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PETITIONER: STATE OF UTTAR PRADESH

       Vs.

RESPONDENT: KlSHORI LAL MINOCHA

DATE OF JUDGMENT21/12/1979

BENCH: GUPTA, A.C. BENCH: GUPTA, A.C. TULZAPURKAR, V.D. VENKATARAMIAH, E.S. (J)

CITATION:  1980 AIR  680            1980 SCR  (2) 724  1980 SCC  (3)   8  CITATOR INFO :  E          1984 SC 993  (27)  D          1984 SC1326  (13)

ACT:      Constitution of India 1950, Article 299 and U.P. Excise Act 1910,  S. 39-Rule  357(5)  of  Excise  Manual  requiring purchaser at  excise action  to deposit  one-sixth of annual fee on  conclusion of  sale-Purchaser  not  making  deposit- Resale by  excise authorities fetching lesser price-Original purchaser whether liable to pay deficiency in price.      U.P. Excise  Act 1910,  S. 77 & Excise Manual Rule 357- Rule not published as required-Whether has the force of law.

HEADNOTE:      The respondent  who was  a bidder  at the annual excise auction offered  the highest  bid for  two groups of country liquor shops,  and which were knocked down in his favour. He affixed his  signature to the respective bid sheets in token of his  acceptance and  also in  the register  of Settlement Record. He,  however, did  not  deposit  l/6th  of  the  bid amounts on  conclusion of  the sales  as required  under the Excise Rules but took time for deposit. In spite of repeated reminders he  did not  pay the  advance deposits. The Excise Authorities resold  the excise  privileges in respect of the two groups  of shops and in the re-auction the shops fetched a lesser  amount than  what the  respondent had offered. The State Government,  appellant directed the respondent to make good the  loss. Since  he failed,  a suit  for recovery  was instituted by  the appellant.  The suit  was contested,  the respondent  pleading   (1)  that  there  were  no  completed contracts between  the  State  Government  and  himself  and consequently there could be no breach of contracts; (2) that the entire  auction proceedings,  having  been  against  the rules and  instructions of  the Government  were illegal and void; (3)  the contracts, if any, were unenforceable as they did not  satisfy the  conditions mentioned in Article 299 of the Constitution;  and (4)  that the State Government having accepted his prayer to be relieved from the bids made by him and subsequently re-auctioning the groups of shops to others was estopped  from fixing  any civil  liability on  him. The trial court decreed the suit.

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    On appeal,  the High  Court dismissed  the suit  on the view that  there  was  no  valid  contract  which  could  be enforced by  the appellant  as the-requirements  of  Article 299(1) of  the Constitution  had not been complied with. It, however, held  that the  failure to  deposit 1/6  of the bid amount did  not make  the proposal  incomplete and  that the absence of the approval of the Excise Commissioner which was in the  nature of  a power  vested in  him  to  reverse  the acceptance of  a bid made by the officer holding the auction did not  in  any  way  exonerate  the  respondent  from  the liability if he was otherwise liable.      In the appeal to this Court on the question whether the respondent would  not be  liable to  make good the loss even though  no   contract  in   writing  had  been  executed  in accordance with Article 299 of the Constitution. 725 ^      HELD :[Per Gupta and Tulzapurkar, JJ.]      1. The suit must be dismissed as there was no concluded contract between  the parties,  nor was  there any statutory rule permitting  recovery of  the deficiency on re-sale from the respondent. [728 B]      2. The  last part  of 5th  clause to Rule 357 providing that in case of default, if the price fetched at the re-sale was less tan the bid at the first sale the defaulter had not been published. [729 C]      3. Assuming  that different clauses of Rule 357 barring the last  part of  the 5th  clause embody  the condition  of sale, it is clear from the 2nd clause that in the absence of the final sanction of the Excise Commissioner the bid cannot be said  to have  been finally accepted. In the instant case it is not claimed that the bid offered by the respondent was sanctioned by the Excise Commissioner. [729 E]      There  was  thus  no  concluded  contract  between  the parties to  make the respondent liable for the alleged loss. [729 E]      Union of  India and  others v. M/s. Bhimsen Walaiti Ram [1970] 2 S.C.R. 594 referred to.      (Per Venkataramiah J. dissenting)      1. The  respondent should  be made  liable for  the sum claimed in  the suit  and the decree made by the trial court should be restored. [745 G]      2. The  respondent was  liable for the sum claimed made by the  State  Government  even  though  no  contracts  were formally entered  into between  the respondent and the State Government,[745 B]      In the instant case on the pleading and evidence it has to be  assumed that the respondent knew that he was under an obligation to  deposit with  the officer holding the auction 1/6th of the bid amount and that if he committed any default in doing  so, the  excise licences  in question  were to  be resold and  that he would be liable to pay any loss suffered by the Sate Government on such re-sale. [733 E]      3. Condition  No. 5  in  the  sale  proclamation  which provides that  if the price at the re-sale be less than that at the first sale, the difference will be recovered from the defaulter negatives the contention of the respondent that in the absence  of the  approval of the Excise Commissioner, he would bot be liable to make good the loss. [73 H, F]      4. There  was no disapproval of the Excise Commissioner of the  bids offered  by the  respondent. On the other hand, the excise  authorities requested  the respondent to perform his part of the obligation under the sale proclamation. [734 E]      5. In  Union of  India &  Ors. v.  M/s. Bhimsen Walaiti

