly concised the points which arose for consideration in the suit and as regards issues 1 to 7 it posed three questions for itself,

namely, whether there was a concluded contract between the plaintiff and the defendant, whether the plaintiff had a right to revoke the contract,

and whether time was the essence of the contract, and answered all the points against the plaintiff. On issues 8 to 11, it found that the plaintiff

committed a breach of contract and that he is not entitled to a refund of the security deposit. The plaintiff''s claim for damages was also negatived.

In the result the suit was dismissed with costs.

It is as against this the present appeal has been filed.

Learned Government Pleader had to accept that one of the essential conditions under Ex. B-1 which is the auction notice and which embodied

the conditions of auction was that the highest bid has to be accepted by the Collector and that the acceptance of the bid by the Tahsildar was only

provisional. It therefore follows that though on record, as is seen from Ex. A-1, the plaintiff paid a sum of Rs. 8000/- as security deposit for the

performance of a contract, yet it was at a time when his offer made in the auction was not finally accepted by the appropriate authority. In this

context it has to be seen whether the plaintiff did revoke his offer before the contract was accepted by the Collector of the District.

The first letter written by the plaintiff in this connection is Ex. A-2 dt . 30th June 1966.

X X X

[The discussion of facts is omitted.--Ed.]

It is in the context of the above events that the relevant question which arises for consideration in this case, namely, whether there was a

concluded contract between the plaintiff and the defendant and whether the plaintiff had a right to revoke such a contract, arises.

We may at once state that in such contracts time cannot be taken to be the essence of the contract and the trial court rightly found the issue

against the plaintiff.

We have already noticed the relevant conditions. The auction was held on 26th May, 1966. The plaintiff deposited the sum of Rs. 8000/- as

security under Ex. A-1 on 27th May 1966. The lease was to commence from 1st July 1966. The plaintiff reminded on 30th June 1966 under Ex.

A-2 about the urgency in the matter. This was acknowledged by the District Revenue Officer in Ex. A-3. The plaintiff did not hear anything further.

He wrote Ex. A-4 on 19th July 1966 seeking for refund of the deposit. Though, no doubt, he did not expressly state that he was revoking his bid,

yet the reasonable inference that follows from the specified attitude of the plaintiff in calling back the security deposit is that the plaintiff''s primary

intention was to revoke the offer and as a consequence he was seeking for refund of the security deposit. Ex. A-4 was acknowledged by the

department under Ex. A-5 dated 21st July 1966. The plaintiff again did not hear in the matter. So he wrote Ex. A-6 dated 30th July 1966

specifically revoking his offer and sought refund of his security deposit. This was acknowledged by the Collector of the district under Ex. A-7, by

the District Revenue Officer of the district under Ex. A-8, and by the Tahsildar who conducted the auction under Ex. A-9. But it is the case of the

defendant that the order of confirmation made by the Collector under Ex. B-6 was communicated in time by the Tahsildar Ex. A-10. We have

already referred to the fact that the Collector, when he passed his orders confirming the plaintiff''s bid under Ex. B-6, did not communicate directly

to the plaintiff, but issued directions to send a copy of his order to the plaintiff through the Tahsildar, Madurai, The Tahsildar, Madurai, takes action

under Ex. A-10 dated 30th July 1966. When he was in the witness box he was not able to say as to when Ex. A-10 was despatched from his

office to the plaintiff. In matters like this, when the State is a litigant, it is imperative on the part of the officers concerned to bring to light essential

and relevant facts which have an impact on the points arising for determination in such a litigation. When the point in issue is whether the plaintiff

revoked his offer prior to the communication of the acceptance of the offer, it is necessary that the defendant should have bestowed more attention

to that aspect of the case and proved by producing the despatch register or the appeal book from the office of the Tahsildar as to when the

communication of acceptance was Bent to the plaintiff. On the other hand, D.W. 1 would say that he has no such records to show when the letter

of communication was despatched. The plaintiff at the earliest point of time in Ex. A-11 dated 12th August 1966, which is in reply to the order of

confirmation made by the Collector, said that he received the said order as also the communication from the Tahsildar only on 9th August 1966.

This is reiterated by him in the witness box. We do not find any justification to reject the testimony of P.W.1 on this aspect. If, therefore, the

plaintiff received a letter from the concerned authorities only on 9th August 1966 where under he was informed that his offer was accepted, the

question is whether prior to that date the plaintiff revoked his offer.

