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PETITIONER: K.P. PERIANNAN

       Vs.

RESPONDENT: GOVERNMENT OF TAMIL NADU AND ORS.

DATE OF JUDGMENT20/04/1990

BENCH: REDDY, K. JAYACHANDRA (J) BENCH: REDDY, K. JAYACHANDRA (J) PANDIAN, S.R. (J)

CITATION:  1990 AIR 2003            1990 SCR  (2) 609  1990 SCC  Supl.  368     JT 1990 (3)   499  1990 SCALE  (1)122

ACT:     Tamil Nadu Toddy and Arrack Shops (Disposals in  Auction Rules, 1981: Rules3-6, 8, 10, 12, 14-16, 20 and 21.  Auction of  Arrack  shop--Successful bid found  inadequate  and  not confirmed--Shop re-auctioned and bid provisionally confirmed but  bidder failed to comply with  requirements--Shop  again re-auctioned--Notional  loss between original sale  and  re- sale--Held not recoverable from original successful bidder.

HEADNOTE:     The appellant gave the highest bid at the auction of  an arrack shop but his bid was considered inadequate. The  shop was  re-auctioned and the bid of ’C’ was  provisionally  ac- cepted.  ’C’ failed to comply with certain requirements  and the shop was again re-auctioned in which the bid offered was lower  than  that offered by the appellant in  the  original sale.  The  respondent  sought recovery  of  the  difference between the original sale amount and the resale amount  from the  appellant,  under Rule 21 of the Tamil Nadu  Toddy  and Arrack  Shops (Disposal in Auction) Rules, 1981. The  appel- lant  challenged the recovery by filing a writ  petition  in the High Court which was dismissed by a Single Judge and the decision was confirmed by a Division Bench on appeal.     In  the appeal to this Court it was contended on  behalf of the appellant that since his bid was not confirmed  under the  rules, no recovery can be made from him and  that  ’C’, whose  bid  was provisionally accepted, was liable  for  the notional  loss. The respondent however contended that  since ’C’  failed to comply with Rule 15, his bid was  not  provi- sionally  accepted and hence he was not liable for  the  re- sultant loss. Allowing the appeal, this Court,     HELD: 1. Normally it may be correct to say that the sale officer  under Rule 16 accepts provisionally the  bid  after there is compliance of Rule 15; but in the instant case, the Court is concerned with the re-auction and about the liabil- ity  of  the original highest bidder in the  light  of  Rule 20(4). [616D-E] 610     2. In view of the document dated 19th June, 1981 it must be  held that the bid of ’C’ was accepted  provisionally  by

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the Sale Officer and by virtue of Rule 20 sub-Rule (4)  when once the bid of ’C’ was accepted provisionally as the  high- est bid, the bid with which the sale began namely the bid of the  appellant,  got lapsed and consequently  the  appellant cannot be held liable for the resultant loss. [616C-D]

JUDGMENT:     CIVIL  APPELLATE  JURISDICTION: Civil  Appeal  No.  1932 of 1990.     From the Judgment and Order dated 4.7.1989 of the Madras High Court in Writ Appeal No. 1153 of 1983. R. Mohan and R. Ayyamperumal for the Appellant. V. Krishnamurthy for the Respondents. The Judgment of the Court was delivered by     K.  JAYACHANDRA REDDY, J. Leave granted. Heard both  the sides.     The  right  to  conduct arrack sale in  Tamil  Nadu  was auctioned on 28.5.1981 for the excise year 1981-82. Shop No. 49  in Koneripatti village in Sankari Taluk  District  Salem was auctioned for the excise year 1981-82. Inrespect of  the auction  of  this  shop, the appellant  was  the  successful bidder and the bid amount was Rs.6550 per month. As per  the terms, the appellant paid the caution deposit of Rs.1000 and a half month’s rent on the same day.     Since  the bid amount was found to be  inadequate  there was  a  re-auction on 11.6.1981 but there was no  bidder  on that  day.  Therefore again on 19.6.1981 the same  shop  was re-auctioned  and one Mr. Chellamuthu was successful  bidder at  Rs.6575 per month but he failed to comply  with  certain requirements.  Therefore it was re-auctioned on 27.6.81  but there were no bidders and the shop was re-auctioned again on 17.8.1981  when the bid was only Rs.3000 by  one  Doraisamy. The  appellant  was called upon by way  of  a  communication dated  17.4.82 to pay the notional loss. It was  claimed  by the  department that the bid of the appellant was  confirmed on  28.6.81  but the appellant refused to receive  the  con- firmed  order and consequently the shop was reauctioned  for Rs.3,000 only and therefore the difference amount is  recov- erable  from  the appellant. This impugned order  was  ques- tioned 611 and the learned Single Judge of the High Court dismissed the writ  petition.  It was observed by the learned  Judge  that records produced before him were perused and they show  that the  bid by the appellant was confirmed on 28.6.81  and  the appellant  can  not  seek any relief in  the  writ  petition having  bidden the auction under certain conditions. In  the writ appeal filed against the order of the Single Judge, the Division Bench agreed with the learned Single Judge. It  was also  cOntended before the Division Bench that his  bid  was never  confirmed validly and that auction in favour  of  Do- raisamy alone was the valid auction.     Learned  counsel for the appellant contended  before  us that  the bid by the appellant was not accepted as  per  the rules and it was not confirmed by the Collector and the very fact that there was subsequent two re-auctions obviously  on the  ground  that the bid by the appellant  was  inadequate, itself shows that the bid was not confirmed as per the rules and  therefore  the question of recovery of  resultant  loss from the appellant does not arise. It is also submitted that Chellamuthu  who was successful bidder in the  auction  that was  held  on  19.6.81 should be held  responsible  for  the resultant  loss,  if any, since he was  the  highest  bidder

