Somasundaram Pillai vs The Provincial Government of Madras

The plaintiff is the appellant in this second appeal. He was a bidder at a public auction of some of the arrack shops held by the Sub-Collector of

Tindivanam. His was the highest bid in respect of two of the shops. But the bids were not accepted by the Sub-Collector, and the sale was

ordered to be continued with the plaintiff''s bids as the initial bids. No bidders came forward to bid even at the amounts offered by the plaintiff. The

shops had ultimately to be sold for lower bids, with the result that there was a loss to the Government of Rs. 1,148. The plaintiff asked for the

return of the amount he paid as advance and for an injunction restraining the Government from proceeding against him for the recovery of the loss.

His suit was dismissed by the District Munsiff and this dismissal was upheld by the District Judge of South Arcot. Hence this second appeal.

Three questions have been raised on his behalf. The first is that the notification under which the sales were held and the terms of which are fully

set out in the judgment of the learned District Judge, has no application at all, because it was not a case falling under Clause (i), Rule 9, under

which the Collector can postpone orders confirming or refusing to confirm the provisional acceptance of the bid, but a case where the appellant

was definitely and finally told that the auction sale in respect of the shops for which he bid, was not confirmed.

Attention is drawn to the terms of the notice, Ex. D-5 (a). There is not much substance in this contention, not only for the reason that it was not

taken in the courts below, nor even in the grounds of appeal, but also because it is easy to see from the terms of the notice read with the

Collector''s proceedings, Ex. D-4, that what was within the contemplation of the parties was not an absolute refusal to confirm but a non-

confirmation for the time being. If an order is made postponing confirmation, it means that for the time being there is no confirmation and this is

what was meant to be conveyed to the appellant. And this is obviously the reason why no such point was put forward until the ingenuity of Mr.

M.S. Venkatarama Aiyar, advocate for the appellant, discovered it.

The other two points raised on behalf of the appellant deserve more consideration. The sale notification, Ex. D-3 under which the auctions were

held, purports to be by the Board of Revenue. Whether this notification has, under the terms of Section 69 of the Madras Abkari Act, the force of

law and has to be read as part of the Act,--which is the view taken by the learned District Judge--will depend upon the further question whether

u/s 5 of the Act the Provincial Government has framed and published any rules prescribing the powers and duties under this Act to be exercised

and performed by abkari officers, which term includes the Board of Revenue u/s 3, Sub-clause (2), and conferring on the Board the power to

frame rules and issue notifications u/s 69. True, it may be presumed that all this was done; but, when challenged, the steps by which the notification

has acquired the force of law, have to be proved. Otherwise the notification would amount to nothing more than conditions of sale prescribed by a

person who is selling property by public auction.

The more serious question is whether, assuming in favour of the Government that the notification has the force of law by reason of Section 69 of

the Act, it is not a piece of legislation by a Provincial Legislature which is repugnant to the Indian Contract Act, in so far as it provides that the bid

shall not be retracted by the offeror but is to be treated as continuing even after the second sale is commenced. u/s 5 of the Contract Act, an offer

in the nature of a bid at a public auction can be revoked any time before acceptance; and it has been held in Joravarmull Champalal Vs.

Jeygopaldas Ghanshandas by his agent Mugduth and Others, that any condition denying this right of revocation is illegal. A continuing offer does

not mean an offer which must be kept open till acceptance; it means it can be accepted at any time, provided it is not revoked. The trouble is not

surmounted merely by pointing to the fact that as abkari falls within List No. II (items 31 and 40) (Provincial Legislative List) contracts are included

in List No. III (Concurrent Legislative List) effect must be given to the notification. The question of repugnancy is different from the question of

competency and is to be judge 1 by the provisions of Section 107 of the Government of India Act, as indicated by the Federal Court in Megh Raj

v. Allah Rakhia ILR (1942) Lah. 623 : 1942 F.L.J. 95 : (1942) 2 M.L.J. 797 (F.C.).

It will thus be seen that the points raised are sufficiently important to be considered by a Bench of two Judges; and the papers in this second

appeal will be placed before the Chief Justice for necessary orders.

This second appeal accordingly coming on for hearing before the Bench (the Hon''ble the Chief Justice and Lakshmana Rao, J.), the Judgment

of the Court was delivered by

Alfred Henry Lionel Leach, C.J.

This appeal raises a question of considerable importance with regard to the conditions prescribed by the Board of Revenue for the conduct of

auctions of liquor shop licences.

