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PETITIONER: UNION OF INDIA & ORS.

       Vs.

RESPONDENT: M/S. BHIM SEN WALAITI RAM

DATE OF JUDGMENT: 29/09/1969

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. SHAH, J.C. GROVER, A.N.

CITATION:  1971 AIR 2295            1970 SCR  (2) 594

ACT:     Delhi Liquor Licence Rules framed  under Punjab   Excise Act  1  1914   Clause 21 Rule  5.34  requiring  purchase  at auction of license to deposit one-sixth of annual fee within seven    days    of    auction--Payment    not    made    by purchaser--Commissioner refusing license  under cls. 31  and 33 of conditions of sale--Resale of licence by Collector  at lesser   price-Original  purchaser  whether  liable  to  pay deficency in price.

HEADNOTE:     The  respondent gave the highest bid at an  auction  for the  sale of license for a country liquor shop in Delhi  for the  year 1949-50.  Under cl. 31 of the conditions  of  sale for   that  year,  the  Chief  Commissioner  was  under   no obligation  to grant a license until he was assured  of  the financial status of the bidder.  Under el. 33 all final bids were made subject to confirmation by the Chief  Commissioner who  could  reject any bid assigning any  reasons.   However under cl. 21 of r. 5.34 of the Delhi Liquor License Rules  a person to whom a shop had been sold had to pay one-sixth  of the  annual  fee  within seven days  of  the  auction.   The respondent  not having paid one-sixth of the annual  fee  as required by the said cl. 21, the Chief Commissioner did  not confirm his bid.  Resale of the excise shop was ordered.  At the new auction it was sold at a lower price. The  Collector Delhi  thereupon  held  the respondent  liable  to  pay  the difference  between his bid and the bid for which  the  shop was  later sold, and commenced proceedings for the  recovery of the sum.  The respondent filed a suit in the Court of the Senior  Subordinate  Judge, Delhi praying  for  a  permanent injunction  restraining  the appellants (Union  of  India  & Ors.)  from taking any proceedings for the recovery  of  the amount.  The trial judge decreed the suit.  The  decree  was upheld  by the first appellate court.  In second appeal  the Single  Judge decided against the respondent.  The  Division Bench  decided in his favour.  The appellants came  to  this Court  with certificate.  It was contended on behalf of  the appellants  that  the   respondent   was   under   a   legal obligation  to pay one-sixth of the annual fee within  seven days  of the auction under el. 21 of r. 5.34; it was due  to

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his default that a resale of the excise  shop  was  ordered; and  under cl. 22 of r. 5.34 the respondent was  liable  for the  deficiency  in price and all expenses  of  such  resale which was caused by his default.     HELD:  (i)  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. [H 597]     From  cl. 33 of the conditions of sale it is clear  that the contract of sale is not complete till it is confirmed by the Chief Commissioner and till such confirmation the person whose  bid  has been provisionally accepted is  entitled  to withdraw  his  bid.  If the bid is so withdrawn  before  the confirmslion  of the Chief Commissioner the bidder will  not be  liable for damages on account of any breach of  contract or for the shortfall on resale. [G-H 597] Hussers  v. Horne Payne, [1878] 8 Ch. D. 670, 676,  referred to. 595     (ii) The phrase "person to whom a shop has been sold" in el.  21 r. 5.34 cannot be accepted to mean a  "person  whose bid  has  bern provisionally accepted".  The first  part  of el.; 21 deals with a completed sale and the second part with a  situation  where the auction is conducted by  an  officer lower  in rank than the Collector.  In the latter  case  the rule  makes it clear that if any person whose bid  has  been accepted  by the officer presiding at the auction  fails  to make  the deposit of one-sixth of the annual fee, or  if  he refuses to accept the licence. the Collector may resell  the licence either by public auction or by private contract  and any  deficiency  in price and all expenses  of  such  resale shall be recoverable from the defaulting bidder. [F-G 598]     In  the  present  case  the first  part  of  d.  21  was applicable.   If the Chief Commissioner had not  disapproved the  bid  offered  by the respondent under  el.  33  of  the conditions  of  sale,  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 prerequisites of a completed sale were lacking in  this  case  there  was  no  liability  imposed  on   the respondent for payment of the deficiency in the price.  [598 H; 599 A-B]

