Case: C. V. K. Rao Vs. Dentu Bhaskara Rao

1. The respondent Dentu Bhaskara Rao was returned to the Andhra Pradesh Legislative Assembly from Kakinada constituency at the last general election. The appellant C.V. K. Rao was his closest competitor. There were two other candidates but they obtained very few votes and they have not shown any further interest. The appellant filed an election petition to question the election of the respondent on many grounds : one such ground was that the respondent was disqualified under S. 7(d) of the Representation of the People Act, 1951 (43 of 1951). The respondent had obtained a mining lease from the State of Andhra Pradesh on April 13, 1960, though on the date he filed his nomination paper he had not begun operations under that lease. The appellant took objection to the nomination of the respondent on the ground that he held a contract from the Andhra Pradesh Government within the prohibition by S.7(d) of the Act, but the Returning Officer overruled his objection. The Election Tribunal later held that he was disqualified under S. 7(d) of Act 43 of 1951 and declared the election void. On appeal, the High Court of Andhra Pradesh reversed the decision and the present appeal has been filed on a certificate granted by the High Court.

Court's reasoning:
This question can be broken into two which are: (a) whether Cl. 21 can he regarded as a contract and (b) whether it can be regarded as a contract for supply of goods. Clause 21 is invariably inserted in every mining lease. It reserves to the Government the right to the minerals which vest in Government but which are allowed to be raised by the lessee holding the lease. The lease is, in one sense, a contract between the Government and the lessee because there is consideration on both sides and an offer and acceptance. There are obligations created by it, some of which are contractual even though some may be regarded as arising from the conditions of the grant. The mining lease without Cl. 21 cannot possibly be described as a contract for the supply of goods. Without that clause there would neither be a mention of goods nor of their supply. If the lease is to be read as satisfying the disqualification in S. 7(d), Cl. 21 alone can satisfy it. Clause 21 speaks of a right of the Government to pre-empt the minerals and all products thereof lying in or around the land demised or elsewhere under the control of the lessee. There is, however, no concluded contract in respect of any goods because it hardly needs to be said that relying upon this clause the lessee cannot begin delivery of the ore to the Government. He can do so only if the Government serves a notice on him stating the quantity pre-empted and the time within which the supply is to be made. The clause, however, does not make it obligatory on Government to pre-empt any quantity of mineral or at all. There is no obligation to buy nor is there any compulsion on the part of the lessee to sell unless asked. In there circumstances, the clause does no more than to keep intact a right of the Government to obtain the minerals or their products as and when Government requires in preference to others. Till Government makes up its mind and serves a notice there is no obligation to make any deliveries and even though the word subsists is a word of wide import, it cannot be said that a contract for the sale of goods subsists because a contract requires an offer and its acceptance and is not a mere reservation of a right.5. Taking the most liberal view of the matter it is clear that Cl. 21 did not bring into being a contract for the supply of goods. All that it did was to reserve to the Government the right to prior purchase of the minerals raised by the respondent. The reservation of such right does not amount to a contract for the supply of goods which can be said to subsist between the parties. The High Court was, therefore, right in reversing the decision of the Election Tribunal.