On the 4th February, 1942, the Sub-Collector of Tindivariam put up for sale by public auction the licences to be issued in respect of certain

arrack shops. The conditions of sale were in accordance with the conditions approved by the Board of Revenue for such sales. The auction was

held by the Sub-Collector, but he had no power to accept a bid. He could signify provisional acceptance, but actual acceptance rested with the

Collector himself. Clause IX(a) of the conditions provided that the order of the Collector confirming a bid provisionally accepted by the selling

officer should be final, unless revised by the Board of Revenue for special reasons. Clause IX(b) was to the effect that if the Collector considered

the bid to be inadequate he might postpone passing orders confirming or refusing to confirm the provisional acceptance and might direct that the

sale should be continued from the point at which it was left. Clause IX(c) stated that a sale ordered to be continued under Clause IX(b) should

begin with the bid provisionally accepted by the selling officer at the original sale and in the name of the individual who offered it. If at the

subsequent sale a higher bid should be made and provisionally accepted by the selling officer the bid previously provisionally accepted should

lapse, but if no higher bid should be accepted the matter should be reported by the selling officer to the Collector, who might pass orders

confirming the bid provisionally accepted at the original sale or might again direct that the sale be continued from the point at which it was left at the

original sale. Clause IX(e) stipulated that no bid which had been provisionally accepted by the selling officer should be withdrawn before it lapsed

under Clause IX(c) or before orders were passed confirming or refusing to confirm it, and provided that if the bidder committed a breach of this

condition he should be liable to make good any loss suffered by the Government.

The appellant was the highest bidder for four shops and his bids were provisionally accepted by the Sub-Collector, but the Collector accepted

only two of them. He refused to confirm the bids made by the appellant for the other two licences which were in respect of shops numbered 30

and 32 respectively. Here he directed that the sales should be ""continued"" under Clause IX(b) of the conditions of sale. On the 17th February,

1942, the Tahsildar wrote to the appellant informing him that his bids for shops Nos. 30 and 32 had not been accepted and that the Collector had

ordered that the auction sale should be continued from the bids already made by him at noon on the 20th February, 1942, at the Taluk Office,

Villupuram. On the day fixed for the further auction, the appellant presented a petition to the Tahsildar in which he stated that he did not require

shops Nos. 30 and 32 and asked that the amount of his deposit should be returned to him. The petition was rejected forthwith. On the 22nd

February, 1942, the appellant wrote through his pleader pointing out that his bids had not been accepted by the Government, and contending that

therefore he was entitled to withdraw them. On the 26th February, 1942, the Collector passed an order drawing the attention of the appellant''s

pleader to Clauses IX(t) and IX(e) of the conditions of sale. By an order dated 27th March, 1942, the Collector accepted the bids made by the

appellant on the 4th February, 1942, in respect of shops Nos. 30 and 32, but the appellant refused to take out the licences and consequently the

Collector was compelled to direct a fresh sale to be held. This resulted in a loss to the Government of Rs. 1,148.

On the 15th February, 1943, the appellant filed in the Court of the District Munsiff of Villupuram the suit which has given rise to the appeal. He

asked for a decree against the Provincial Government for Rs. 105 (the amount of his deposit) and for an injunction restraining the Provincial

Government from taking action to recover from him the Rs. 1,148. The District Munsiff dismissed the suit on the ground that the conditions of sale

had the force of law, their publication amounting to a notification u/s 69 of the Madras Abkari Act, 1886. His finding was accepted by the District

Judge of South Arcct on appeal. The appellant then appealed to this Court. The appeal came before Chandrasekhara Aiyar, J., on the 29th

October, 1946. The learned Judge referred it to a Bench for decision as he considered that it raised three questions, namely: (1) Whether the case

fell within clause IX(b) of the conditions of sale; (2) whether the publication of the conditions of sale constituted a notification u/s 69 of the Act; and

(3) if so, whether the notification was ultra vires the Provincial Government because the conditions of sale conflicted with the provisions of the

Indian Contract Act, a statute passed by the Central Legislature.

The learned Advocate-General has very properly conceded that the publication of the conditions of sale did not amount to a notification u/s 69

of the Madras Abkari Act. The conditions of sale had been settled by the Board of Revenue, but not under any particular provision of the Act.

They were merely rules drawn up by the Board for the conduct of sales of liquor shop licences and had no statutory force. This being the position

the District Munsiff and the District Judge erred in holding that the conditions of sale had the force of law and the questions formulated by

Chandrasekhara Aiyar, J., do not call for decision. The question which the Court has to decide is whether a bid made at such an auction and

provisionally accepted can be enforced, notwithstanding that the maker withdraws it before acceptance by the Collector. In deciding the question

the Court can only have regard to the law of contract.