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Ram, [1970]  2 S.C.R. 594, this Court proceeded on the basis that the  liability of  the bidder  could arise  only  as  a consequence of  the  breach  of  a  completed  contract.  No attention appears  to have  been given  in the  case to  the question whether  the act of the offering of the highest bid which was  accepted by  the officer  holding the auction and which resulted in the closure of the auction could by itself become a  source of liability when the highest bidder failed to  comply  with  the  conditions  stipulated  in  the  sale proclamation. [734 F] 726      6. In  section  39,  the  words  "all  excise  revenue, including all amounts due to the Government by any person on account of  any contract relating to the excise revenue, may be recovered  from the  persons primarily  liable to pay the same"   by him  on account  of any  contract relating to the excise revenue. The words "on account relating to the excise revenue"  include   within  their   scope  not   merely  any compensation which  a person may be liable to pay on account of the  breach  of  contract  committed  by  him  after  the contract is  completed   but also  any other amount that may become due  on account  of a  contract which would come into existence if  all  the  formalities  are  completed,  having regard  to  the  scheme  and  manner  in  which  the  excise privilege is  disposed of by the excise authorities. [735 E- F]      7. A  reading of  clauses 1  and 2  of Rule  357 of the Excise Manula  show that  the officer  holding the  sale was empowered to accept the bid and that his acceptance was only subject to  the sanction  of the  Excise Commissioner.  They mean that  the power  which had  been reserved to the Excise Commissioner, only  enabled him  to set aside the acceptance already made  by the  officer conducting the sale. If it was not  set  aside  by  him,  the  acceptance  of  the  officer conducting the sale would be effective. [737 B]      In the  instant case  the Excise  Commissioner had  not refused to  sanction the  acceptance  of  the  highest  bids offered by  the respondent.  The liability  of  the  highest bidder to  deposit a  sum equivalent  to 1/6th  of  the  bid offered by  him arises  as a consequence of his offering the highest bed  with the  knowledge of  the conditions  of  the auction, immediately  on the  conclusion of the sale for the day in  his favour and if he does not make such deposit, the officer holding  the same  is entitled  to  put  the  excise privilege for  re-sale either immediately of on a subsequent day with liberty to recover from the defaulter any loss that may be occasioned to the Government by such re-sale. [737 C- D]      8. The completion of the contract or the execution of a contract in  accordance with Article 299 of the Constitution arises only  after the highest bidder has deposited 1/6th of the bid  offered by  him on the conclusion of the sale which is a  condition precedent for the completion of the contract or for  execution of  a formal  document in  accordance with Article 299  of the  Constitution.  It  is  not,  therefore, correct to determine the liability of a defaulting bidder on the basis  of a  completed contract  or a formal document to be executed under Article 299. [737 E-F]      9.  In   the  interest   of  public   revenuer,  excise privileges, privileges  of cutting  and removing timber from Government forests,  occupancy right  over Government  lands and building sites etc. are disposed of in public auction by the Central  Government, State Governments, statutory boards and local  authorities and  in almost  every  such  auction, there is  invariably boards  a condition that the acceptance

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of the highest bid at the auction is subject to the sanction of some  superior officer  or statutory  or the  appropriate Government. If  the liability  of such  a bidder  is  to  be funded only  on the  basis of  a completed  contract them in then in  the case  of auctions  held by  or on behalf of the Central or State Governments, no liability can arise even it such sanction  is accorded,  unless it  is followed  up by a formal  document   executed  under   Article  299   of   the Constitution which  alone amounts  to a  completed  contract where Government is a party. [737 H-738 A, 738 D] 727      In the  instant case  the respondent by his own conduct in not depositing 1/6th A of the bids offered by him made it impossible  for  the  excise  authorities  to  conclude  the contract. ’the  question may  have  been  different  if  the respondent had  done  all  that  he  had  to  do  under  the condition of  the auction but the excise authorities had not intimated him that he could exploit the excise privileges in accordance with law. [744 E]      10. The  liability of  the respondent  arises under the statute and it also arises as the result of a civil wrong or a tort  committed by  him, in  offering the highest bid with open eyes  and in  not fulfilling  the  obligations  arising therefrom. The  latter source  of liability may appear to be novel but if justice requires, the Court should not hesitate to impose  it on  the person  who has committed the wrong to secure justice for the innocent injured party. [745 Cl      A. Damodaran  & Anr. v. State of Kerala & ors. [1976] 3 S.C.R. 780;  Candlar v.  Crane Christmas & Co. [1951] 2 K.B. 164 at p. 178 referred to.      K. P.  Chowdhary v.  Stare of  Madhya  Pradesh  &  Ors. [1966] 3 S.C.R. 919 distinguished.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal No. 173 of 1969.      From the  Judgment and  order  dated  2-4-1968  of  the Allahabad High Court in First Appeal No. 5/62.      G. N. Dikshit and O. P. Rana for the Appellant.      H. K.  Puri and  Miss Madhu Mulchandani and V. K. Bahal for the Respondent.      The Judgment  of A. C. Gupta and V. D. Tulzapurkar, JJ. was delivered  by Gupta,  J. E.  S. Venkataramish, J. gave a dissenting opinion.      GUPTA, J.-This appeal by certificate is from a judgment of the  Allahabad High  Court, Lucknow Bench, dismissing the suit instituted  by the  appellant, State  of Uttar Pradesh, for recovery of a sum of Rs. 20,100 from the respondent. The facts stated  in the  plaint on which the claim is based are these. The annual ’excise auctions’ for the year ]951-52 for Faizabad district were held at Faizabad on February 22, 1951 "under the Excise Rules." The respondent offered the highest bid of  Rs. 73,000  and Rs.  48,000 respectively as fees for two groups of country liquor shops but as he did not deposit l/6th of  the aforesaid  sum on  conclusion of  the sales as required under the Excise Rules, the two groups of shops had to be  sold again  on March  30, 1951.  The  resale  fetched respectively Rs.  65,700 and Rs. 35,200 for there two groups of country  liquor shops.  According to  the State  of Uttar Pradesh it  suffered-a total loss of Rs. 20,100 which is the difference between  what the  respondent had offered and the sum for  which the shops were later sold, and the respondent was liable to compensate 9-91SCI/80

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728 the loss. The suit was decreed by the trial court. On appeal the High Court dismissed the suit on the view that there was no valid  contract which  could be enforced by the plaintiff as the  requirements of  Article 299(1)  of the Constitution had not been complied with. We are also of the view that the suit must  be dismissed but for a slightly different reason; in our  opinion there  was no concluded contract between the parties,  nor   was  there  any  statutory  rule  permitting recovery the deficiency on re-sale from, the respondent.      The sale  proclamation which  is said to have contained the conditions  of sale  was  not  produced.  The  Assistant Excise Commissioner  (P.W. 1)  in his  testimony referred to rule 357 of the Excise Manual. The relevant part of the rule is as follows:      "The following  conditions shall  apply  to  all  sales      under the  auction system,  and will be inserted at the      foot of  the sale  proclamation if such proclamation is      issued by the Excise Commissioner:           (1)  The officer conducting the sales is not bound                to accept the highest or any bid. In any case                when the  highest or  any bid is not proposed                to be  accepted, the  next highest bid should                also be reported to the Excise Commissioner.           (2)  The final acceptance of any bid is subject to                the sanction of the Excise Commissioner.           (3)  Veery person bidding will be held to his bid,                whether i it be the highest or not.           (4)  .... ... ... ...           (5)   A sum  equal to one-sixth of the annual fees                shall   be   payable   immediately   on   the                conclusion of  the sales for the day, and the                balance by  such instalments as are specified                in the  licence to  be granted. If default be                made  in   the   payment   of   the   advance                instalment, the  shop on farm will be resold,                and if  the price  finally bid at the re-sale                be less  than that bid at the first sale, the                difference  will   be  recovered   from   the                defaulter." I Section 77 of the U.P. Excise Act, 1910 states:           "All rules made and notifications issued under the      Act shall  be published  in the  official  gazette  and      shall have  effect as  if enacted  in this Act from the      date of such publication or from such other date as may      be specified in that behalf." 729 The High  Court found  that the conditions mentioned in rule 357 had A never been published as required and they did not, therefore, have  the force  of law. The High Court held that Part II  of  the  Excise  Manual  which  includes  rule  357 contained provisions  which where  "commonly referred  to as rules" but  were not  really statutory rules and that it was "a sort  of book  of guidance".  Before us it was claimed on behalf  of   the  appellant  that  some  of  the  conditions contained in  rule 357  had been  published in  the official gazette, but the learned counsel for the appellant, State of Uttar Pradesh,  was not  in a  position to  dispute that  at least the  last part  of the 5th condition providing that in case of  default, if  the price  fetched at  the re-sale was less than  the bid at the first sale the difference would be recovered from  the defaulter,  had not been published. That being so  it must  be held that there was no law under which the respondent  could  be  asked  to  make  amends  for  the shortfall.

