Case: M/s. Padia Timber Company(P) Ltd Vs. The Board of Trustees of Visakhapatnam Port Trust Through its Secretary

seen that even according to the M/s Padia Timber Company Pvt. Ltd., and as per its letter dated 27.11.1990 ex.A.10, the M/s Padia Timber Company Pvt., Ltd., admitted about the receipt of the letter dated 29.10.1990 and the acceptance of tender which is valid for three months. Therefore, having regard to the letter in Ex.A.10 mentioning about the acceptance of the tender on 29.10.1990, it is not open to the M/s Padia Timber Company Pvt. Ltd., to fall back and say that there was no acceptance at all nor there was any concluded contract. The Court below was rightly held that the tender of the defendant was duly accepted on 29.10.1990 which was followed by the purchaser order on 31.10.1990 and that itself is more enough to show that there was concluded and enforceable contract. Thus, nothing lies in the mouth of the M/s Padia Timber Company Pvt. Ltd., to say that there was no concluded contract. Further, having regard to facts and circumstances and admittedly there being no steps at all in terms of such acceptance, the breach squarely falls only on the M/s Padia Timber Company Pvt. Ltd. and therefore, the Visakhapatnam Port Trust has rightly forfeited the amount and the Court below was rightly held that the said plaintiff namely the Visakhapatnam Port Trust is entitled for the amounts as claimed. Following the same and consequently to the said findings which go to the very root of the case itself, the claim as made by the M/s Padia Timber Company Pvt. Ltd., for refund in the other suit also squarely falls to ground with the self-same reasons. Hence, we do not find any merits in these appeals... 54. With the greatest of respect, the High Court has cursorily dealt with the contentions of the Appellant and has not even discussed the cases that had been cited on behalf of the Appellant. 55. The Trial Court relied on Section 4 of the Contract Act, but completely overlooked Section 7. Section 7 of the Indian Contract Act, 1872 is set out hereinbelow for convenience:- 7. Acceptance must be absolute.—In order to convert a proposal into a promise the acceptance must— —In order to convert a proposal into a promise the acceptance must— (1) be absolute and unqualified; (2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but, if he fails to do so, he accepts the acceptance. 56. It is a cardinal principle of the law of contract that the offer and acceptance of an offer must be absolute. It can give no room for doubt. The offer and acceptance must be based or founded on three components, that is, certainty, commitment and communication. However, when the acceptor puts in a new condition while accepting the contract already signed by the proposer, the contract is not complete until the proposer accepts that condition, as held by this Court in Haridwar Singh v. Bagun Sumbrui and Ors. AIR 1972 SC 1242 An acceptance with a variation is no acceptance. It is, in effect and substance, simply a counter proposal which must be accepted fully by the original proposer, before a contract is made. 57. In Union of India v. Bhim Sen Walaiti Ram (1969) 3 SCC 146, a three-Judge Bench of this Court held that acceptance of an offer may be either absolute or conditional. If the acceptance is conditional, offer can be withdrawn at any moment until absolute acceptance has taken place. 58. In Jawahar Lal Burman v. Union of India (supra), referred to by the High Court, this Court held that under Section 7 of the Contract Act acceptance of the offer must be absolute and unqualified and it cannot be conditional. However, in the facts and circumstances of that case, on a reading of the letter of acceptance as a whole, the Appellants argument that the letter was intended to make a substantial variation in the contract, by making the deposit of security a condition precedent instead of a condition subsequent, was not accepted. 59. The High Court also overlooked Section 7 of the Contract Act. Both the Trial Court and the High Court over-looked the main point that, in the response to the tender floated by the Respondent-Port Trust, the Appellant had submitted its offer conditionally subject to inspection being held at the Depot of the Appellant. This condition was not accepted by the Respondent-Port Trust unconditionally. The Respondent-Port Trust agreed to inspection at the Depot of the Appellant, but imposed a further condition that the goods would be finally inspected at the showroom of the Respondent-Port Trust. This Condition was not accepted by the Appellant. It could not, therefore, be said that there was a concluded contract. There being no concluded contract, there could be no question of any breach on the part of the Appellant or of damages or any risk purchase at the cost of the Appellant. The earnest deposit of the Appellant is liable to be refunded. 