It was held by a Division Bench of this Court (Coutts-Trotter and Ramesam, JJ.) in Joravarmull Champalal Vs. Jeygopaldas Ghanshandas by

his agent Mugduth and Others, that a bid at a Court auction sale is merely an offer which can be withdrawn at any time before it is accepted and

the lot knocked down to the bidder. The present case does not fall within the four corners of the judgment in that case because the conditions of

sale were different. There was no prohibition against the withdrawal of a bid pending its acceptance. Two of the cases considered by Coutts-

Trotter and Ramesam. JJ., are, however, of importance here. They are Payne v. Cave (1789) 3 Term Rep 148 : 100 E.R. 502 and Cooke v.

Oxley (1790) 3 Term Rep. 653 : 100 E.R. 785. In the former case it was said:

The auctioneer is the agent of the vendor, and the assent of both parties is necessary to make the contract binding; that is signified on the part of

the seller by knocking down the hammer, which was not done here till the defendant had retracted. An auction is not unaptly called locus

poenitentiae. Every bidding is nothing more than an offer on one side, which is not binding on either side till it is assented to. But according to what

is now contended for, one party would be bound by the offer, and the other not, which can never be allowed.

Cooke v. Oxley (1790) 3 Term Rep. 653 : 100 E.R. 785 is even more in point. There a tobacco merchant offered to sell a quantity of tobacco to

the plaintiff at a certain price. The plaintiff asked the tobacco merchant for time in which to decide whether he should buy the goods or not. The

time for consideration was granted; but before it expired the tobacco merchant sold the, goods to a third party. The plaintiff claimed to be entitled

to damages. It was held that the action did not lie. Lord Kenyon said that nothing could be clearer than that at the time of entering into the contract

the engagement was all on one side. The other party was not bound and therefore it was a nudum pactum. In other words no consideration ha

passed to bind the seller by his promise to give time and consequently he was entitled to ignore it.

To have an enforceable contract there must be an offer and unconditional acceptance. A person who makes an offer has the right of

withdrawing it before acceptance, in the absence of a condition to the contrary supported by consideration. Does the fact that there has been a

provisional acceptance make any difference ? We can see no reason why it should. A provisional acceptance cannot in itself make a binding

contract. There must be a definite acceptance or the fulfilment of the condition on which a provisional acceptance is based. Our attention has been

drawn to an observation made by Muttuswami Aiyar, J., in Agra Bank v. Hamlin ILR (1890) Mad. 235 where it was also held that it was

competent for a bidder at a Court auction to withdraw his bid. In the course of his judgment, Muttuswami Ayyar, J., said:

It appears that, in the case under reference it was not one of the conditions of sale that bidders were not at liberty to withdraw their bids.

We do not regard this statement as a definite acceptance of the proposition that where there is such a condition a bid cannot be withdrawn. If

Muttuswami Ayyar, J., intended so to hold, we can only express our dissent.

The learne Advocate-General has suagested that the decision of this Court in Chitibobu Adenna v. Garimalla Jaggaraydu (1913) 28 M.L.J.

617 recognises that there can be in law a conditional acceptance which will constitute a contra t. We have already indicated that where there is a

conditional acceptance and the condition is subsequently fulfille. there is a contract and that was all that was said in that case. Certain occupancy

rights in jeroyiti lands had been put for sale by public auction by the amin of the Maharaja of Vizianagaram. The amin accepted a bid subject to the

approval of the special agent. The special agent gave his approval whereupon the sale became irrevocable.

In the present case there was a provisional acceptance by the Sub-Collector of the appellant''s bids, but the Collector refused to confirm the

acceptance and directed the sale to continue. He changed his mind at a later stage and accepted the bids, but before this happened, the appellant

had withdrawn them, which he was entitled to do in law as there was no consideration to support his implied acceptance of the condition that once

a bid had been made it could not be withdrawn. If the conditions of sale had statutory force, he position would of course be different but they had

not statutory for e. They were merely conditions which the Board of Revenue had directe should be imposed in respect of auction of liquor shop

licences. We are firmly of the opinion that he appellant was entitled to withdraw his bids because the prohibition against withdrawal had not the

force of law and there was no consideration to bind him down to the condition.

For these reasons, we allow the appeal and decree the suit with costs throughout.