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    The question  that remains  to be  answered is, even if there was  no  statutory  provision,  whether  there  was  a concluded contract  between the appellant and the respondent under which  the respondent  was liable  to pay  Rs.  20,100 which represents  the difference  between the highest bid at the first  sale and  the price  fetched at  the re-sale. The sale proclamation  containing the conditions of sale has not been produced.  Assuming that  the different clauses of rule 357 barring  the last  part of  the 5th  clause  embody  the conditions of  sale, it is clear from the 2nd clause that in the  absence   of  the   final  sanction   of   the   Excise Commissioner, the  bid cannot  be said  to have been finally accepted. lt  is not  claimed by  the appellant that the bid offered by  the respondent  was  sanctioned  by  the  Excise Commissioner. There  was thus  no concluded contract between the parties  to make  the respondent  liable for the alleged loss. The  point appears  to have been decided by this Court in Union  of India  and  another  v.  M/s.  Bhimsen  Walaiti Ram(1). This  was a  case of  an auction  for  the  sale  of licence for  a country  liquor shop  in Delhi  for the  year 1949-50. Clause  33 of the conditions of sale provided inter alia  :  "All  final  bids  will  be  made  subject  to  the confirmation by  the Chief  Commissioning who may reject any bid  without  assigning  any  reasons".  This  condition  is similar to  clause 2  of  rule  357  in  the  instant  case. Ramaswami J.  speaking  for  the  court  in  Bhimsen’s  case observed:           "It is, therefore, clear that the contract of sale      was not  complete till  the bid  was confirmed  by  the      Chief  Commissioner  and  till  such  confirmation  the      person whose  bid has  been provisionally  accepted  is      entitled to withdraw his bid. 730      When the bid is so withdrawn before the confirmation of      the Chief  Commissioner the  bidder will  not be liable      for damages  on accurate  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."      The appeal is dismissed but in the circumstances of the case we make no order as to costs.      VENKATARAMIAH, J.  I have had the advantage of perusing the judgment  prepared by  my learned  brother, Gupta,  J. I regret my  inability to agree with the conclusion reached by him.      Since some  of the  facts which  are necessary  for the purpose of  this case  have not been set out in the judgment of my learned brother, I have to mention them at this stage. The excise  auctions for  the  year  1951-52  were  held  on February 22,  1951 under  the provisions  of the U.P. Excise Act, 1910  (hereinafter  referred  to  as  ’the  Act’).  The respondent offered  the highest  bid of  Rs. 73,000  for the chowk group  shops and  of Rs.  48,000 for  Rakabganj  group shops. At  that auction,  the shops in question were knocked down for  the  above-mentioned  amounts  in  favour  of  the respondent who  affixed his signatures to the respective bid sheets in  token of  his acceptance and also in the register of Settlement  Record.  The  respondent,  however,  did  not deposit  1/6th   of  the  above  mentioned  amounts  on  the aforesaid date  but took  time for  its deposit later on. In spite of  repeated reminders, the respondent did not pay the advance deposits  in both  the cases. The excise authorities resold the excise privileges in question and on such resale,

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the chowk  group shops  fetched Rs. 65,700 and the Rakabganj group shops  fetched Rs.  35,200.  Consequently,  the  State Government the  appellant herein  suffered  a  loss  of  Rs. 20,100. As the respondent did not pay the said amount of Rs. 20,100, a  suit was  instituted by the appellant against him for recovery  thereof before  the Civil  Judge, Faizabad. In the course of his written statement, the respondent, after a general denial  of the  allegations in  the  plaint,  raised among others the following additional pleas:-           "1.   There was  no completed contract between the                plaintiff and  defendant. Consequently  there                had been no breach and no cause of action for                the suit.           2.    The  entire auction  proceedings having been                against the  rules and  instructions  of  the                Government    were    illegal,    void    and                ineffective. 731           3.    The  plaintiff himself  having accepted  the                prayer of  the  defendant to be relieved from                the bid  made by  him  and  subsequently  re-                auctioning the  shops or  the groups of shops                to others  was now  estopped from  fixing any                civil liability on the defendant."      Four contentions were urged on behalf of the respondent in the  1 trial  court viz.  (1) since  the  offers  of  the respondent had  not been  accepted, no  valid contracts  had come into existence; (2) as the respondent had withdrawn the offers  before   their  acceptance,   there  could   be   no enforceable contracts  in existence;  (3) the  contracts, if any,  were   unenforceable  as  then  did  not  satisfy  the conditions mentioned  in Article 299 of the Constitution and (4) that even though the respondent had committed the breach of the  agreements he  was not  liable to pay any damages as the excise  authorities had  not taken any steps to mitigate the loss  by granting the excise licences in question to the second highest  bidder in  each case.  The trial court after rejecting the  contentions of  the respondent  made a decree for Rs.  20,100 with  costs. Aggrieved  by the decree of the trial court,  the respondent filed an appeal before the High Court of  Allahabad. In  the course  of the appeal, the High Court formulated four points for its consideration as can be seen from the following extract from its judgment:-           "The points  now requiring  consideration are  (1)      whether there  came  into  existence  a  contract,  (2)      whether by  reason of  non-deposit of  one-sixth of the      bid money  there was  a breach  of the  contract on the      part of the appellant; (3) whether this breach entitled      the respondent  to re-auction  the shops and to recover      the loss  on re-auction  from the  appellant;  and  (4)      whether the  deficit of Rs. 20,100 represents the legal      loss recoverable from the appellant."      Before the  High Court in so far as the first point was concerned, the  respondent’s contention  was three  fold-(i) since the  bids were  not accompanied  by l/6th  of the  bid amount, there  were no  completed proposals  and, therefore, there could  be no  acceptance thereof  so as  to bring into existence a  contract; (ii)  as the  Excise Commissioner had not accorded  his approval,  there was  no acceptance of the proposal and  (iii) as  no agreements  in writing  had  been executed by  the person competent to do so under Article 299 of the  Constitution, no  contracts had come into existence. The High Court rejected the first two contentions by holding that the  failure to deposit l/6th of the bid amount did not make the  proposals incomplete  and that  the absence of the

