HARIDWAR SINGH

v .

BA GUN SUMBRUI AND ORS.

February 25, 1972

[K. S. HEGDE AND K. K. MATHEW, JJ.]

Cqntracts-Acceptance of auction bi~ b, y Divisional Forest Officer r; ubject to confirmation by Government does nof result in concluded contracts in the abnce of confirmation by Governm.eint7""""Rules of Executive Busines9 of Bihar Government 1nade under Art. 166(3) of Constitution-Rule-10(1) as relaxe(i does not prohibit grallt of /eare by vrivnte Neaty-Rule 10 (1) in so far llS it requires prior con.fultation with

Finance Depar'1nent is mnndatory.

The right to exploit a bamboo coup in the Hazaribagh district of Bibar was auctioned in August .1970.

The reserve price was Rs. 95,000/· but the appellant's bid of Rs. 92,001/· being the highest was accepted by the Divisional Forest Officer. Too petitioner deposited the security required and executed an agreement. The Divisional Forest Officer reported

obout the aucion sale to the Conservator of Forests, Hazaribagli Circkl.

As the price for which the coup was provisionally settled exceeded Rs. 50,000 / • the Conservator of Forests forwarded ili> papers reprding the auction sale to the Deputy Sl:cfetary to the Government of Bihar, Forest Department for confirmation of the acceptan<" by the Govctnment.

Since provisional . 'Settlement was made for an amount less than the reserve prioe the matter was also referred to the Finance Department. When the

matter was pending the appellant expmserl his willingness to take the settlement at the res:rve price of Rs. 95,000/- by his communication dated October 26, 1970. The appellant thereafter filed an application.. on Sovembe< 3, 1970 praying for settlement of the <ioup on 111> b3sis of the highest bid. The Minister of Forest by his proceedings dated NOYemfier 27, 1970 directed that 111> coup may be. settled with the highest bidder

viz .. ' the appellant at the reserve price. A telegram was sent by the Government. to the Consorvator of F<W.sts, Hazaribagh Circle on November

28, 1970 with copy of the same to the Conservator of Forest, Bihar <:<>'nliniling the auction sale '3t 'the reserve price of Rs. 95,000/·. As no intimati911 was receiwd by the Divisional Forest Officel" he did not communicate the proceedings of the Minister to the appellant.

On JJecmber 24; respondent No. 6 filed a petition to the Government offering to take the settlement of the coup in question for Rs. 101125/·. The

~1inister, by his proceedings dated December 13, 1970 canrelled the •ettlement of the coup with the appellant and settled the same with res. pondcnt No. 6 fol: Rs, 101125 / -.

The appellant filed '3 writ petition in the lfigb Court contending that there was a concluded contract when the bid. of the appellant was accepted by the Divisional _Fo.:est Olllcer though that was subject to the confirmation by the Government and when the Government confirmed acceptance by its proceedings dii&if Decanber

2 7, I 970. it was no longer within the power of the Gove'rnment to malre the settlement of th~ coup upon the 6th respondent. It was abo contended that the settlement of the coup in favour of the 6th respoodent

was invalid because (a) rule IO(l) of the Rules of :£xecutive Business made under Art. 166( 3) of the Constitution as relaxed by the letter of the Deputy Secretary to the Government dated November 27, 1'67 P*

hibited the grant of r.ase by. private treaty and (b) the requirement of 12-Ll031SupCT/12

prior consull':ltion in r. 10( I) with the Finance Department was mandatory and had not been complied with.

The High Court rejected the appellant's contentions. In appeal to this Court by special leave.

HELD : ( 1) The actptance of the appellant's offer was subject to confirmation by the Government and in the absence of such confirmation there could be no concluded contract.

The appellant's bid was for Rs. 92001/ -.

The acceptance of the bid by the Divisional Forest Officer was therefore, subject to confirmatioo by the Government. The pro=ding of the Minister dated November 27, I 970 would show that he did not confirm acceptance of the offer by the Divisional Forest Officer. What the Minister did was not to confirm the acceptance made by tho Divisioll".li Forest Officer bui to accept the offer made by the appellant in his communication dated October 26, 1970 that he would take the coup for the reserved price of Rs. 95,000/. lberc was. thorefolre, no confirmation of the acceptance of the bid to take the coup in the settlement for the amount of Rs. 92,001/-. ·~634-G-635B]

If the offer that was accepted was the offelcontained in the communication of the appellant dated October 26, 1970 it could not be said that there was any communicati(ln of the acceptance of that offer to the appellant.

