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PETITIONER: C. V. K. RAO

       Vs.

RESPONDENT: DENTU BHASKARA RAO

DATE OF JUDGMENT: 04/05/1964

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. GAJENDRAGADKAR, P.B. (CJ) GUPTA, K.C. DAS SHAH, J.C. DAYAL, RAGHUBAR

CITATION:  1965 AIR   93            1964 SCR  (8) 156

ACT: Representation  of the People Act (XLIII of 1951), s.  7(d)- Scope  of"In the course of trade or business",  Meaning  of- Mining leaseRight of Government to pre-emption of  minerals- If a contract for supply of goods by lessee.

HEADNOTE: The  respondent  obtained  a mining  lease  from  the  State Government.   Clause  21  of  the  lease  reserved  to   the Government  the  right  to prior purchase  of  the  minerals raised by the lessee.  While the lease was subsisting,  the, respondent  stood  for  election to  the  state  Legislative Assembly  and  was  elected.   The  appellant,  his  closest competitor, challenged the election by an election  petition on   the  ground,  inter  alia,  that  the  respondent   was disqualified  under  section 7(d) of the  Representation  of People  Act (XLIII of 1951), because he had a contract  with the Government for supply of goods. 153 HELD:the petition must be dismissed. The  disqualification  which  results from  the  section  is conditioned by three circumstances.  First, there must be  a subsisting  contract between the appropriate Government  and the  candidate.  Then the contract must be in the course  of the trade or business of the candidate and, finally it  must be  inter alia for the supply of goods to  such  Government. Held  in the case that as the mining lease  was  subsisting, the contract if any, was also subsisting.  Further that  the mining lease, if it was a contract, was in the course of the business  of  the respondent.  It was not necessary  that  a course  of business based upon other transactions must  have first existed before the offending contract could be said to be in the course of business.  The contract itself could  be the  start of the business.  Held therefore that the  mining lease was not a contract to supply goods to the  Government. There  was  only a right in the Government to  pre-empt  the minerals  and  lessee  could  not  begin  delivery  to   the Government  until Government served a notice on him  stating the quantity preempted and the time within which the  supply

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should  be made.  This was only a reservation of a right  of pre-emption  which  did  not amount to a  contract  for  the supply  of goods which could be said to subsist between  the parties.

JUDGMENT: CIVIL  APPELLATE  JURISDICTION: Civil Appeal  -No.  1072  of 1963. Appeal  from the judgment and order dated April 10. 1963  of the  Andhra Pradesh High Court in Special Appeal No.  52  of 1962. K.   R. Chaudhuri, for the appellant. A.   V. Viswanatha Sastri and T. V. R. Tatachari, for the respondent. May 4, 1964.  The Judgment of the Court was delivered by HIDAYATULLAH  J.-The  respondent  Dentu  Bhaskara  Rao   was returned  to  the Andhra Pradesh Legislative  Assembly  from Kakinada  constituency  at the last general  election.   The appellant  C. V. K. Rao was his closest  competitor.   There were  two other candidates but they obtained very few  votes and they have not shown any further interest.  The appellant filed  an election petition to question the election of  the respondent  on  many grounds: one such ground was  that  the respondent was disqualified 154 under s. 7 (d) of the Representation of the People Act, 1951 (43  of 1951).  The respondent had obtained a  mining  lease from  the State of Andhra Pradesh on April 13, 1960,  though on  the date he filed his nomination paper he had not  begun operations  under that lease.  The appellant took  objection to  the nomination of the respondent on the ground  that  he held  a contract from the Andhra Pradesh  Government  within the  prohibition  of s. 7(d) of the Act, but  the  Returning Officer  over-ruled  his objection.  The  Election  Tribunal later held that he was disqualified under s. 7(d) of Act  43 of 1951 and declared the election void.  On appeal, the High Court  of  Andhra  Pradesh reversed  the  decision  and  the present  appeal has been filed on a certificate  granted  by the High Court. Section 7(d) reads as follows:-- "7. A person shall be disqualified for being chosen as,  and for  being,  a member of either House of Parliament  or  the Legislative Assembly or Legislative Council of a State- (a) (b) (c) (d)  if there subsists a contract entered into in the course of  his  trade  or  business by  him  with  the  appropriate Goverment  for the supply of goods to, or for the  execution of any works undertaken by, that Government;" The mining lease was in the standard form and after  setting out the consideration for the lease, it described in Parts I to III, the area of the lease, the description of the  area, liberties, powers and privileges to be exercised and enjoyed by  the  lessee and the restrictions and  conditions  as  to their  exercise.   In Part IV it  described  the  liberties, powers  and privileges reserved to the State Government  and in  Parts V and VI the rents and royalties reserved  by  the lease  and certain other provisions relating to them.   Part VII  then dealt with the covenants of the lessee in  respect of payment 155 of  rents, royalties, taxes etc.  One such covenant  was  in