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approval or  the Excise Commissioner which was in the nature of 732 power vested  in him  to reverse  the acceptance of a bid by the officer holding the auction did not in any way exonerate the respondent  from  the  liability  if  he  was  otherwise liable. It,  however, held  that since  the requirements  of Article 299  of the Constitution had not been fulfilled, the respondent was  not liable  to pay any damages on the ground that he had committed a breach of contract.      On the  second point  which was  formulated by the High Court for its consideration, it observed as follows:-           "Coming to  the second  point of  controversy,  to      wit, whether  by reasons of non-deposit of one-sixth of      the bid money there was a breach of the contract on the      part of  the appellant,  the  answer  must  be  in  the      affirmative for  the simple  reason that the deposit of      the money  was one  of the  conditions of the contract.      This condition,  as has  been shown above, follows both      from the  statutory provision  and the admission of the      appellant himself  that there  was this  deposit to  be      made."      On the third point viz. whether the breach committed by the respondent  in each  of the two cases entitled the State Government to  re-auction the  shops and to recover the loss on such  re-auction from  him the  High Court  held that the right to  re-auction had  not been  proved to  be founded on either any  statutory rule  or on  any express  terms of the contract but  the said right was the ’natural outcome of the breach of an accepted term of contract’, when the respondent failed to  deposit the amounts in terms of the agreement. It further held  that when the respondent had failed to deposit the amounts in terms of the agreement on which the bids were given  and  accepted  the  State  Government  was  under  an obligation for  minimising the  loss arising from the breach of the  contract to  re-auction the shops and in case of any loss  arising  therefrom,  to  recover  the  same  from  the respondent.      On the  last point  of controversy  viz. the quantum of damages, the  High  Court  held  that  the  extent  of  loss suffered by the State Government on account of breach on the part of  the respondent  was in the order of Rs. 20,100. The High Court,  however, allowed  the appeal  and set aside the decree of  the trial  court on the ground that there were no valid contracts  which satisfied the requirements of Article 299 of  the Constitution.  Dissatisfied with the judgment of the High  Court, the  State Government has come up in appeal to this Court.      In the instant case, the only question which arises for consideration is whether the respondent is not liable to pay the damage even though 733 no contract  in writing had been executed in accordance with Article A  299 of  the Constitution.  It was not the case of the respondent  that the  excise authorities had no right to re-sell the  excise licences. after he had committed default in depositing  l/6th of the bid amounts. His principal pleas were (i)  that there were no completed contracts between the State Government and himself and consequently there could be no  breach   of  contract;  (ii)  that  the  entire  auction proceedings, having  been against the rules and instructions of the  Government were  illegal and void and (iii) that the State Government,  having accepted his prayer to be relieved from the bids made by him and subsequently re-auctioning the groups of shops to others was estopped from fixing any civil

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liability on  him. It is seen from what is stated above that no attempt was made; by the respondent to make good his plea regarding the  legality of  the auction  proceedings and the plea of  estoppel. The  only  plea  raised  in  the  written statement which  ultimately appealed  to the  High Court was that the  respondent was  not liable  to pay  any damages as there  were  no  completed  contracts  which  satisfied  the requirements of  Article 299  of the Constitution. The other plea that  the offers  made by  the respondent  had not been approved be the Excise Commissioner was rejected by the High Court by observing that the power of the Excise Commissioner to accord  his approval  was only  a power  which  had  been vested in  him to set aside the acceptance of the bid by the officer holding  the auction. Having regard to the pleadings and the evidence in this case, it has to be assumed that the respondent knew  that he  was under an obligation to deposit with the  officer holding  the  auction  l/6th  of  the  bid amounts and  that if  he committed  any default in doing so, the excise  licences in  question were to be resold and that he would  be liable  to pay  any loss  suffered by the State Government on  such  resale.  The  contention  that  in  the absence of the approval of the Excise Commissioner, he would not be  liable to make good the loss has Loss to be rejected in view  of condition No. 5 which according to the testimony of the  Assistant Excise Commissioner (P.W. 1), which cannot be rejected,  had been  mentioned in  the sale proclamation, which read thus:           "5. A  sum equal  to one-sixth  of the annual fees      shall be  payable immediately  on the conclusion of the      sale for  the day,  and the balance by such instalments      as are  specified in  the licence  to  be  granted.  If      default  be   made  in   the  payment  of  the  advance      instalment, the shop on farm will he resold, and if the      price finally  bid at  the resale be less than that bid      at the  first sale,  the difference  will be  recovered      from the defaulter." 734      It is  no doubt  true that  in Union of India & ors. v. M/s. Bhimsen  Walaiti  Ram,(’)  this  Court  held  that  the contract of sale was not complete till the bid was confirmed by the  Chief Commissioner  and till  such confirmation  the person whose  bid  had  been  provisionally  accept  ed  was entitled to  withdraw his  bid and  that when the bid was so withdrawn before the confirmation of the Chief Commissioner, the bidder  was not  liable for  damages on  account of  any breach of contract or for the shortfall on the resale. Those observations were  made by  this Court  in that  case in the context  of   the  disapproval  of  the  bid  by  the  Chief Commissioner  and   this  is  borne  out  by  the  following observations of this Court at page 598:-           "It is  not disputed  that the  Chief Commissioner      had disapproved  the bid  offered by the respondent. If      the Chief  Commissioner had  granted sanction under cl.      33 of  Ex. D-23  the auction  sale  in  favour  of  the      respondent would  have been a completed transaction and      he would  have been  liable for  any shortfall  on  the      resale. As  the essential pre-requisites of a completed      sale are  missing in  this case  there is  no liability      imposed on the respondent for payment of the deficiency      in the price."      In the  case before  us there was no disapproval of the Excise Com  missioner of the bids offered by the respondent. On the  other hand,  the excise  authorities  requested  the respondent to  perform his  part of the obligation under the sale proclamation.  It is  also further been that this Court