The telegram sent to the Conservator of Forest, Hazaribagh by the Government on November 28, 1970 could not be considered as a communication of the acceptance of that offer to the appellant.

The acceptance of the offer was nor hen put in counie of transmission to the appellant; and so even as5uminl!" that acceptance need not <!<>me to theknowledge of the offl'!'or, the appellant could not contend that there was a concluded contract on the basis of his offer cont, Uned in his communication dated October 26, 1970, as . the acceptance of that offer was not put in the course of transmission.

Apari from that the appellant himself revoked the offer ma<h by him on OctOber 26, 1970 by his letter dated November 3, 1970 in which he stated that the coup may be settled upon him at the highest bid made by him in . the auction. There was, thm no conclud,¢ contract between the appellant and the overnment. f,6358-DJ ·

The Raianagoram Village C<10perative Socit, v v, Veeraswami Mudaly, ,[1950] II M.L.J. 486, distinguished.

Somasundaram Pillai v. Provincial Governmen( of Madras,· A.J.R.

F 1947 Madras, 366, appl~.

(ii) Rule 10(1) in so far as it was relevant to the pre5ent case cn!y says that" no department shall without prior consultation with the F'mance

DepartD>.lnt 'Outhorise by any order the lease cir license of mineral. of forests.

The rule read in the context of its relaxation as mentionod in the letter of the Deputy Secretary wotild only show that consultation with the Finance Department is not necessary fdr a lease if leaoe is of land of G the .value of more tllan Rs. 50,000/- .and is granted in pursuance of public auction held in conformity with the conditions mentioned in the letter of the Deputy Secretary, The rule wmther before or after ,.,_ laxation did" not prohibit the grant of leave by private treaty. [637C]

(iii) It was clear from records relating to the proceedings for the grant of the lease in favour of the 6th respondent thst the Finance Department was not consulted befo0> the Minister passed the order on j)ecember 13, H 1970 to grant lease." It could not be oaid that rule 10(1 ). in so .far as it requires prior consultation with the Finance Department i• only drirOC' tory and therefore even if there was no prior consultation the settlement

HARIDWAR SINGH v. BAGUN SUMBRUI (Mal/Jew, J.) 631

was valid. The neg:itive or prohibitive language of rule 10(1) is a strong indication of the intent to make the rule mandatory.

Furthei: rule 10(2) mak"s it clear that where prior consultation with the Finance Department is,.required for a propOflal and the department on consultation, does not agree to the propOS".ll, the department originating the proposal can take no further action on the propo; al. The Cabinet alone would be compent to take a decision.

Pridr consultation is therefore an essnial prerequisite to the <!xcrci!I! of power. The orde/ passed b~ the Mmtster of Forest, Government of Bihar on December 13 1970 settling the coup in favour of 100 6th ['espondent was, therefore d anJ the order must be quashed. [637EF; 6380-FJ

Dattatreya Moreshwar Pangerkar v. The State of Bombay and Others, [.1952] 2 S.C.R. 612 applied.

C CIVIL APl'ELLATE JURISDICTION: Civil Appeal No. 1807 of 1971. .

Appeal by special leave from the judgment and order dated May 6, 1971 ol the PatnaHigh Court in C.W.J.C. No. 41of1971.

L. M. Singhvi, S. C. Dingra and U. P. Singh, fortlie appellant.

O S. V. Gupte and B. P. Singh, for r11spondents Nos. 1 to 5.

S. N. Prasad and D. N. Mishra, for respondent No. 6 ..

The Judgment of the Court was delivered by

Mathew, J. The appellant filed a writ petition before the High Court of Patna praying for quashing an order passed by the Minister or-Forest, Government of Bihar, on December 13, 1970, and for issue of a writ in the nature of mandamus directing the . respondents 1 to 5 to give effect to the previous order of the Minister of Forest dated November 27, 1970. The writ petition was heard by a Division Bench of the Court and the petition was dismissed.

This appeal, by special leave, is from that judgment.

There is a bamboo coup know as "Bantha Bamboo coup" in Chatra North Division of Hazaribagh district.

On July 22, 1970, the Forest Department of the Government of B, ihar adv~ tised for settlement of the right to exploit the coup by. blic auction.

