MANU/OR/0007/1978

Equivalent/Neutral Citation: AIR1978Ori41

IN THE HIGH COURT OF ORISSA

Original Jurisdiction Case No. 943 of 1975
Decided On: 07.07.1977
Sri Durga Saw Mill Vs. State of Orissa and Ors.
Hon'ble Judges/Coram:
Ranganath Misra and Naba Kumar Das, JJ.
Counsels:
For Appellant/Petitioner/Plaintiff: R. Mohanty, S.P. Mohapatra, S. Das and S. Mohanty,
Advs.
For Respondents/Defendant: Govt. Adv.
Case Note:
Contract - Rectification - Quashing of - Articles 19 and 226(1)(a) of
Constitution of India - Present application filed for quashing of rectification
order passed against petitioner - Held, there is no scope for entertaining
second opinion that as result of these letters, offer had not been withdrawn -
By date of acceptance, not only had offer been withdrawn but also writ
applications was pending adjudication and State Government had already had
notice of it through its counsel - There was nothing to be ratified or accepted
in order to give rise to valid contract - Court may add that even if time had
not been made essence of contract, at time auction sale took place, petitioner
by notice had made position so and in spite of petitioner's notice, no
communication was sent until acceptance - There is force in submission of
counsel for petitioner that dispute relates to protection of property rights
covered by Article 19 of Constitution - Though there is no scope for
ratification of offer and spell out contract, attempt has been made to do so
taking advantage of fact that opposite parties exercise mighty powers of State
and by adopting stand that contract has come into existence, opposite parties
are likely to forfeit security deposit and deal with petitioner adversely -
Matter is covered by first clause Article 226(1)(a) of Constitution and,
therefore, Sub-article (3) has no application - Existence of alternate remedy
does not arise for consideration - As already stated, there has been no factual
dispute relevant to determination of questions and, therefore, there is no
force in objection of Government Advocate to maintainability of writ
application - There was no offer in existence when ratification was made and,
therefore, order of ratification is without basis and has to be annulled -
Petitioner is entitled to refund of security deposit - Accordingly writ
application is allowed
JUDGMENT
Ranganath Misra, J.
1. A registered firm by the name and style of Sri Durga Saw Mill owns a saw-mill and
carries on the business of a forest contractor. In the Orissa Gazette of 6th of
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September, 1974, the opposite parties published a sale notice for the purpose of leasing
of certain forest coupes within the Baripada Division for the year 1974-75. On the 27th
of September, 1974, auctions were held; petitioner participated in the auctions and
came out as the highest bidder in respect of kuldiha Coupe No. II, Lot No. I in the
Divisional Lot No. 61 of 1974-75 for a sum of Rs. 1,80,000/-. Petitioner paid security
deposit of Rs. 18,000/-. The bid money being more than rupees one lakh, ratification
had to be made by the State Government in the appropriate Department.
As per the sale notice, the contract period for the Divisional Lot was eleven working
months and was terminable on the last day of the last working month. According to the
petitioner, ratification usually takes a period of about three weeks to a month and
petitioner expected that the contract would be finalised by ratification by the competent
authority by end of October, 1974, at the latest, so that the coupe could be worked out
without delay as by then the rainy season would be over. As no confirmation came until
the end of December, 1974. petitioner along with some other contractors applied to the
Divisional Forest Officer who had held the auction to refund the security deposit and
treat the offer as withdrawn. As no steps were taken on the application on 15th of
February, 1975. petitioner along with some others applied to the State Government to
the same effect and forwarded a copy thereof to the Divisional Forest Officer. When no
action was taken on the several representations, petitioner filed this application on 12th
of March 1975, asking for a direction of refund of the security deposit and for an order
prohibiting the opposite parties from proceeding to accept the offer. On 7th of April,
1975, the counsel on behalf of the opposite parties wanted time to obtain instructions.
On the 21st of April, 1975, the matter was again adjourned at the instance of the
opposite parties. On 23-4-1975, in presence of counsel for both parties, the Court
issued a rule nisi. Notices were actually issued in the second week of May, 1975.
The Divisional Forest Officer, Baripada Division, by letter dated 17th of June, 1975
(Annexure-2) informed the petitioner that Government had accepted the petitioner's
highest bid and communicated that the period of contract would be from 17th June,
1975 till 30th of November, 1976 and the bid money would be payable in four
instalments as indicated in that letter. Petitioner amended the writ application and asked
for quashing of the order of ratification.