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in the case of M/s. Bhimsen Walaiti Ram (supra) proceeded on the basis  that the liability of the bidder could arise only as a  consequence of  the breach of a completed contract. No attention appears  to have  been given  in that  case to the question whether  the act of the offering of the highest bid which was  accepted by  the officer  holding the auction and which resulted in the closure of the auction could by itself become a  source of liability when the highest bidder failed to  comply  with  the  conditions  stipulated  in  the  sale proclamation.      It is  necessary  to  refer  briefly  to  some  of  the relevant provisions  of law  governing the  disposal of  the excise licence  by auction system which were in force during the relevant  time. Section  21 of the Act prohibits sale of any intoxicant  without a  licence by  the concerned  excise authority. Section  24 of  the Act  authorities the grant of exclusive privilege of selling by wholesale or by retail any intoxicant within  any specified  local area.  The right  to sell any  excisable article  under a  licence issued  by the excise authority can be acquired only by paying 735      such fees  or amount  which may  be equivalent  to  the highest bid  offered at  an auction when an auction is held. Section 39  of the  Act which  deals with  the  recovery  of excise revenue reads as follows:-           "39.  Recovery   of  excise   revenue-All   excise      revenue, including all amounts due to the Government by      any person  on account  of any contract relating to the      excise  revenue,  may  be  recovered  from  the  person      primarily liable  to pay  the same,  or from his surety      (if any) as an arrears of land revenue or in the manner      provided for  the recovery of public demands by any law      for the time being in force. In case of default made by      a holder  of a licence the Collector may take the grant      for which  the licence  has been given under management      at the  risk of the defaulter, or may declare the grant      forfeited and  resell it  at the  risk and  loss of the      defaulter. When  a grant is under management under this      section, the  Collector may  recover as  excise revenue      any moneys  due to  the  defaulter  by  any  lessee  or      assignee:           Provided  that   no  licence   for  an   exclusive      privilege granted  under section  24 shall be forfeited      or  re-sold  without  the  sanction  of  the  authority      granting the licence."      In the  above section,  the words  "all excise revenue, including all amounts due to the Government by any person on account of  any contract relating to the excise revenue, may be recovered  from the  person primarily  liable to  pay the same" show that the Government is entitled to recover from a person any  amount due  by him  on account  of any  contract relating to the excise revenue. The words "on account of any contract relating  to the  excise  revenue"  include  within their scope  not merely  any compensation which a person may be liable  to pay  on account  of the  breach of  a contract committed by  him after  the contract  is completed but also any other  amount that  may become  flue  on  account  of  a contract which  would come into existence if all formalities are completed  having regard  to the  scheme and  manner  in which the  excise privilege  is disposed  of by  the  excise authorities. The  relevant rules  governing the  conduct  of excise sales  are found  in a notification bearing No. B. O. No. 423/V-284-B  dated September 26, 1910. The rules require the publication  of a sale proclamation announcing the dates of sale  and the  place where  it will  be held.  Before the

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sales for the day commence, the general conditions governing the sale  which are  set out  in paragraph  373 of  the U.P. Excise Manual  (Vol. I)  shall be  read out and explained to all present  so that  the competitors may clearly understand the conditions  on which  they bid.  The general  conditions governing retail vend and the special 736 conditions governing  each class  of licence  shall also  be read out  in public  before the  sales to  which they apply. Information should  be freely given on all matters affecting the  value   of  licence  about  to  be  sold.  The  officer conducting the  sales shall  record the  name of each person making a bid and the amount of bid. Signature of the highest bidder and the next two lower bidders shall also be taken on the bid  sheet, whether  such persons  have been accepted as auction-purchasers or  not. At  the time  of  the  sale  the person accepted  as the  auction purchaser shall be required to sign  his name  or affix  his mark  against the  relevant entry of  the licence in the Record G-14, it being explained at the  time that  the  deposit  paid  in  advance  will  be returned in  the event  of the  licence  being  subsequently refused. The final bid accepted shall invariably be recorded with his  own hand  by-the officer conducting the sales. The treasurer  of   the  district,  or  one  of  his  recognised assistants, shall be required to attend the sales to receive the advance fees paid by bidders provisionally accepted. The amount that  has to  be paid  as advance  deposit is  a  sum equivalent to  l/6th of  the  annual  fees  which  shall  be payable immediately  on the conclusion of the sales. for the day, and the balance by such instalments as are specified in the licence to be granted. If default be made in the payment of the advance instalments, the shop or farm will be resold. If the price finally offered at the resale be less than that at the first sale, the difference will be recovered from the defaulter through  a civil  suit If any person whose bid has been accepted  at auction  fails to make the advance deposit or if  he withdraws  from his  bid, the excise authority may sell the  contract immediately  or on  any  subsequent  date fixed by him.      It is  not the  case of  the respondent  in the instant case that  he was  not aware  of the above conditions, which had been  set out  in the  sale proclamation  and also which must have  been read out at the commencement of the sale, as required by  the rules  for the information of the intending purchasers. The question for consideration is whether having offered the  highest bid,  it was  open to the respondent to avoid the  liability arising  from his  act of  offering the highest bid  merely because  the Excise Commissioner who had the power  to refuse to sanction the sale had not sanctioned it. It  is no  doubt true  that one of the conditions of the auction was  that the  acceptance of  any bid by the officer conducting the  sale was  subject to  the  sanction  of  the Excise Commissioner.  It, however,  did not  mean  that  the acceptance of  the bid  would be  complete  only  after  the sanction was  accorded by the Excise Commissioner because of the other conditions which read as under:-           "1. The  officer conducting the sales is not bound      to accept the highest or any bid. 737           2. The  final acceptance  of any bid is subject to      the section of the Excise Commissioner."      A reading  of the  two clauses  referred to above shows that the  officer holding  the sale  was empowered to accept the bid  and that  his acceptance  was only  subject to  the sanction of  the Excise  Commissioner. They  meant that  the