60. Since we hold that the Appellant was neither in breach nor liable to damages, it is not necessary for us to examine the questions of whether the compensation and/or damages claimed by the Respondent Port Trust was reasonable or excessive, whether claim for damages could only be maintained subject to proof of the actual damages suffered, and whether the Respondent Port Trust had taken steps to mitigate losses. We also need not embark upon the academic exercise of deciding whether prior approval of the Board of Trustees is a condition precedent for creation of a valid contract for supply of goods, or whether post facto ratification by the Board would suffice.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]47. In the judgment and order under appeal, the High Court has not discussed any of the judgments referred to above. The High Court simply recorded the contention of the Appellant that there was no previous approval of the Board of Trustees as contemplated under Section 34(1) of the Major Port Trusts Act, 1963, and therefore, no enforceable contract.48. In Visakhapatnam Port Trust, Visakhapatnam and Anr. v. Bihar Alloy Steels Ltd. and Ors. (supra) a Division Bench of the High Court held:17. In the instant case the provisions of S. 34 prescribe the manner in which a contract is to be made on behalf of the Board of Trustees and further sub-section (3) contains a prohibition that a contract not made in accordance with the earlier portions of Section shall not be binding on the Board. It has been held by the Supreme Court in its decision reported in H.S. Rokhy v. New Delhi Municipality AIR 1962 SC 554  that the effect of such a prohibition as is contained in sub-sec. (3) of S. 34 renders the contract itself void and unenforceable. In that case the controversy was about estoppel against New Delhi Municipal Corporation which was governed by the Punjab Municipal Act, 1911, which contains a similar provision viz., S. 47.. In Visakhapatnam Port Trust, Visakhapatnam and Anr. v. Bihar Alloy Steels Ltd. and Ors. (supra) this Court held that the promise as contained in the letter of Traffic Manager to lease an area of port trust was void and unenforceable against the Board of Trustees, there being no contract made in accordance with Section 34 of the Major Port Trusts Act.51. The judgment of this Court in Mahesh Transport Co. v. Transport and Dock Workers Union (supra), which relates to the validity and propriety of the reference of an industrial dispute under Section 10(1) of the Industrial Disputes Act, 1947, apparently has no relevance to the issues involved in this case. In M.V. Shankar Bhat and Anr. v. Claude Pinto since (D) by Lrs. and Ors. (supra), this Court held that an agreement which was subject to ratification by heirs under a will who were not parties to the agreement did not create a conclusive contract. The relevance of the judgment is unexplained.52. In U.P. Rajkiya Nirman Nigam Ltd. v. Indure Pvt. Ltd. And Ors. (supra) this Court held that a contract by a Government Notification is not binding unless it is executed in accordance with its Articles of Association.53. The High Court found that there was no dispute that tenders had been called for and that it was the case of the Respondent Port Trust that the offer of the Appellant had in fact been accepted and purchase order issued on 31st October, 1990 under registered Post that had been acknowledged but refused by the Appellant. The High Court also recorded the contention of the Appellant that in the absence of previous approval from the Board of Trustees of the Respondent-Port Trust, under the proviso to Section 34(1) of the Major Port Trust Act 1963, there could be no enforceable contract. Even though the High Court referred to the submission of the Appellant that the letter of intent was subject to ratification by the Board and and the only witness of the Respondent-Port Trust had admitted that no contract had been concluded, the High Court did not deal with the same. The High Court observed:….The main reliance placed by the Visakhapatnam Port Trust under Clause 16 of the tender conditions in Ex.A.1, was that in the event of non-supply of the material, the Port Trust has right to cancel the contract itself whereas the case of the Company was that there was no contract at all. Therefore, one has to see whether there was really any concluded or enforceable contract before one could blame the other. There has been a quite re-assertion through the evidence on behalf of the Port Trust by P.W.1. There is a reference to a mention in Ex.A.8 as to the ratification by the Board, which according to the M/s Padia Timber Company Pvt. Ltd., nothing is forthcoming. Further, P.W.1 during his cross-examination, stated that it is true that the contract was not concluded. However, that itself cannot be a reflection on the nature of intent, which could follow the facts and circumstances in the documents, which are staring at. It is to be seen that even