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because  his bid was higher than that of the  appellant.  To appreciate these contentions, it becomes necessary to  refer to  the  relevant rules. Some of the relevant rules  of  the Tamil  Nadu  Toddy and Arrack Shops (Disposals  in  Auction) Rules,  1981 were framed under the powers conferred by  Sec- tion  4 of the Tamil Nadu Prohibition Act. Rule 3 lays  down that  the  privilege of selling liquor by  retail  shall  be granted to any person by auction and the period shall be one excise year. Under Rule 5, a notice has to be given mention- ing  particulars as required under Rule 6. The tenders  also will  be  received an hour before the  commencement  of  the auction.  Under Rule 8 every person desiring to bid in  such open  auction  shall deposit a sum of Rs. 1,000  as  earnest money  and only the bidders who have deposited  the  earnest money  deposit shall be admitted into the place of  auction. Rule 10 provides for refund of such a deposit to the  unsuc- cessful bidders. Rule 12 lays down that the Sale Officer can refuse  to  accept the bid under any one of  the  conditions specified therein. Rule 14 similarly lays down that  highest of the bid shall be taken into consideration for acceptance. As  per  Rule 15 every auction purchaser  shall  immediately after  the announcement or atleast before the close  of  the day’s  sale,  deposit half a month’s rental  with  the  Sale Officer.  If  he does not do so, the earnest  money  deposit made  by  him under Rule 8 shall be forfeited to  the  State Government.  For the purpose of this case Rule 16 is  impor- tant and it is in the following terms: 612 "Deposit of advance--The Sale Officer, if he accepts  provi- sionally  the  bid of an auction purchaser,  shall  issue  a notice  to the auction purchaser to pay as advance,  in  any case within seven days from the date of the sale, an  amount equal  to  three months rental in addition  to  the  earnest money deposit already made under rule 8 but inclusive of the half  a month’s rental paid at the close of the  sale  under rule 15." (emphasis supplied) We will consider the scope of this rule in a detailed manner at  a later stage. Rule 17 lays down that  the  auction-pur- chaser  shall produce a solvency certificate issued  by  the Tehsildar  for  the  purpose of  creating  encumbrances  and should also execute a mortgage deed and if does not own  any properties he should deposit additional amount towards three months’ rental or should furnish bank guarantee. Under  Rule 18,  the  Collector should refund the deposits made  by  the auctionpurchaser  in case he refuses to confirm the  accept- ance of the bid. Rule 20 is another important rule and it is necessary that it should be fully extracted: "20.  Confirmation of sale by the Collector--(1)  Every  bid provisionally accepted by the Sale Officer shall be  subject to  confirmation by the Collector and on  such  confirmation the  orders  of the Collector shall be final, unless  it  is revised  by the Commissioner for special reasons to  be  re- corded  in writing. The Commissioner may on appeal or  revi- sion or suo motu, revise any order of the Collector confirm- ing a bid provisionally accepted by the Sale Officer,  after issuing  a  show  cause notice to the  person  affected  and considering  his representations, if any. Any order  of  the Collector  confirming  the  sale  of a  shop  in  favour  of a--person  may be cancelled by the Commissioner even  subse- quent  to  the grant of a licence to him for reasons  to  be recorded  by  him  and after giving an  opportunity  to  all persons concerned. (2)  On receipt of the order of confirmation and on  receipt of  an  application in Form No. 2 the Excise  Officer  shall

