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REVOCATION OF THE PROPOSAL HARIDWAR SINGH V. BAGUN SAMBRUI & ORS

INTRODUCTION

The word contract is defined under section 2(h)[1]. In India, Contracts are governed by the Indian Contract Act, of 1872. There are a total of 266 sections out of which Section 5[2]of the said act deals with the revocation of the proposal. In today’s era, lots of people contract every day and when a contract is breached the aggrieved party is reimbursed by the party who fails to fulfil the obligation mentioned in the contract. Haridwar Singh v Bagun Sambrui & Ors[3] is one of the crucial cases which talks about the factors which leads to the revocation of the proposal under ICA, 1872.

REVOCATION OF THE PROPOSAL

Revocation of the proposal means withdrawing the offer by the promisor before the acceptance of the same by the promisee or can be withdrawn before the communication of acceptance of the proposal is put in the course of transmission, so as to be out of the control of the promisee. Communication of the revocation can be communicated by the offeror himself or by any third party. Section 5 of the ICA,1872 deals with the revocation of the proposal:

  • “A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards”.[4]

In this case the appellant, who is Haridwar Singh, himself revoked the proposal by offering Rs.95,000/- which was the reserve price, as the new bid for that coup on 26 October 1970. In this way the earlier offer to exploit a coup at the bid of Rs.92,001/- stands revoked because the communication of the acceptance was not made to the appellant and the new bid offered by the appellant for the right to exploit bamboo coup needs the confirmation of the competent authority i.e., the Forest Department of Bihar.

FACTS OF THE CASE

  • At the North Division of Charta located in the district of Hazaribagh, there was a “Bantha Bamboo Coup”.
  • On 22 July 1970, the Department of Forest of Bihar’s Government advertised the Public Auction regarding the sale of the right to exploit the coup, an auction was held on August 7, 1970, in the office of the Divisional Forest Officer.
  • Appellant along with 5 more persons participated in the auction and he made the highest bid for the right but it was less than the reserve price which was declared to be Rs.95000, but the bid was accepted by the Divisional Forest Officer.
  • Appellant also credited the security which costs Rs.23,800 and an agreement was executed by him.
  • Then, a report was sent by the Divisional Forest Officer regarding the auction to the Conservator of Forest via letter, he further forwarded the letters to the Department of Forest of Bihar’s Government for the acceptance of the bid made by the appellant.
  • As the bid was below the reserve price, the matter was then referred to the Finance Department, then the dept also asked the reason from the Divisional Forest Officer for approving the bid at a price less than Reserve Price. He then submitted his explanation to the dept and while the matter was pending the appellant expressed his willingness to buy the right at the reserve price of Rs. 95,000/- same was accepted by the Minister of Forest and a telegram was sent by him to the Conservator of Forest for confirming the sale of the right to exploit the coup to the appellant.
  • But, the Divisional Forest Officer didn’t receive any information of acceptance. Then the acceptance was further not communicated by him to the appellant.
  • In the meanwhile, Md Yakub who was respondent no.6, offered the deal to get the right of the coup for Rs. 1,01,125.
  • As the acceptance was not communicated to the appellant, the Minister of Forest rescinded the deal of the settlement of the coup with the appellant on 13 December 1970 and settled the deal with the 6th Respondent for Rs. 1,01,125/-. Then the Divisional Forest Officer directed Md. Yakub deposited the security amount and he also deposited the amount required for the security and an agreement was executed.
  • The appellant filed the writ petition at the Patna High Court.

LEGAL ISSUES RAISED IN THIS CASE

  • Whether The Contract Was Concluded Or Not When The Divisional Forest Officer Accepted The Bid Offered By The Appellant.
  • Whether The Settlement Made With Respondent No.6 Violated Of Rule 10 (1) Read With Article 166(3) Of The Coi.
  • Whether The Decision Taken By The High Court Was Appropriate Or Not.