2. On behalf of the opposite parties, a common counter affidavit has been filed by the
Deputy Secretary to Government in the appropriate Department. None of the material
facts pleaded by the petitioner has been disputed. In paragraph 11, it has been stated
that there have been several instances where four to six months of time for ratification
has been taken. Petitioner's allegation that the delay was on account of continued
negotiations with the Orissa Forest Corporation has been denied and it has been stated
that Government were considering the liability of paving sales-tax on the contracts and
taking a final decision with reference to sales-tax liability, took time.
3. On the pleadings, the following questions arise for determination :--
(1) In view of Clause 1 of the General Conditions of Sale in Part-III of the Sale
Notification, was it open to the petitioner to rescind the contract between the
date of bidding and the date of approval of the competent authority
(2) Was it open to the petitioner to withdraw the offer and is the acceptance of
the offer as communicated under Annexure-2 invalid?
(3) Whether the dispute raised in this matter can be appropriately adjudicated
in a proceeding under the extraordinary jurisdiction?
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4. We may deal with the first two questions together. As already noted, the highest bid
offered by the petitioner was Rs. 1,80,000/-. Under the administrative instructions, the
ratifying authority for bids above rupees one lakh is the State Government. Though the
auction sale took place on 27th Sept., 1974 and petitioner furnished security of ten per
cent amounting to Rs. 18,000/- that day, the bid was not concluded by acceptance and
no contract came into existence. It has been the stand of the petitioner that as long as
the offer had not been accepted, petitioner was entitled to withdraw the offer. Reliance
is placed on the provisions of Section 5 of the Contract Act and several authorities in
support of petitioner's stand that its offer was open to revocation on the dates it
demanded the refund of the security deposit. Section 5 of the Contract Act provides :--
"A proposal may be revoked at any time before the communication of its
acceptance is complete as against the proposer, but not afterwards." The
statutory illustration runs thus:
"A proposes by a letter sent by post, to sell his house to B. B accepts
the proposal by a letter sent by post. A may revoke his proposal at any
time before or at the moment when B posts his letter of acceptance, but
not afterwards."
The price offered at the auction was nothing more than an offer and until the competent
authority ratified the offer by acceptance, under the statutory provision quoted above,
petitioner was entitled to withdraw the offer. Such a question arose before the Bench of
the Madras High Court in the case of Somesundaram Pillai v. Provincial Govt. of Madras
MANU/TN/0172/1946 : AIR 1947 Mad 366. Chief Justice Leach spoke for the Court in
the following manner (at p. 367):
"To have an enforceable contract there must be an offer and an 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....."
Such a question also arose for consideration before the Andhra Pradesh High Court in
the case of Raghunandhan Reddy v. State of Hyderabad MANU/AP/0087/1963, in
connection with an auction sale under the Hyderabad Abkari Act. Jaganmohan Reddy. J.
as the learned Judge then was, spoke for the court thus (at p. 112):
"It is a well-established principle of law that only when an offer is accepted that
the contract is concluded and binds the parties. It is equally well settled that
before an offer is accepted, the offerer can withdraw his offer, but if the
acceptance is conditional or is not final, then there is no concluded contract.
Section 5 of the Indian Contract Act states that a proposal may be revoked at
any time before the communication of its acceptance is complete as against the
proposer, but not afterwards. Similarly, an acceptance may be revoked at any
time before the communication of the acceptance is complete as against the
acceptor, but not afterwards."
Natesan, J. in the case of Municipal Council, Karur v. V. Pasupathi Mathuraja ILR (1969)
1 Mad 124, was dealing with an auction held by a Municipal Council. The learned Judge
observed:

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 ".....It is a well-established rule that at an auction, the auctioneer calling for
bids is not an offer, which is accepted by the highest bidder. It is the bid that
constitutes an offer and the auctioneer may accept or reject the bid. Before its
acceptance, the bidder has the liberty of revoking his offer. ....."
A similar dispute arose before the Punjab High Court in an excise settlement. - Kapur,
J., as the learned Judge then was, in the case of Union of India v. Narain Singh
MANU/PH/0121/1953 stated:
"..... The offer was therefore revocable till the final acceptance of the bid and as
there was no final acceptance of the bid the plaintiff could withdraw his
offer....."