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subject  to  the provisions in rule 17, issue a  licence  in Form No. 3 under Section 17-C(2) of the Act. (3) If the Collector considers any bid to be inadequate,  he may refuse to confirm the provisional acceptance of the 613 bid, and immediately direct the resale of the shop from  the point  at  which it was last left on such date and  at  such time  and  place as may be fixed by him. The  conditions  of sale shall remain unaltered unless otherwise directed by the Collector.  Any  order passed by the  Collector  for  resale shall be given adequate publicity and shall also be notified at the Taluk Office. (4)  Any resale ordered to be made under sub-rule (3)  shall begin with the bid provisionally accepted by the sale  offi- cer  at the original sale and in the name of the  individual who offered it. If at such sale a higher bid is offered  and is provisionally accepted by the Sale Officer, the bid  with which  such sale began shall lapse. But if no higher bid  is accepted by the Sale. Officer, the matter shall be  reported to  the  Collector who may pass orders  confirming  the  bid provisionally  accepted  at the original sale or  may  again direct that the sale be continued from the point at which it was left at the original sale, and the order of the  Collec- tor shall be final unless it is revised by the  Commissioner on appeal or revision. (5)  The provision of sub-rule (4) shall apply to  any  sale the re-opening of which is directed under that sub-rule. (6) No bid which has been provisionally accepted by the Sale Officer  shall be withdrawn before it lapses  under  subrule (4)  or before orders are passed confirming or  refusing  to confirm  it,  and if the bidder commits any breach  of  this condition,  he shall be liable to make good  the  difference between  his  bid  and any lower bid which  may  be  finally accepted,"                         (emphasis supplied) Rule 21 lays down that on the failure of any person to  make a  deposit or to comply with’ any requisition or  to  comply with any formality like executing bond etc. the shop may  be resold  under the orders of the Collector on a  report  from the  Assistant  Commissioner and the same  shall  be  resold under  this rule. It shall be at the risk of the  defaulting bidder  who shall forfeit all gain, if any, that may  secure by the resale in the event of a loss by resale, the default- ing  bidder  shall be required to make good  the  deficiency between the total amount payable for the whole period  under the terms of the original sale and by the total 614 amount  payable by the successful bidder at the  resale  and the  deposit already made by the defaulting bidder shall  be forfeited.     As  already  mentioned it is under this  last  rule  the action  is  taken against the appellant. At  this  stage  it would  be  useful to refer to some of the everments  in  the affidavit  and  the counter-affidavit  putting  forward  the rival.  The appellant in his affidavit has stated  that  his bid  was  never confirmed and that he has not  received  any notice and that on the other hand there was a re-auction and there  was  a  higher bid in the re-auction,  but  the  said bidder  defaulted.  Therefore there was  again  another  re- auction but on that day there were no bidders but ultimately during  the final re-auction on 27.6.1981 the bid  was  only Rs.3,000  by one Doraisamy and that was confirmed. The  plea of the appellant has been that his bid was not confirmed  by the  Collector  as required under Rule 20 and  repeated  re- auctions would itself go to show that the bid of the  appel- lant  was  not confirmed. In the counteraffidavit  filed  on