JUDGMENT: CIVIl,  APPELLATE  JURISDICTION: Civil Appeal  No.  1613  of 1966.     Appeal  from  the judgment and decree dated  August  19, 1963  of the Punjab High Court, Circuit Bench  at  Delhi  in Letters Patent Appeal No. 50-D of 1960.     V.A.  Seyid Muhammad, S.P. Nayar and B.D.  Sharma’,  for the appellants.     S.T. Desai, K.L.Arora, Bishambar Lal and H.K. Puri,  for the respondent. The Judgment of the Court was delivered by     Ramaswami,  J.   This appeal is brought  by  certificate from the judgment of the Division Bench  of the Punjab  High Court dated August 19, 1963 in Letters Patent Appeal No. 50- D of 1960.     An  auction was held for the sale of licence of  country liquor  shop in Bela Road for the year 1949-50 on March  23, 1949. The auction took place in pursuance of the  conditions of  "Auction of Excise Shops in Delhi for the year  1949-50" Ex.  D-28.  Clauses 31 and 33 of the conditions were to  the

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following effect:                   "31.  The Chief Commissioner is  under  no               obligation  to grant any license until  he  is               assured of financial status of the bidder.  At               the conclusion of the auction an enquiry  will               be  made  into the financial position  of  any               bidder  not known to the excise staff and  any               such bidder shall if necessary be called  upon               to furnish security for the observance of  the               terms  of  his  licence as  required  by  sub-               section (2) of section 34 of the Punjab Excise               Act 1 of 1914, as extended to Delhi Province.               596                    33.  All final bids will be made  subject               to the confirmation by the Chief  Commissioner               who  may reject any bid without assigning  any               reasons. If no bid is accepted for any  shop,_               the  Chief Commissioner reserves the right  to               dispose.  it off by tender or otherwise as  he               thinks The respondent offered the highest bid of Rs. 4,01,000/- for the shop.  Under the Excise Rules the bidder had to  deposit one-sixth  of  the purchase price within seven days  of  the auction but the deposit was not made by the respondent.   In these  circumstances the Chief Commissioner did not  confirm the bid of the respondent and resale of the Excise Shop  was ordered.   On May 3, 1949 the shop was again auctioned  when Messrs Daulat Ram Amar Singh offered the highest bid of  Rs. 2,20,000/- which was confirmed by the Chief Commissioner, on July 7, 1949.  Holding the respondent liable for the loss of Rs.  1,81,000  being the difference between the bid  of  the respondent and of Messrs Daulat Ram Amar Snigh the Collector of  Delhi  started  proceedings  for  the  recovery  of  Rs. 1,81,000,./.   On July 22, 1949 the respondent filed a  suit in the court of Senior Subordinate Judge, Delhi praying  for a  permanent  injunction  restraining  the  appellants  from taking  any  proceedings to recover the amount.   The  trial judge decreed the suit holding that the sale was subject  to confirmation  by  the Chief Commissioner under  cl.  33  and since  the  auction  in favour of  the  respondent  was  not accepted by him there was no binding obligation between  the parties.   The decree of the trial court was upheld  by  the lower appellate court.  In second appeal False, J., took the view  that cl. 3 3 was not in consonance with the  statutory rules and the contract came into existence when the  bidding was  closed in favour of the respondent on March  23,  1949. The  respondent was therefore held liable to make  good  the loss  which  the Government sustained in  resorting  to  the resale  of  the excise shop.  The resportdent  preferred  an appeal under Letters Patent. The Division Bench allowed  the appeal  reversing  the  decision of  the  single  Judge  and restored that of the trial court. Clause 21 of rule 5.34 states:                 "A person to whom a shop has been sold shall               pay  one-sixth of the annual fee within  seven               days of the auction (any deposits already made               shall be credited to this sum, and any  excess               shall be either returned to him or credited to               future payments).  By the 7th of the month  in               which he begins his business under his license               and  by the 7th of every subsequent month  the               licensee  shall pay one-twelfth of the  annual               fee till the whole fee is paid.    But he  may               at  any  time pay the whole amount due  if  he               wishes.  If the total amount due is less  than