ARGUMENT BY THE APPELLANT

A Writ Petition was filed by the appellant at the Patna High Court arguing that the contract was already concluded when the highest bid offered by him was accepted by the divisional forest officer though the confirmation by the government was still pending but later on government also confirmed it. So, it is out of the power of the government to settle the coup with Respondent No. 6. In support of this, counsel for the appellant cited the case of The Rajanagaram Village Cooperative Society v Veerasami Mudaly[5]. In this case, the court held that when the acceptance is conditional it has the effect to bind the highest bidder and when it has been approved by the competent authority there is no need to communicate the approval which is the condition to make the contract binding. Later on, neither they have the authority to withdraw from the offer nor they can back off from the contract. Also, the deal of the coup in favour of Respondent No. 6 violated Rule 10(1) made by the Bihar Government under Article 166(3) of the COI for the conduct of Executive Business in the state of Bihar. Rule10 states that “no department shall, without prior consultation with the finance department, authorize by any order, title lease, or license of mineral or forests”.[6]

ARGUMENT BY THE DEFENDANT

The Counsel who was arguing in favour of Bihar’s Government and 6th Respondent contended that the provision given under Rule 10(1) regarding the prior consultation with the Department of Finance is merely a direction. So, the prior consultation is not mandatory and the settlement with Respondent No.6 is valid.

JUDGMENT OF THE HC OF PATNA

The HC of Patna ruled that the contract with the appellant was conditional in nature as it required the confirmation of the government and in the absence of the same the contract cannot be concluded even if the Divisional Forest Officer approved the highest bid offered by the appellant. Apart from this, the appellant himself revoked the proposal by offering to settle the coup at the reserve price. Also, according to Rule 10 the prior consultation with the Department of Finance is not mandatory if the price of the lease exceeds the amount of Rs.50000/. And the same is merely a direction. So, the settlement of the government with Respondent No.6 is valid.

JUDGMENT OF THE SUPREME COURT

The Supreme Court of India quashed the order given by the High Court and held that the negative and prohibitory language of Rule 10 (1) makes it clear that the prior consultation with the Department of Finance is mandatory in nature and according to Rule 10(2)it is evident that the prior consultation with the department of finance is needed for the confirmation of the proposal and if the finance department does not agree with the offer, then the department which is organizing can take no further action on the respective offer. The appeal by the appellant was approved by J. Mathew. Hence the settlement with Respondent No. 6 violated Rule 10.

CONCLUSION

An offer to buy or sell may be retracted at any time before it is unconditionally and completely accepted, by words or conduct; and bidding at an auction is a mere offer which may be retracted before the hammer is down[7]

The above case stated that for the contract to become valid the communication of the acceptance by both parties to each other is mandatory also according to section 4[8], communication completes as against the proposer when it is put into course of transmission to him that’s why in the absence of the communication of the acceptance to appellant there was no contract concluded between the Government and the Appellant. Also, as observed in the case of Somasudaram Pillai v Provincial Government of Madras[9]where CJ Leach, stated that to make a contract enforceable that there must be an offer and also the acceptance should be unconditional section 7(1)[10].

Author(s) Name: Riya (Dr. B. R. Ambedkar National Law University, Sonipat)

[1]The Indian Contract Act1872,s 2(h)

[2]The Indian Contract Act1872,s 5

[3]Haridwar Singh v Bagun Sambrui & Ors(1972) AIR 1242

[4]‘Section 5 in The Indian Contract Act(1872)’(Indian Kanoon)<https://indiankanoon.org/doc/931937/ > accessed 5 July 2023

[5]The Rajanagaram Village Cooperative Society v Veerasami Mudaly(1951) AIR Mad 322

[6]Bhoomika CB,‘Haridwar Singh vs Bagun Sambrui Case Summary(1973)’(Law Planet,8 June 2021)<https://lawplanet.in/haridwar-singh-vs-bagun-sambrui-case-summary-1973/>accessed 3 July 2023

[7]Agra Bank v Hamlin(1891) ILR 14 Mad 235( Best J)

[8]The Indian Contract Act1872,s 4

[9]Somasudaram Pillai v provincial Government of Madras(1947) 1 MLJ 123

[10]The Indian Contract Act1872,s 7(1)