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behalf of the Government, it is admitted that the petitioner was  the highest bidder on 28.5.1981 but the  Collector  or- dered  resale as already mentioned and one  Chellamuthu  was ’the highest bidder offering Rs.6575 but he failed to comply with the conditions. It is averred that the said Chellamuthu though was the highest bidder in the said re-auction but did not comply with the conditions under Rule 15 inasmuch as  he failed  to deposit half a month’s rental and  therefore  his bid  was not accepted. Therefore subsequent bids were  held. It is further averred by the Government that the bid offered by  the appellant was confirmed by the Collector as per  the proceedings of the Collector dated 28.6.81 but the appellant refused  to receive the order of confirmation and  therefore he has to make good the resultant loss.     Learned counsel for the appellant submits that Chellamu- thu  was  the highest bidder and he should be held to  be  a defaulter and consequently be liable for the resultant loss.     In order to see whether the appellant’s liability in any manner  continued  consequently making him  liable  for  the resultant  loss,  we have to examine Rules 20(3)  and  20(4) carefully,  in  the context of the facts of  this  case.  As extracted  above  Rule 20(3) states that  if  the  Collector considers any bid to be inadequate, he may refuse to confirm the provisional acceptance of the bid and immediately direct the  resale of the shop from the point it was last left.  As per sub-Rule 4 any resale ordered to be made under  sub-rule (3)  shall begin with the bid provisionally accepted by  the Sale Officer at the original sale and if at such 615 sale  a higher bid is offered and is provisionally  accepted by  the  Sale Officer, the bid with which  such  sale  began shall  lapse. This part of the rule is very significant.  If the  record  shows that the bid offered by  Chellamuthu  has been  provisionally  accepted by the Sale Officer,  the  bid with  which  the  sale began, i.e. the bid  offered  by  the appellant  lapses  but  if, on the other hand,  such  a  bid during  the re-auction is not’ accepted by the Sale  Officer then  the  subsequent  steps for further  reauction  or  for confirmation of the original bid i.e. that of the  appellant would take place. In this context it is once again necessary to  note that as per the Department, bid of Chellamuthu  was not even provisionally accepted. As laid down in Rule 16  if the record shows that his bid has been provisionally accept- ed by the Sale Officer then as provided under Rule 20(4) the bid of the appellant gets automatically lapsed. For our  own satisfaction  we called for the record and perused the  file concerning the auction. So far as the bid made by  Chellamu- thu  is  concerned, we find a document in the  record  which authentically  shows that his bid being highest  was  provi- sionally  accepted and announced by the Sale  Officer.  This document reads as under:      "Second resale of toddy/arrack shops in Sankari Taluk.                      (1.7.1981 to 30.6.1982) Shop No. 49                         Place: Koneripatti      Name and full address of            Tender amount      the tenderer.         Nil Highest tender amount Rs. nil by Thiru Highest bid amount Rs.6575 by Thiru The highest of these two, that is Rs.6575 (Rupees Six  Thou- sand five hundred seventy five only) by Thiru Sellamuthu s/o Nachimuthu    of   Kumaranpalayam   Village   the    highest bidder/tenderer is provisionally accepted and announced.                                                  Sd/-19/6/81                                                 Sale officer

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&                                      Sub Collector/Sankari." 616 As  per  Rule 16 when there is such  provisional  acceptance then the Sale, Officer issues a notice to the highest bidder to pay as advance three months rental. But according to  the respondents  namely  the Department,  the  said  Chellamuthu though  was  the  highest bidder, did  not  deposit  half  a month’s  rental  as required under Rule  15,  therefore  the question of accepting his bid did not arise even  provision- ally.     Consequently the highest bid of the appellant was subse- quently  confirmed. Since we find a genuine doubt about  the liability of the appellant, we went through the rest of  the file  also. No doubt there is a note here and there  to  the effect  that Chellamuthu did not deposit the |5 days  rental on that day. But in view of the document mentioned above  it must  be  deemed  that the Chellamuthu’s  bid  was  accepted provisionally by the Sale Officer and by virtue of Rule  20, sub-rule  (4) when once the bid of Chellamuthu was  accepted provisionally  as the highest bid, the bid with  which  such sale  began namely the bid of the appellant, got lapsed.  We do  not want to go into the question whether under  Rule  16 the  provisional acceptance of the bid by the  Sale  Officer should  necessarily  be preceded by the  fulfilment  of  the condition  of deposit of half a month’s rental by  the  auc- tion-purchaser  under  Rule 15. Perhaps normally it  may  be correct  to say that the Sale Officer under Rule 16  accepts provisionally the bid after there is compliance of Rule  15; but in the instant case we are concerned with the re-auction and  about the liability of the original highest  bidder  in the light of Rule 20(4). The document mentioned above clear- ly  shows that the Chellamuthu’s bid was  provisionally  ac- cepted  and  therefore Sub-Rule (4) of Rule  20  comes  into force  and consequently the bid of the appellant lapsed.  At any  rate after a due consideration of the contents  of  the declaration issued by the Sale Officer accepting the bid  of Chellamuthu provisionally, a genuine doubt arises about  the liability of the appellant. Having given our earnest consid- eration,  we are of the view that the bid by  the  appellant got lapsed by virtue of the acceptance of the bid by Chella- muthu provisionally by the Sale Officer and consequently the appellant cannot be held liable for the resultant loss.  The appeal is accordingly allowed. T.N.A.                                                Appeal allowed. 617