In the case of Union of India v. M/s. Bhimsen Walaiti Ram. MANU/SC/0087/1969,a
similar dispute under the Excise Law came for consideration. The Court observed (at p.
2297):
".....But the sale is deemed to have been made in favour o f the highest bidder
only on the completion of the formalities before the conclusion of the sale.
Clause 16 of Rule 5.34 states that 'all sales are open to revision by the Chief
Commissioner. Under Clause 18. the Collector has to make a report to the Chief
Commissioner where in his discretion he is accepting a lower bid. Clause 33 of
the conditions, Ex. D-28, states that 'all final bids will be made subject to the
confirmation by the Chief Commissioner who may reject any bid without
assigning any reasons.' It is, therefore, clear that the contract of sale was not
complete till the bi d w as confirmed by the Chief Commissioner and till such
confirmation the person whose bid has been provisionally accepted is entitled
to withdraw his bid. When the bid is so withdrawn before the confirmation of
the Chief Commissioner the bidder will not be liable for damages on account of
any breach of contract or for the shortfall on the resale. An acceptance of an
offer may be either absolute or conditional. If the acceptance is conditional the
offer can be withdrawn at any moment until absolute acceptance has taken
place. This view is borne out by the decision of the court of appeal in Hussey v.
Bor-nepayne (1878) 8 Ch D 670 "
The ratio of the decision in the case of Haridwar Singh v. B e g u n Sumbrui.
MANU/SC/0017/1972 also supports the same view.
L earned Government Advocate, however seeks to rely upon the special condition
incorporated in Clause 1 of Part III of the Sale Notification under the heading "General
Condition of sale" which ran thus :--".....No bidder shall be eligible to rescind the
contract between the date of bidding and the date of approval of the competent
authority." Relying on this clause, counsel contends that there was a special contract
and every person who participated in the bid was bound to abide by the said
stipulation. As such, the petitioner was not eligible to resile from its offer until it had
been ratified. Reference to this clause had been made in the counter affidavit and the
defence raised by the opposite parties is mainly based upon the presence of such a
stipulation. Counsel for petitioner relies upon the case of Somasundaram Pillai
MANU/TN/0172/1946 : AIR 1947 Mad 366, already referred to. Clause ix (e) of the sale
notice 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. Dealing with the defence based upon such a clause.
Chief Justice Leach observed:

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 "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, the position would of
course be different but they had not statutory force. They were merely
conditions which the Board of Revenue had directed should be imposed in
respect of auctions of liquor shop licences. We are firmly of the opinion that the
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. ....."
This decision has in terms been approved by the Supreme Court in the case of Haridwar
Singh v. Bagun Sumbrui (supra). Natesan, J. in the Municipal Council case ILR (1969) 1
Mad 124 also referred to this aspect by saying :
".....It may also b e stated that quite often in conditions of auction sale, a
proviso is found that bidding shall not be retracted. The term as such would be
inoperative in law there being no consideration for assenting not to retract from
the bid. To imply such a term is to postulate that there is a contract to enter
into a contract. That there may b e an obligation not to retract it must be
supported by consideration o r there must be some statutory provision having
the force o f l aw providing against the withdrawal of the bid-Section 5 of the
Indian Contract Act entitles the maker of a proposal to revoke the proposal at
any time before the communication of its acceptance is complete as against
hi m. It is based on the principle found in Section 25 of the Act that an
agreement made without consideration is void. ....."
The same learned Judge in the case of T. Linga Gowder v. State of Madras AIR 1971
Mad 28 stated:
"In the present case, when the District Forest Officer had taken time to consider
whether he should confirm the plaintiff's highest bid, no consideration passed
for the contract. Nor did the conditions in th e sale notice, by the plaintiff
signing the same, bring about a precedent eon-tract between the parties. In
fact, there are no such conditions in the terms of the sale notice. Even if there
was such a one, it would be invalid as having no legal force, as pointed out in
MANU/TN/0172/1946. The position may be different, if, as noticed in Secy, of
State v. Bhasker Krishnaji MANU/MH/0090/1925, there is a statutory rule
having force of l a w precluding withdrawal of bid before its acceptance or
refusal is communicated to the bidder. ....."