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clause  21  and  was headed "Right of  Pre-emption"  and  it conferred on the State Government a right of pre-emption  of the minerals lying in or upon the land demised or  elsewhere under   the  control  of  the  lessee.   That   clause   was interpreted  by  the Tribunal as a contract entered  in  the course  of’  trade or business by the  respondent  with  the State Government for the supply of goods to that   Government. The High Court held that there was no such contract. The  disqualification which results from s. 7(d)  is  condi- tioned by a number of circumstances.  First, there must be a subsisting  contract  (this is to say in  actual  existence) between the appropriate Government and the candidate.   Then the contract must be in the Course of the trade or  business of the candidate and, finally, it must be inter alia for the supply   of  goods  to  such  Government   The   appropriate Government according to the definition of the expression  is the  Government  of  Andhra Pradesh.   Tile  High  Court  in reaching  its conclusion interpreted cl. 21 of Part  VII  of the lease and held that the mining lease was not a contract, that clause 21 did not amount to a contract and that cl.  21 even  if  a contract was not a contract for  the  supply  of goods to the Government.  This conclusion is assailed by the appellant.   It is convenient. to quote the clause  at  this stage: "21. (a) The State Government shall from time to time and at all  times  during  the  said term have  the  right  (to  be exercised by notice in writing to the lessee) of pre-emption of the said minerals (and all products thereof) lying in  or upon  the said lands hereby demised or elsewhere  under  the control  of  the  lessee  and  the  lessee  shall  with  all possible,  expedition  deliver all minerals of  products  or minerals  purchased by the State Government under the  power conferred by this provision in the quantities, at the  times in  the  manner  and at the plate  specified-in  the  notice exercising the said right. 156 (b)  Should  the  right  to pre-emption  conferred  by  this present  provision  be exercised and a vessel  chartered  to carry the minerals or products thereof procured on behalf of the  State Government or the Central Government be  detained on demurrage at the port of loading the lessee shall pay the amount  due  for  demurrage according to the  terms  of  the charter  party  of such vessel unless the  State  Government shall  be satisfied that the delay is due to  causes  beyond the control of the lessee. (c)  The  price to be Paid for all minerals or  products  of minerals  taken  in pre-emption by the State  Government  in exercise  of  the right hereby conferred shall be  the  fair market price prevailing at the time of pre-emption  provided that in order to assist in arriving at the said fair  market price the lessee shall, if so required, furnish to the State Government   for   the  confidential  information   of   the Government particulars  of quantities, descriptions and prices  of  the said minerals or products for carriage of the same and shall produce  to such officer or officers as may be  directed  by the  State  Government original or authenticated  copies  of contracts  and charter parties entered into for the sale  of freightage of such minerals or products. (d) Mr.  K. R. Chaudhury contended that under this clause  there was a standing contract for the supply of goods and all that Government had to do was to send a notice to the  respondent -and he was compelled to supply the goods to Government.  He

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pointed  out  that  from  the time  the  lease  was  granted Government was asking the respondent to commence  operations to raise the minerals but the respondent avoided working the mine  probably  to save himself from  the  disqualification. According to Mr. Chaudhury, it mattered not whether the mine was worked or not, but 157 what  mattered was that there was a subsisting contract  for the  supply of mineral, to the appropriate Government.   Mr. A.  Vishwanatha Sastri, in reply, contended that the  mining lease  could not be regarded as a contract and further  that it  was not in the course of’ the trade or business  of  the respondent,  and  finally that, in any event, it was  not  a contract for the supply of goods.  That it was in the course of  business of the respondent almost goes  without  saying. It is not necessary, as Mr. Sastri suggested, that a  course of business based upon other transactions must first exist before  the  offending  contract can be said to  be  in  the course  of business.  That contract may itself be the  start of the business and the words ’in the course of the business’ would still be apt.  As the mining lease was subsisting, the  con- tract, if any there be, was also subsisting and there is  no doubt on that aspect of the matter.  The question is whether the  provisions  of cl. 21 bring about a  contract  for  the supply of goods.  This question can be broken into two which are:  (a) whether cl. 21 can be regarded as a  contract  and (b)  whether it can be regarded as a contract for supply  of goods.   Clause  21 is invariably inserted in  every  mining lease.   It  reserves  to the Government the  right  to  the minerals  which vest in Government but which are allowed  to be raised by the lessee holding the lease.  The lease is, in one sense, a contract between the Government and the  lessee because  there is consideration on both sides and  an  offer and  acceptance.  There are obligations created by it.  some of which are contractual even though some may be regarded as arising from the conditions of the -rant.  The mining  lease without  cl. 21 cannot possibly be described as  a  contract for  the supply of goods.  Without that clause  there  would neither  be a mention of goods nor of their supply.  If  the lease is to be read as satisfying the disqualification in s. 7(d),  cl. 21 alone can satisfy it.  Clause 21 speaks  of  a right  of  the Government to pre-empt the minerals  and  all products  thereof  lying in or around the  land  demised  or elsewhere  under  the  control of  the  lessee.   There  is, however,  no  concluded  contract in respect  of  any  goods because  it hardly needs to be said that relying  upon  this clause  the lessee cannot begin delivery of the ore  to  the Government.  He can do so only if the Government 158 serves  a notice on him stating the quantity pre-empted  and the time within which the supply is to be made.  The clause, however,  does not make it obligatory on Government to  pre- empt  any  quantity  of  mineral or at  all.   There  is  no obligation to buy nor is there any compulsion on the part of the  lessee to sell unless asked.  In  these  circumstances, the  clause does no more than to keep intact a right of  the Government  to obtain the minerals or their products as  and when  Government  requires in preference  to  others.   Till Government makes up its mind and serves a notice there is no obligation  to make any deliveries and even though the  word ’,subsists’ is a word of wide import, it cannot be said that a contract for the sale of goods subsists because a contract requires  an  offer  and its acceptance and is  not  a  mere reservation of a right.

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Taking the most liberal view of the matter it is clear  that cl. 21 did not bring into being a contract for the supply of goods.  AR that it did was to reserve to the Government  the right  to  prior  purchase of the  minerals  raised  by  the respondent.  The reservation of such rights does not  amount to  a contract for the supply of goods which can be said  to subsist between the parties.  The High Court was, therefore, right  in reversing the decision of the  Election  Tribunal. The appeal fails and is dismissed with costs. Appeal dismissed.