The auction was held in the. office of '!te D!vmouai F0rest Officer Oil August 7, 1970.. Five persons mcluding . e appellant participated in the auction.

Though the resee pnce fixei! in. the tender notice was Rs. 95,000/ ·, the appellant.s .b.1d of Rs. 92,001/-, being the highest, was accepted b)'. the Div1s1oa\

Forest Officer.

The petitioner thereafter deposited the secll?t.Y amount of Rs. 23,800/~ and execu~ an aent. The ; DlVI~ sional Forest Officer reporteii about the auon sale to. the Conservator of Forests, Hazaribagh Circle, by his letter dated ugust 25, 1970.

As the price for which the coup was pro'vis1onally

settled exceeded Rs. 50,000/-, the Conservator of Forests forwarcd the papers regarding the auction sale to the Deputy Secretary Id Government of Bihar, Foest Department, for confirmation of the acceptance by the Govermnent.

Since the provisional settlement was made for an amount less than the reserve price the matter was also referred to the Finance Department. 'The Finance Department invited comments from the Divisional Forest Officer as .tO why the settlement was made for a lesser amount.

The Divisional Forest Officer, by his letter dated . October 30,

1970, submitted his explanation for the provisional settlement at

n amount below the reserve price.

W]]en the matter was pend- . mg before the -Government, the appellant expressed his willingness to take the settlement at the reserve price of Rs. 95,000/-, by his communication dated October 26, 1970.

The appellant thereafter filed an application on November 3, 1970, praying for settlement of the coup on the basis of the highest bid.

The Minister of Forest, by his proceedings dated November 27, 1970, directed that the coup may be settled with the highest bidder, namely the appellant, at the reserve price.

A telegram was sent by the Government to the Conservator of Forests, Hazaribagh Circle on November 28, 1970, with a copy of the same to the Conservator of Forest, Bihar, confinning the auction sale to the appellant at the reserve price of Rs. 95,000/-.

As no intimation was received by the Divisional Forest Officer, he did not communicate the proceedings of the .Minister to the appell!jllt. . One Md. Y akub, Respondent No. 6, filed a petition on December 4,

1970, before the Government of Bihar, Respondent No. 1, offering to take the settlement of the coup in question for Rs. 1,01,125/-. A telegram was sent by the Government on December 5, 1970; to the Divisional Forest Officer, directing him not to take any action on the basis of the telegram dated November 28, 1970, sent to him in pursuance of the proceedings of the Government dated November 27, 1970. That telegram was received by the Divisional Forest Officer on December 10, 1970, and the Divisional Forest Officer, by his letter dated December 10,

1970, informed the Government that the previous telelgram dated Nove!J1ber 28, 1970, was not received by him and so it content was

not communicated to the appellant.

The whole matter was there-. after placed before the Minister Of Forest and the Minister, by his G proceedings dated December 13, 1970, cancelled the settlement of the ooup with appellant a\ld settled the same with Respondent No. 6 for Rs. 1,01,125/-. The Government thereafter sent.telegrams on December 21, 1970, to the Conservator of Forests aitd the Diviional Forest Officer, informing them that the coup had been settled with Respondent No. 6. . The Di_vit>:ional Forest Officer, by Iii$ letter dated December 23, 1970, directed }lesdent N'o, 6 to deposit the security amount and to pay the rust instalment.

Re5poildent No. 6 depositedthe same and executed an agreement.

HARIDWAR SINGH v. BAGUN SUMBRUI (Mathew, J.) 633

The contention of the appellant in the writ petition was that there was a concluded contract when the bid of the appellant was accepted by the Divisional Forest Officer though that was subject to confirmation by the Government and that, when the Government confirmed the acceptance by its proceedings dated November 27, 1970, it was no longer within the power of Government to make the settlement of the coup upon the 6th Respondent by its proceedings dated December 13, 1970.

It was also contended in the alternative that the settlement of the coup in favour of the 6th Repondent was in violation of statutory rules and, therefore, in any event, that settlement was invalid.

As already indicated, the High Court negatived these contentions and upheld the validity of the settlement in favour of the 6th Respondent.