A Division Bench of the Patna High Court in the case of Abdul Rahim Khan v. Union of
India MANU/BH/0118/1968, has stated:
"It is well settled that a person, who bids at an auction, thereby does not
conclude a contract, but merely states an offer and like all other offers it is
subject to the ordinary incidents of law, namely, that until it is accepted, it is
open to the offerer to withdraw it; the time for withdrawal can, however, be
always determined by a separate and binding contract for consideration. ....."
The opposite parties who rely upon the clause in the sale notice putting an embargo on
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withdrawal of the bid have neither pleaded nor advanced any contention to justify that
there was consideration for the contract against withdrawal. An agreement without
consideration is void as provided under Section 25 of the Contract Act.
There is admittedly no contract until by approval of the competent authority acceptance
is complete. Therefore, counsel for petitioner has rightly contended that the clause in
question was a meaningless one and the position would not be changed by the presence
of such a clause. Reliance is placed on the observations in 'Halsbury's Laws of England',
Vol. IX (4th Edition) page 150. Reliance is also placed on the decision of the Court of
Appeal in the case of Nicolene Ltd. v. Simmonds (1953) 1 All ER 822 at page 825. We
are, therefore, inclined to agree with learned counsel for the petitioner that the presence
of this clause gives no footing for the defence.
On 2-1-1975, petitioner along with some others wrote to the Secretary of the Forest
Department thus:
"We the applicants named below are Forest Contractors and Timber Merchants
in the district of Balasore and Mayurbhanj. In the auction held on 20-9-74 at
Baripada and 27-9-74 at Nilgiri, District Balasore, we purchased the forests
scheduled below against each of our names in the highest bid.
Each one of us has also paid heavy amounts of security deposit as directed by
the D. F. O., Baripada Division.
Although a period of three months has passed the Ratification Order from the
Government has not yet been issued to the D. F. O., Baripada. Consequently we
are unable to work in the forests for extracting timbers.
In view of the delay already caused we shall suffer heavy loss in executing the
contract (auction). Usually there can be no reason for such inordinate delay in
merely giving Ratification Order. We businessmen, cannot also indefinitely wait
anticipating a ratification order from the Government. All our employees and
labourers, trucks are remaining idle due to non-execution of the forest work.
Our Saw Mills are almost closed down. Any further delay will put us to
irreparable loss. The money kept as security deposit could have been better
utilised either to earn more interest or being invested in some other business.
In view of the delay it will also not be possible to complete the work in the
forest before the coming rainy season.
In view of the aforesaid circumstances, if the ratification orders are not received
within one week from the date of receipt of this letter, this ' may be treated as
our notice to withdraw ourselves as auction-purchasers of the lots. We further
beg to state that in case ratification orders are not issued as stated above, the
Government may be pleased to cancel the auction and put the forests for a
fresh auction.
We also beg to state that the security deposits paid by us may kindly be
refunded without any further delay and without causing further hardship and
financial loss to the petitioners and for which act of your kindness, they shall
ever pray.

Schedule of Forests
1. Sri Junil Jena Divisional 55
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 1. Sri Junil Jena Divisional 55
Lot No.
2. Sri A. K. Dutta -do- 56
3. Shree Durga -do- 61
Saw Mill
4 Ananta Gopal -do- 63
Karata Kala
5. N. C. Society. -do- 64

It may not be out of place to mention here that in the month of January hardly
the contractors can work in the forest for about a fortnight since all the
labourers would go away to their native places in connection with Makar
Sankranti festival. From the month of May usually monsoon sets in and
therefore the trucks will not ply in the forests. Therefore there will be hardly
four months now available to us to complete the work which is most inadequate
to complete the same.
We hope that the Government will be pleased to consider our case
sympathetically.''
This letter was followed by another dated 15-2-1975, wherein petitioner along with
some others had written to the Secretary to Government to the following effect :--
"We beg to state that we are forest contractors and timber merchants and every
year we purchase forests in auction from the Government which are sold by the
D. F.O., Baripada, District Mayurbhanj and D. F. O., Karangia, District
Mayurbhanj. In the auction held on 20-9-74 at Baripada and Niligiri (District
Balasore) respectively we purchased some forests individually in auction as per
schedule given below.