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             Rs. 100 it shall be payable in one sum  unless               the  Collector for               597               special reasons, allows payment to be made  in               instalments.  If any person whose bid has been               accepted  by  the  officer  presiding  at  the               auction fails to make the deposit of one-sixth               of the annual fee, or if he refuses to  accept               the  license,  the Collector may  resell   the               license,  either  by  public  auction  or   by               private contract, and any deficiency in  price               and  all expenses of such resale or  attempted               resale   shall   be   recoverable   from   the               defaulting  bidder in the manner laid down  in               section  60  of the Punjab Excise  Act,  1  of               1914, as applied to the Delhi Province.               Rule 22 states:                   "When  a license has been  cancelled,  the               Collector  may resell it by public auction  or               by  private  contract and  any  deficiency  in               price  and  all  expenses of  such  resale  or               attempted resale shall be recoverable from the               defaulting licensee in the manner laid down in               section  60 of the Excise Act as  applied  .to               the Delhi Province." On  behalf of the appellants it was contended by  Dr.  Seyid Muhammad that the respondent was under a legal obligation to pay  one-sixth  of the annual fee within seven days  of  the auction  under cl.    21 of r. 5.34 and it. was due  to  his default that a resale of the excise shep was ordered.  Under cl.  22  of  r.  5.34 the  respondent  was  liable  for  the deficiency  in price and all expenses of such resale*  which was  caused  by his default.  We are unable to  accept  this argument.  The first portion of cl. 21  requires the "person to whom the shop has been sold" to deposit one-sixth of  the total annual fee within seven days.  But the sale is  deemed to  have been made in favour of the highest bidder  only  on the  completion of the formalities before the conclusion  of the  sale.  Clause 16 of r. 5.34 states that "all sales  are open to revision by the Chief Commissioner".  Under cl.  18, the Collector has to make a report to the Chief Commissioner where in his discretion he is accepting a lower bid.  Clause 33 of the Conditions, Ex. D-28, states that "all final  bids will  be  made  subject to the  confirmation  by  the  Chief Commissioner  who may reject any bid without  assigning  any reasons."  It is, therefore, clear that the contract of sale was  not  complete till the 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.   When the bid is so withdrawn before the  confirmation of the Chief Commissioner the bidder will not be liable  for damages  on  account of any breach of contract  or  for  the shortfall  on the resale.  An acceptance of an offer may  be either  absolute  or  conditional.   If  the  acceptance  is conditional  the offer can be withdrawn at any moment  until absolute acceptance has taken place.  This view is borne out by the 598 decision of the Court of Appeal in Hussey v.  HornePayne(1). In that case V offered land to P and P accepted ’subject  to the title being approved by my solicitors’.  V later refused to go on with the contract and the Court of Appeal held that the  acceptance  was conditional and there  was  no  binding contract  and  that V could withdraw at any time  Until  P’s solicitors had approved the title. Jessel, M.R. observed  at

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p. 626 of the report as follows:                   "The  offer made to the Plaintiff  of  the               estate  at  that  price  was  a  simple  offer               containing  no  reference whatever  to  title.               The  alleged acceptance was an  acceptance  of               the  offer,  so far as  price  was  concerned,               ’subject  to the title being approved  by  our               solicitors’.  There was no acceptance of  that               additional  term, and the only question  which               we are called upon to decide is, whether  that               additional term so expressed amounts in law to               an  additional term or whether it amounts,  as               was  very fairly admitted by the  counsel  for               the  Respondents,   to  nothing  at  that  is,               whether it merely expresses what the law would               otherwise   have  implied.    The   expression               ’subject  to the title being approved  by  our               solicitors’  appears  to me to be  plainly  an               additional  term.   The law does  not  give  a               right  to the purchaser to say that the  title               shall  be approved by any one, either  by  his               solicitor or his conveyancing counsel, or  any               one else.  All that he is entitled to  require               is  what is called a marketable title, or,  as               it   is  sometimes  called,  a   good   title.               Therefore,  when  he puts in ’subject  to  the               title  being approved by our  solicitors’,  he               must  be taken to mean what he says, that  is,               to make a condition that solicitors of his own               selection shall approve of the title." It was submitted on behalf of the appellant that the  phrase "person  to whom a shop has been sold" in cl. 21 of r.  5.34 means a "’person whose bid has been provisionally accepted". It  is  not possible to accept this argument.   As  we  have already  shown  the  first  part of  cl.  21  deals  with  a completed  sale and the second part deals with  a  situation where  the auction is conducted by an officer lower in  rank than  the Collector.  In the latter case the rule  makes  it clear that if any person whose bid has been accepted by  the officer  presiding at the auction fails to make the  deposit of  one-sixth of the annual fee, or if he refuses to  accept the licence, the Collector may resell the licenee, either by public auction or by private contract and any deficiency  in price  and all expenses of such resale shall be  recoverable from  the defaulting bidder.  In the present case the  first part of cl. 21 applies.  It is not disputed that the (1) [1878]  8 Ch. D. 670 at 676.                             599 Chief  Commissioner has 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. For  these reasons we hold that the judgment of  the  Punjab High Court dated August 19, 1963 in L.P.A. No. 50-D of  1960 is correct and this appeal must be dismissed with costs. G.C.                          Appeal  dismissed. 600