The special conditions in the tender notice makes it clear that the Divisional Forest Officer has the right to accept a bid of less than Rs. 5,000/-, that acceptance of a biid of more than Rs. 5.000/- by him is subject to confirmation by the Chief Con-

'ervator of Forests and the Forest Department of the Bihar Government, that an auction sale for an amount of more than Rs. 5,000/- would n0t be recognised until it is confirmed by the competent authority, and that a bid made in auction and which has been provisionally accepted by the Divisional F:orest Officer shall be binding on the bidder for two months from the date of auction or till the date of rejection by the competept authority, whichever is earlier.

Counsel for the appellant contended that there was a conditional acceptance of the offer of the appellant by the Divisional Forest Officer, that on confirmation by the Government, that acceptance became unconditional and, therefore, there was a concluded contract when the Government confirmed the acceptance, even though the confirmation was not commllnicated to the appellant.

In suppon of this, he relied on The Rajanagaram Village Cooperative Society v. Veerasami Mudaly( 1). There it was held that in the case of a 'conditional acceptance in the presence of a l>idder, the condition being that it is subject to approval or confirmation by some other peyso.n, the acceptance, though conditional, has to be communicated and when that is communicated, there is no further need to communicate the approval or confinna- . tion which is the fulfilment of the condition. It was further _held

that a conditional acceptance has' the effect of binding the highest bidder to the contract if there is subsequent approval or confumation by the person indicated, that he cannot resile from the contract or withdraw the offer, and if there is approval or confirma-

(1) [19501 11 M.L.J. 486.

tion, the contract becomes concluded and enforceable.

This decision was considered in Somasudaram Pillai v.

Provincial Government of Madras(') where Chief Justice Leach, speaking for the Court said that, to have an enforceable contract, there must be an offer and an unconditional acceptance and that a person who makes an offer has the right to withdraw it before acceptance, in the absence of a condition to the contrary supported by consideration. He further said the fact that there has. been a provisional or conditional acceptance would not make any difference as a provisional or conditional acceptance cannot in Itself make a binding contract. ·

The question whether by an acceptance which is conditional upon the occurrence of a future event a contract .will become concluded was considered by Williston and this is what he says:(')

"A nice distinction may be taken here between ( 1 )' a so-called acceptance by which the acceptor agrees to become immediately bound on a condition not named in the offer, and (2) an acceptance which adopts unequivocally the terms of the offer but states that it will not be effective until a certain contingency happens or fails to happen. In the first case there is a counter offer and rejection of the original offer; in the second case there is no counter-officer, since there is no assent to entei; into an immediate bargain.

There i~. so to speak, an acceptance in escrow, which is not to take effect until the future.

In the meantime, of course, .neither party is bound and either may withdraw.

More over, if the time at which the acceptance was to become effectual is unreasonably remote, the offer may lapse before the acceptance becomes effective.

But if neither party withdraws and the delay is not unreasonable a contract will arise when the contingency happens or stipulated i; vent occurs"

In this case, it is not the want of communication of the confirmation by the Government to the appellant that really stands in the way of there being a concluded contract, but .. rather the want of confirmation by the Government of the eond1tional acceptance by the Divisional Forest Officer.

The appellant's bid was for Rs. 92,001/-. The acceptance of the bid by the Divisional Forest Officer was, therefore, subject to confirmation by Government.

The proceedings of the Minister dated November 27 .• 1970, would show that he did not confirm the acceptance of the

(!) A.LR. 1947, 34 M•dras, 366.

(2) Williston On Contracts, Vol. I, 3rd Ed. Section 77A.

..,. . .... . ,

.. ~

HARIDWAII. SINGH V, BAGUN SUMBRUI (Mathew, J.) 635

offerby the Divisional 'Forest Officer.

What the Minister did was not to confirm the acceptance made by the Divisional Forest Officer, but to accept the offer made by the appellant in his com- ·

munication dated October 26, 1970, that he would take the coup for the resed price of Rs. 95,000/-. T)lere was, therefore, no confirmation of the acceptance of ihe bid to take tlle COUP' in settlement for the amount of Rs. 92,001/-. If the offer that was accepted was the offer contained in the communication of the appellant dated October 26, 1970, we do not think that there was any communication of the acceptance of that offer to the appellant. The telegram sent to the Conservator of Forest, Ha-zeribagh,

by the Government on November 28, 1970, cannot be considered as a communication of the acceptance of tl)at offer to the appellant.

The acceptance of the-offer was not even put in the course of transmission to the appellant; and so even assuming that an acceptance need not come to the knowledge of the offeror, the appellant cannot contend that there wa8 a concluded contract on the basis of his offer contained in his communication dated October 26, 1970, as the acceptance of that offer wa& no, t put in the D course of transmission.