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power which  had been  reserved to  the Excise  Commissioner only enabled him to set aside the acceptance already made by the officer  conducting the sale. If it was not so set aside by him,  the acceptance  of the  officer conducting the sale would be  effective. As mentioned earlier, in this case, the Excise  Commissioner   had  not   refused  to  sanction  the acceptance of  the highest  bids offered  by the respondent. The liability  of  the  highest  bidder  to  deposit  a  sum equivalent to  l/6th of  the bid  offered by him arises as a consequence  of  his  offering  the  highest  bid  with  the knowledge of the conditions referred to above immediately on the conclusion  of the sale for the day in his favour and if he does  not make such deposit, the officer holding the sale is entitled to put up the excise privilege for resale either immediately or  on a  subsequent day with liberty to recover from the  defaulter any  loss that  may be occasioned to the Government on  such resale. In a case like this, no question of waiting  till the  contract either  being completed  on a formal document  coming into  existence in  accordance  with Article 299 of the Constitution can arise. The completion of the contract  or the  execution of  a contract in accordance with Article  299 of  the Constitution arises only after the highest bidder has deposited l/6th of the bid offered by him on the conclusion of the sale which is a condition precedent for the  completion of  the contract  or for  execution of a formal  document  in  accordance  with  Article  29  of  the Constitution. It is not, therefore, correct to determine the liability of a defaulting bidder on the basis of a completed contract or  a formal  document to be executed under Article 299. If  the contention urged on behalf of the respondent is accepted, it  will make  every  public  auction  held  by  a Government a  mockery. A man without a pie in his pocket may offer the  highest bid at an auction thus scaring away other bona fide bidders who have assembled at the auction to offer their bids  and then  claim that he is not liable to pay any damages only because a completed contract or an agreement in writing in  accordance with  Article 299 of the Constitution has not come into existence. We should remember that, in the interest of  public revenue excise privileges, privileges of cutting  and   removing  timber   from  Government  forests, occupancy rights  over Government  lands and  building sites etc. are  disposed of  in  public  auction  by  the  Central Government, State  Governments, statutory  boards and  local authorities and  in almost  every  such  auction,  there  is invariably a condition that the acceptance 738 of the highest bid at the auction is subject to the sanction of some  superior officer  or a  statutory authority  or the appropriate Government. If the contention urged on behalf of the respondent  is accepted  then a  person who  offers  the highest bid  in any  such auction can always absolve himself of all  his liability  flowing from  his act of offering the highest bid  by  writing  a  letter  immediately  after  the conclusion of sale to the concerned authority expressing his intention to withdraw from the bid or by resiling from it in any other  manner. The  result will  be that on the one hand the other  bona fide bidders who have come to offer the bids would not  be entitled  to claim  the privilege  or property that is  put up  for sale  and on  the other  the defaulting bidder would  also be not liable to carry out his obligation flowing from  his act  or offering  the highest  bid. If the liability of  such a  bidder is  to be  founded only  on the basis of  a completed  contract then in the case of auctions held by or on behalf of the Central or State Governments, no liability can  arise even  if  such  sanction  is  accorded,

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unless it is followed up by a formal document executed under Article 299  of the  Constitution-which alone  amounts to  a completed contract  where Government is a party. Judged from the foregoing,  I am  of the view that the acceptance of the conclusion reached  by my  learned  brother  would  lead  to enormous public prejudice and instead of advancing the cause of justice  would hamper it. This case is an illustration of what prejudice  is likely to be caused to the public revenue when  default  is  committed  by  the  highest  bidder.  The documents produced before the Court in the present case show that the second highest bid in the case of chowk group shops offered by  some other bidder was Rs. 72,500 and in the case of Rakabganj  group shops  was Rs. 47,000. If the respondent had not  offered his bids Government could have realised Rs. 1,19,50 from  both the  groups i.e. Only Rs. 1,500 less than what the  respondent offered.  By the  intervention  of  the respondent’s bids  and the  default committed  by him,  the. Government could  realise on  resale only  Rs. 1,00,900 thus resulting in  a loss  of Rs.  20,100. Can it be said that in such a  case where  legal injury  is sustained,  there is no remedy available to the State Government ?      In a somewhat similar but not identical situation, this Court in  A. Damodaran  & Anr.  v. State  of Kerala  Ors was called upon  to decide  whether the  highest  bidder  at  an excise auction  was liable to be proceeded with for recovery of excise  dues in the absence of an agreement executed in . accordance with  Article 299.  In that  case, the appellants offered the highest bid at the auction sales held in respect of some  toddy shops.  The conditions of the sales, notified in pursu- 739 ance of  the statutory  provisions were:  (1)  that  it  was incumbent upon  the bidder  to pay  immediately 10%  of  the amount due,  (.2) that  the successful bidder had to deposit 30% of  the  amount  payable  on  demand  by  the  Assistant Commissioner and  to execute  agreements before  getting the necessary licences and (3) that if The contract could not be executed, the  whole amount was to be forfeited and the shop itself was  to  be  resold.  The  appellants  deposited  the necessary  amount  on  demand  and  were  allowed  to  start business even  before agreements  were executed  or licences were issued.  But the  appellants failed  to pay the balance due to  the State.  The amounts  were sought to be recovered under section  28 of  the Kerala  Abkari Act  (Act No.  l of 1967) which  was more  or less  similar to section 39 of the Act. The  High Court  of Kerala  held that  the amounts were recoverable from  the appellants.  In the appeal before this Court, the  appellants contended  that as  no agreement  was executed between  the appellants  and the  Government in the manner prescribed  by Article  299 of the Constitution, they had not  become the  ’grantees’ of  any privilege  and hence were not  liable to  pay the amounts sought to be recovered. Dismissing The appeal, the Court held that the absence of an agreement executed  in accordance  with  the  provisions  of Article 299  of the  Constitution could  not be  a  bar  for recovering the  excise dues  in view  of section  28 of  the Kerala Act.  The Court held that the liability was one which arose under  the statute  and therefore  was enforceable. In taking that view, this Court observed at pages 782-783 thus:           "The appellants  submit that  they had  not become      "grantee" of any privilege without the execution of con      tracts complying  with the  requirements of Article 299      of the  Constitution. The  learned Judge  of the Kerala      High Court  relied  on  Madhavan  v.  Assistant  Excise      Commissioner, Palghat  (I.L.R.  (1969)  2  Kerala  71),