The first attempt at revocation made by the plaintiff was on 19th July 1966 and the second explicit and specific one was on 30th July 1966

under Ex. A-6. Even assuming that Ex. A-4 is not so clear and unambiguous, Ex. A-6 is Ex. A-6 was received by the Department on 2nd August

1966 is admitted by D.W.1 when he was in the witness box. We have already seen that even though the Collector accepted in his proceedings the

offer on 27th July 1966, it was not communicated to the plaintiff till 9th August 1966. The question therefore is whether the revocation of the offer

made by the plaintiff under Ex. A-6 is in order.

We have already referred to the undisputed fact that the offer of the plaintiff subject to acceptance by the District Collector. The trial court was

apparently guided by the principle laid down by Satyanarayana Rao, J. in Rajanagaram Village Cooperative Society v. P. Veerasami Mudaliar

1950-2 M.L.J. 486; 63 L.W. 965. It noticed, however, that this decision was not approved by the Andhra Pradesh High Court and the Patna

High Court. But being bound by a decision of our Court it held that the conditional acceptance by the Tahsildar had the effect of binding the highest

bidder to the contract if finally there is an approval or confirmation by the superior person indicated in terms of sale and the plaintiff had no right to

withdraw the offer. In a decision of this court in State of Madras v. Ranganatham Chettiar A.S. No. 772 of 1968 to which one of us was a party,

we considered the scope of the Judgment of Satyanarayana Rao, J., and observed as follows:--

The general principle enunciated in the above case by Satyanarayana Rao, J. who dealt with ordinary auctions, is not of universal application when

the parties bid at an auction which is subject to certain specified conditions.

If therefore, there was a further condition in the contract, which is not denied in the instant case, that the offer was subject to acceptance by the

District Collector, then the rule in The Rajanagaram Village Co-operative Society Vs. P. Veerasami Mudaly, is not applicable to the facts of this

case.

We fall back, therefore, on first principles. Under S. 4 of the Indian Contract Act, the communication of a proposal is complete when it comes

to the knowledge of the person to whom it is made, and 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; and such communication of acceptance is complete as against the

acceptance when it comes to the knowledge of the proposer. In the instant case there is no evidence to show as to when the communication of an

acceptance was put in a course of transmission to the proposer. D.W. 1 does not produce any record to show as to when he posted Ex. A-10

under which he communicated the acceptance of the offer by the Collector. In these circumstances the communication of an acceptance is not

complete. Under S. 4 again , 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. And under S. 6(1) a proposal is revoked

by the communication of notice of revocation by the proposer to the other party.

It is clear in the instant case that the plaintiff as the proposer has definitely put into the course of transmission on 30th July, 1966 under Ex. A-6

a communication of his specific and avowed intention to revoke the offer and made it out of his power to call it back. Therefore, the revocation in

the instant case has become complete in the eye of law under Ex. A-6. This was received by the concerned officers on 2nd August, 1966 as is

admitted by D.W.1. The plaintiff''s case is that he received Ex. A-10, under which the acceptance of the offer was intimated, only on 9th August,

1966. It is therefore clear that long before the acceptance was made known to the plaintiff, he has revoked his offer. As we said, the contract was

not a concluded contract. It could only become a concluded contract on the date when the Collector communicates his acceptance in a manner

known to law. There being no evidence that such communication was sent by post on a specific date, it should be presumed that it was served OH

the plaintiff only on 9th August, 1966. Long before the said date the plaintiff has revoked his offer and that revocation is possible and plausible in

the instant case, because the contract is not concluded until there is an acceptance of the offer in a manner known to law. There was no such

acceptance in accordance with the provisions in S. 4 of the Contract Act. Based on the fundamental principles contained in Ss. 4 and 6 of the

Contract Act, we are of the view that the offer of the plaintiff has not been accepted before it was revoked. The plaintiff, therefore, would be

entitled to a refund of the security deposit which was intended as a deposit for the due performance of the contract. There being no contract at all,

the plaintiff, both in law and in equity, would be entitled to such a refund. We have already expressed the view that the plaintiff is not entitled to any

loss of profits as claimed by him. In the result, therefore, we allow the appeal in part and decree the suit for recovery of the sum of Rs. 8000/- for

principal and Interest at the rate of 6 per cent per annum from the date of deposit to the date of plaint and thereafter with proportionate costs.