according to the M/s Padia Timber Company Pvt. Ltd., and as per its letter dated 27.11.1990 ex.A.10, the M/s Padia Timber Company Pvt., Ltd., admitted about the receipt of the letter dated 29.10.1990 and the acceptance of tender which is valid for three months. Therefore, having regard to the letter in Ex.A.10 mentioning about the acceptance of the tender on 29.10.1990, it is not open to the M/s Padia Timber Company Pvt. Ltd., to fall back and say that there was no acceptance at all nor there was any concluded contract. The Court below was rightly held that the tender of the defendant was duly accepted on 29.10.1990 which was followed by the purchaser order on 31.10.1990 and that itself is more enough to show that there was concluded and enforceable contract. Thus, nothing lies in the mouth of the M/s Padia Timber Company Pvt. Ltd., to say that there was no concluded contract. Further, having regard to facts and circumstances and admittedly there being no steps at all in terms of such acceptance, the breach squarely falls only on the M/s Padia Timber Company Pvt. Ltd. and therefore, the Visakhapatnam Port Trust has rightly forfeited the amount and the Court below was rightly held that the said plaintiff namely the Visakhapatnam Port Trust is entitled for the amounts as claimed. Following the same and consequently to the said findings which go to the very root of the case itself, the claim as made by the M/s Padia Timber Company Pvt. Ltd., for refund in the other suit also squarely falls to ground with the self-same reasons. Hence, we do not find any merits in these appeals.... With the greatest of respect, the High Court has cursorily dealt with the contentions of the Appellant and has not even discussed the cases that had been cited on behalf of the Appellant.56. It is a cardinal principle of the law of contract that the offer and acceptance of an offer must be absolute. It can give no room for doubt. The offer and acceptance must be based or founded on three components, that is, certainty, commitment and communication. However, when the acceptor puts in a new condition while accepting the contract already signed by the proposer, the contract is not complete until the proposer accepts that condition, as held by this Court in Haridwar Singh v. Bagun Sumbrui and Ors. AIR 1972 SC 1242  An acceptance with a variation is no acceptance. It is, in effect and substance, simply a counter proposal which must be accepted fully by the original proposer, before a contract is made.57. In Union of India v. Bhim Sen Walaiti Ram (1969) 3 SCC 146,  a three-Judge Bench of this Court held that acceptance of an offer may be either absolute or conditional. If the acceptance is conditional, offer can be withdrawn at any moment until absolute acceptance has taken place.58. In Jawahar Lal Burman v. Union of India (supra), referred to by the High Court, this Court held that under Section 7 of the Contract Act acceptance of the offer must be absolute and unqualified and it cannot be conditional. However, in the facts and circumstances of that case, on a reading of the letter of acceptance as a whole, the Appellants argument that the letter was intended to make a substantial variation in the contract, by making the deposit of security a condition precedent instead of a condition subsequent, was not accepted.59. The High Court also overlooked Section 7 of the Contract Act. Both the Trial Court and the High Court over-looked the main point that, in the response to the tender floated by the Respondent-Port Trust, the Appellant had submitted its offer conditionally subject to inspection being held at the Depot of the Appellant. This condition was not accepted by the Respondent-Port Trust unconditionally. The Respondent-Port Trust agreed to inspection at the Depot of the Appellant, but imposed a further condition that the goods would be finally inspected at the showroom of the Respondent-Port Trust. This Condition was not accepted by the Appellant. It could not, therefore, be said that there was a concluded contract. There being no concluded contract, there could be no question of any breach on the part of the Appellant or of damages or any risk purchase at the cost of the Appellant. The earnest deposit of the Appellant is liable to be refunded.60. Since we hold that the Appellant was neither in breach nor liable to damages, it is not necessary for us to examine the questions of whether the compensation and/or damages claimed by the Respondent Port Trust was reasonable or excessive, whether claim for damages could only be maintained subject to proof of the actual damages suffered, and whether the Respondent Port Trust had taken steps to mitigate losses. We also need not embark upon the academic exercise of deciding whether prior approval of the Board of Trustees is a condition precedent for creation of a valid contract for supply of goods, or whether post facto ratification by the Board would suffice.