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    affirmed by  a Division  Bench in Damodaran v. State of      Kerala (1969)  Kerala Law  Times 587.  It appears that,      although  the  Division  Bench  did  ’not  specifically      consider whether  a bidder  at an  auction of  the kind      before us  was the  "grantee" of a privilege within the      meaning of section 26 of the Act, yet, it held that the      liability to  satisfy the dues arising out of a bid was      enforce able  under section  28 of  the Act quite apart      from any  contractual  liability.  Reference  was  also      made, in this connection, to the decision of this Court      in Union  of India v. A. L. Ralia Ram (A.I.R. 1963 S.C.      1685),  for  contending  that  the  absence  of  formal      contract is  not fatal  in all  cases so as to make the      whole transaction null and void ab initio. 740      Statutory duties  and liabilities  may be  enforced  in      accordance   with   statutory   provisions.   Equitable      obligation may also arise and been forced by decrees of      Courts quite apart from the requirements of article 299      of the  Constitution. Mulamchand  v.  State  of  Madhya      Pradesh (1968)  2 S.C.R.  214 affords an instance where      on  a  claim  for  compensation  or  restitution  under      section 70  of the Contract Act, this Court relied upon      the principle stated in Nelson v. Harbolt (1948) 1 K.B.      30 as follows at p. 222:-           "It is no longer appropriate to draw a distinction      between law  and equity.  Principles  have  not  to  be      stated in the light of their combined effect. Nor is it      necessary to canvass the.- niceties of the old forms of      action. Remedies  now depend  on the  substance of  the      right, not  on  whether  they  can  be  fitted  into  a      particular framework. The right here is not peculiar to      equity or  contract or tort, but falls naturally within      the important  category of cases where the Court orders      restitution if the justice of the case so requires."           In the  case before  us, we are concerned with the      legality of  proceedings under  section 28 quoted above      of the Act. It is evident that these proceedings can be      taken in  respect of "all amounts due to the Government      by any  grantee of  a privilege  or by any farmer under      this Act  or by  any person  an account of any contract      relating to  the Abkari  Revenue._". It  is clear  that      dues may  also be  "recovered from the person primarily      liable to  pay the  same or from his surety (if any) ".      It is  not a  condition precedent  to  recovery  of  an      amount due  and recoverable that it should be due under      a formally drawn up and executed contract."      In reaching  the above  conclusion, this Court approved the observation  made by Mathew, J. in Madhavan v. Assistant Excise Commissioner, Palghat which ran as follows:-           "It was  contended on behalf of the petitioners in      some of these cases that no agreements were executed by      them, and therefore, the Government are not entitled to      recover any  amount by  way  of  rental.  Reliance  was      placed upon the decisions of the Supreme Court in H. P.      Chowdhry v.  State  of  M.P.  (AIR  1967  SC  203)  and      Mulamchand v.  State of  M.P. (1969(II)  S.C.W.R. 397),      for the  proposition that  unless there is an agreement      executed in accordance 741      with the provisions of Article 299 of the Constitution,      the   petitioners in  the case where no agreements have      been executed,  would not  be liable to pay rental. The      argument was  that the  liability to  pay rental arises      only  out   of  the  agreement,  and  if  there  is  no

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    agreement, then there is no liability to be enforced As      I have  indicated the liability to pay the renal arises      not only  by virtue  of the  agreement but  also by the      provisions of  section 28  of the  Act. The decision of      the Supreme  Court in  H. P.  Chowdhry v. State of M.P.      would make it clear that if there are provisions in the      Act, the liability to pay the rental can be enforced. I      think that  even if  no agreement  has  been  executed,      there was  the liability  under section  28 of the Act,      and that  the liability  would be  enforced  under  the      provisions of the Revenue Recovery Act. (See Sections 6      and 62 of the T.C. Act) ".      Chandrashekhar, J. (as he then was) has also taken more or less  the same  view in-State of Mysore v. Dasappa Naidu. In that  case, the  plaintiff who was a licensee for sale of ganja had  executed a  counterpart agreement  as required by section 25  of the  Mysore Excise Act but no formal deed was executed by  both the  plaintiff and the State Government as required by Article 299 of the Constitution. When the period of contract  expired, rental for four months was in arrears. When  the   Government  sought   to  bring   the  licensee’s properties  to   sale  for  recovery  of  the  arrears,  the plaintiff executed  a mortgage  in favour  of the  State  to secure payment of the arrears undertaking to pay the arrears in monthly  instalments. As  he defaulted  in payment of the instalments,  the   Assistant  Commissioner  issued  a  sale proclamation for  sale of  the mortgaged  properties. In the suit he  questioned the  said sale  proceeding on the ground that the  counterpart of the agreement and the mortgage deed executed  by   him  were  void  for  nonfulfillment  of  the requirements of  Article’,- 299  of  the  Constitution.  The learned Judge held that the absence of a document conforming to Article  299 was  not a  bar in  view  of  the  statutory provisions contained in the Mysore Excise Act.      The Rajanagaram  Village Co-operative  Society  by  its Secretary, . Parthasarathi Pillai v. P. Veerasami Mudaly was a reverse  case and the facts involved in it were these: The defendant Co-operative  Society put  up a property belonging to it for sale at a public auction. H 742      The auction  was held  by a  sale officer.  One of  the conditions of  the auction  sale was  that the sale would be knocked down  in favour of the highest bidder subject to the approval of  the defendant  Co  operative  Society  and  the Chittoor District Bank. The plaintiff was the highest bidder at the  auction and  the sale was knocked down in his favour by the  sale officer.  He-deposited on  the date of the sale with the  sale officer  the amount  which he  had to deposit under the  conditions of  the sale  and also  deposited  the balance with  t the  defendant within the stipulated period. The  Chittoor   District  Bank   took  up   the  matter  for consideration at  its meeting  held on  a date subsequent to the date  of the sale and approved the sale. This resolution was, however,  not communicated to the plaintiff and no sale deed was  executed in  favour of  him. The  plaintiff by his notice called  upon the defendant to execute a conveyance in his favour.  There upon  the  Bank  cancelled  its  previous resolution and  directed a  re-sale  of  the  property.  The plaintiff thereafter  instituted a  suit for  enforcing  the sale on the basis that there was a concluded contract in his favour which  was denied  by the  defendant in  the  written statement. The  main  contention  urged  on  behalf  of  the defendant was  that the  contract did  not become  final and complete as  the approval  of the Chittoor District Bank was not communicated  to the  plaintiff. Under  section 4 of the