Since no work order was received till the month of January we sent a registered
letter to you on 2-1-75 requesting to cancel the auction for the reasons stated
therein.
Again we separately sent another registered letter requesting for cancellation of
the auction and for directing the D. F. O. to refund the security deposit.
That hardly two months are left for executing the work after which the rains will
start in the month of May and it will never be possible on our part to ply the
vehicles into the forest and extract the timbers.
That already five months have lapsed from the date of auction and the security
deposit paid by us is unnecessarily lying idle with the D. F. O. All our saw mills
are closed and we are suffering huge loss every day by maintaining the staff
without any work. Although tax has been paid for the trucks we are unable to
utilise the same for our business.
That we are small businessmen and it will be great hardship to us if the security
deposit is not returned to us immediately,
We, therefore, earnestly request that the D.F.O., Baripada, District Mayurbhanj
may kindly be directed to refund the security deposit as de tailed in schedule

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 below and for which act of your kindness we shall ever remain grateful. "
Receipt of these letters is clearly admitted in the counter affidavit. There is no scope for
entertaining a second opinion that as a result of these letters, the offer had not been
withdrawn. By the date of acceptance, not only had the offer been withdrawn but also
the writ applications was pending adjudication and the State Government had already
had notice of it through its counsel. While the matter was before the Court and the
counsel for the opposite parties had already taken several adjournments and the
question for consideration was as to whether the opposite parties may be restrained
from accepting the non-existing offer, it was indeed improper on the part of the State to
have proceeded to accord ratification. At any rate, the offer having been withdrawn,
there was nothing to be ratified or accepted in order to give rise to a valid contract. We
may add that even if time had not been made the essence of the contract, at the time
the auction sale took place, petitioner by notice dated 2-1-1975 had made the position
so and in spite of petitioner's notice, no communication was sent until the acceptance
more than four months thereafter. The ratio indicated in the case of Tandra Venkata
Subrahmanayam v. Vegesana Viswanadharaja MANU/AP/0098/1968 supports the view
that by notice time can he made the essence of a contract in formation. Thus, in spite of
notice, the opposite parties having sat tight over the offer, petitioner was entitled to
withdraw the offer.
5 . We may now advert to the last question. Learned Government Advocate has
contended relying on the decision of the Supreme Court in the case of Har Shankar v.
Deputy Excise and Taxation Commr. MANU/SC/0321/1975 that a writ petition is not an
appropriate remedy for deciding disputes arising under contracts. He has also further
contended that in several of the cases to which we have referred and on which reliance
has been placed by us, the question arose in regular civil litigations. It has also been
contended by learned Government Advocate that the writ application is not maintainable
in view of the amended provisions of Article 226 of the Constitution as per the Forty
Second Amendment. We find no force in either of these objections. As already
indicated, the offer had been withdrawn and no contract could ever come into existence
by acceptance or ratification. There being no contract, the question of deciding upon
contractual obligation does not arise. On the other hand, there is force in the
submission of counsel for the petitioner that the dispute relates to protection of
property rights covered by Article 19 of the Constitution. Though there is no scope for
ratification of the offer and spell out a contract, attempt has been made to do so taking
advantage of the fact that the opposite parties exercise the mighty powers of the State
and by adopting the stand that a contract has come into existence, the opposite parties
are likely to forfeit the security deposit and deal with the petitioner adversely. We are of
title view that the matter is covered by the first clause Article 226(1)(a) of the
Constitution and, therefore, Sub-article (3) has no application. The existence of an
alternate remedy does not arise for consideration. As already stated, there has been no
factual dispute relevant to the determination of the questions and, therefore, there is no
force in the objection of learned Government Advocate to the maintainability of the writ
application.
6 . We, therefore, find that the writ application is maintainable: there was no offer in
existence when ratification was made and, therefore, the order of ratification is without
basis and has to be annulled: we also find that petitioner is entitled to refund of the
security deposit. Accordingly the writ application is allowed, the order under Annexure-
2 accepting the offer is quashed and the opposite parties are directed to refund to the
petitioner the security deposit of Rs. 18,000/- within a month from today. Petitioner
shall have its costs of the petition. Hearing fee is assessed at rupees one hundred.
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Naba Kumar Das, J.
7. I agree.
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