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Contract Act,  it was claimed, that even the approval should have been  communicated like  acceptance as according to the contention  of   the  defendant  that  constituted  a  final acceptance of  the contract.  The trial  court accepted  the contention of  the defendant  and dismissed  the  suit.  The first appellate  court reversed  the decision  of the  trial court and  granted a  decree for specific performance of the contract in  favour of  the plaintiff.  While affirming  the Judgment of  the  first  appellate  court,  the  High  Court observed in the above decision as follows:-           "The defendant appointed a sale officer who, under      the terms  of E.  D. I  was authorised to knock down in      favour ’  of the highest bidder the property subject of      course to  the approval  of Mahasabha  and the Chittoor      District Central  Bank. No  point  was  raised  in  the      courts below,  and indeed it could not be raised before      me, that  this sale  officer had no authority to accept      any bid  on behalf  of the defendant. Further there was      also no  plea any  where that  there was no approval of      the sale  by the  Mahasabha, that is the defendant. The      defendant should  have  known  if  there  was  no  such      approval  and  should  have  put  that  matter  in  the      forefront of  the case if really there is any substance      in that contention 743      in  the  second  appeal.  The  matter,  therefore,  for      consideration is  whether the sale officer, in knocking      down the  bid subject  to the approval of the Bank, had      or had  not accepted the offer of the plaintiff subject      to the condition of approval. Ever since the well-known      decision of  payne v. Cave, (1789) 3 T.R. 148: 100 E.R.      502, it  has been  established that  the position of an      auctioneer is  that of  an agent of the vendor and that      until the  bid is  knocked down,  there is no concluded      contract in  favour of the bidder and the bidder was at      liberty to  withdraw his  offer before it was accepted.      To a similar effect is also the decision Cook v. oxley,      (1790) 3  T.R. 653:  100 E.R.  785. If  there. is  . no      further  condition  of  an  approval  or  confirmation,      ordinarily if  the bid  is knocked down, the acceptance      is communicated  by the  acceptance of  the bid  in the      presence of  the bidder  and no  further  communication      would be  necessary. If,  however, the  acceptance  was      conditional, the  condition being that it is subject to      the approval or confirmation by some other person, what      is the position ? The acceptance in such circumstances,      in my  opinion, is  conditional acceptance and that has      to be  communicated. Nobody  suggests that  in order to      make the  contract enforceable,  it is not necessary to      have the  approval  of  the  person  indicated  in  the      conditions of the auction sale. The question is whether      the approval  also in  such  circumstances,  should  be      communicated to  the bidder  in order  to conclude  the      contract. In  my opinion,  the acceptance  contemplated      may be  absolute or  may be  conditional and  when once      that conditional  acceptance is  communicated, there is      no need or necessity for a further communication of the      fulfillment of  the condition  when the acceptance is a      conditional  acceptance.   The  communication   of  the      acceptance twice is not needed".      The correctness  of this decision is doubted elsewhere. It is  not necessary in this case to decide whether the view expressed by  the High  Court of Madras in the above case is correct or  not for  the situation  in the  instant case  is anterior to  the situation  which obtained in the said case.

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The officer  who held  the same  in the present case had the power to  accept the  bids though it was subject to sanction by the  Excise Commissioner.  The respondent who offered the bids after conclusion of the sale failed to make the initial deposit and thereby drove the Department to hold the resale. It was  high conduct  which ultimately  resulted in the loss suffered by the Department. 10-91SCI/80 744      The decision  of this Court in K. P. Chowdhary v. State of Madhya  Pradesh &  Ors is  not of  much assistance to the respondent in  this case, since in that case the officer who held the  sale was  not competent  to accept the bids of the appellant therein  as the bids offered were higher than what he could  accept. The  appellant therein  resiled  from  the offer made  by him by raising a dispute as to the marking of the trees  even before  the Chief Conservator of Forests who was competent  to accept  the bids  could accept  them. This Court no  doubt upheld  the plea of the appellant therein as there was no acceptance of the bid by the competent officer. This case  is one falling in the category of cases where the sale officer  has no  power to  accept the  bid and  not one falling under  the category of cases involving a conditional acceptance as  observed  in  the  case  of  the  Rajanagaram Village Co-operative  Society by its Secretary, Parthasarati Pillai (supra). It is not the case of the respondent in this appeal that  the officer who held the excise auction was not competent to  accept the  bids. It  is further seen that the question whether  the appellant in the above case was liable in  any  other  manner  also  was  not  considered  in  that decision. Hence  no reliance  can be  placed  on  the  above decision.      The respondent by his own conduct in not depositing the 1/6th of the bids offered by him made it impassible, for the excise authorities  to conclude  the contract.  The question may have  been different if the respondent had done all that he had  to do  under the  conditions of  the auction but the excise authorities  had not  intimated  him  that  he  could exploit the  excise privileges  in accordance  with law. The documents produced  before the  Court show  that on February 24, 1951,  the Deputy  Commissioner, Faizabad wrote a letter (Exh. S) 11’ calling upon the respondent to make the initial deposit which  he had  to make at the conclusion of the sale at the  fall of  the hammer  on the  date of the sale within three days of the receipt of that letter and intimating that in the absence of compliance with the said demand, the shops would be re-auctioned and the amount of deficiency resulting on such  re-auction would be recovered from him. That letter was received  by the  respondent on  March 8,  1951. As  the respondent did  not  comply  with  the  demand,  the  excise authority concerned  decided to  conduct  a  resale  of  the excise privileges  on March  21, 1951, and also to prosecute the respondent  for an  offence punishable under section 185 of the  Indian Penal  Code. Thereafter the respondent gave a representation (Exh. 7) on March 30, 1951 stating that I any action other than prosecuting him may be taken. He stated in that representation  that his  sole object  in offering  the bids was to 745 help  the  Government  and  to  help  himself  but  when  he calculated whether  he would make any profit he felt that he would not  do so. According to the said representation, that was the reason for not depositing 1/6th of the bid amount at the fall  of the  hammer. He,  however, did not question the authority of  the excise  authorities to  put up  the excise privileges for  resale and  to claim  the loss occasioned by

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such resale  from him.  In these  circumstances I  am of the view that it is not possible to hold that the respondent was not in law liable for the claim made by the State Government even though  no contracts were formally entered into between the respondent  and the  State Government.  The liability of the respondent  in the instant case arises under the statute and it  also arises as the result of a civil wrong or a tort committed by him, in offering the highest bid with open eyes and in not fulfilling the obligations arising therefrom. The latter source  of liability  in this  case may  appear to be novel but if justice requires, the Court should not hesitate to impose  it on  the person who has committed the wrong and secure justice for the innocent injured party. The following observation of  Denning L.J.  (as he then was) in Candler v. Crane, Chrismas  & Co.(1)  at page  178, though in minority, are apposite:-           "This argument  about the  novelty of  the  action      does not  appeal to  me in  the least.  It has been put      forward  in   all  the  great  cases  which  have  been      milestones of  progress in  our law, and it has always,      or nearly  always, been rejected. If you read the great      cases of  Ashby v. White (1703) 2 Ld. Raym, 938, Pasley      v. Freeman  (1789) 3  Term  Rep.  51  and  Donoghue  v.      Stevenson (1932)  A.C. 562,  you will find that in each      of them  the judges were divided in opinion. On the one      side there  were the timorous souls who were fearful of      allowing a  new cause  of action.  On the  other  side,      there were  the bold spirits who were ready to allow it      if justice so required. It was fortunate for the common      law that the progressive view prevailed."      Considering the  facts and circumstances of the instant case, I  am of  the view  that the respondent should be made liable for  the sum  claimed in the suit and the decree made by the trial court should be restored.                            ORDER      In  view  of  the  majority  judgment,  the  appeal  is dismissed with no order as to costs. N.V.K. 746