Quite apart from that, the appellant himself revokd the offer made by him on October 26, 1970, by his letter dated November 3, 1970; in which he stated that the coup may be settled upon him at the highest bid made by him in the auction.

We are, therefore, of the opinion that there was no concluded contract between the appellant and the Government.

This t.akes us to the question whether the settlement in favour of the 61h Respondent was in violation of any statutory rule. The appellllillt's contention was that the settlement in favour of the 6th Respondent by a private treaty was in violation of the rules of executive business made under Article 166(3). Rule 10 of the Rules provides :

"10(1) No department shall, without previous consultation with the Finance Department, authorise aily orders (other than orders pursuant to any general or special delegation made by the Finance Department) which:

(a) either immediately or by their repercussion. will affect the finances of the State, or which,. in particular.

( i) involve any grant of land or assignment of revenue or concession, grant, lease or licence of mineral or forests, rights or a right to water power of any easement or privilege in respect of such concession.

•• •• • •

(2) Where on a proposal under this rule, prior consultation with the Finance Department is required, but on which the Finance Department might not have

agreed, no further action shall be taken on any such proposal until the cabinet takes a decision to this effect."

A copy of the letter from the Deputy Secretary to the Government of the Accountant General, Bihar, dated November 22, 1967 would show that some relaxation of Rule JO ( l) of the rules of executive business was made by the Finance Department relating to lease of forest Coups or forest produce of the value of more than'Rs. 50,000/-.

That letter read~ as under:

"Suhjecr : Revision of procedure in issuing any order C involving any grant of lease, sale or licence of minerals of forest rights if such order is issued by the Administrative Department at the Secretariat level.

"Sir; D

l am directed to say that in relaxation of rule 10 ( 1) of the Rules of Executive Business, Government have been pleased to decide that the Forest Department shall authorise orders sanctioning leases of Forest coups or produce of the value of more than Rs. 50,000/- (ru~ fifty thousand) each, subject to the following conditions E that:-

( I ) Reserve price of the coup has been fixed before auction.

( 2) Highest bid should be accepted.

( 3) Highest bid should not be less than the reserve price.

( 4) Any relaxation to the above conditions may not ordinarily be allowed except with the prior concurrence of the Finance Department."

Before the High Court the contentions of the 6th Respondent were, firstly, that the rule 10(1) is not a statutory rule and. secondly, that it did not concern lease of forest land.

The High Court, without deciding the question whether the rule is a statutory rule, held that the rule has nothing to. do with the lease of forest coups and said that there was nothing which prevented th<!

Government from giving the coup on lease by private treaty. The High Court, therefore, held that there was no bar, statutory or otherwise, to the settlement of the coup in favour of Respondent

HARIDWAR SINGH V, DAGUN SUMBRUI (Mathew, J.) 637

No. 6 by private negotiation and as such the settlement in his favour was valid.

Counsel for the appellant argued that the High Court went wrong in its conclusion that rule 10{1) as.relaxed, did not apply to the grant of the lease of the coup in question and that it really prohibited a lease of forest land except by public auction.. We are not satisfied that the construction contended for is correct.

Neither rule 10(1) nor the rule as relaxed says that forest land can be leased only by public auction.

Rule 10( 1) in so far as il is relevant to the present case only says that no department shall, without prior consultation with the Finance Department, authOrise by any order, the lease or licence of mineral or forests.

The relaxation made to rule 10 (I) as evidenced by the letter from the . Deputy Secretary to the Government is to the effect that in .the case of lease of forest land of the value of more than Rs. 50,000/-. if made by public auction, it can only be made subject to the conditions mentioned there.

Jn other words, rule 10( 1) as relaxed does not prohibit the grant of a lease by private treaty.

The rule read in the' context of its relaxation as mentioned in the letter of the Deputy Secretary would only show that con@ta, fion with the Finance Department is not necessary for a lease, if the lease is of lan.d of the value of more than Rs. 50,000/- and is granted in pursuance of a _public auction held in conformity 'with the conditions mentioned in the letter of the Deputy Secretary.

Now the question is whether the coup in question was settled in favour of the 6th Respondent in accordance with Rule 10( 1) . ft is clear from the records relating to the proceedings forthe grant of the lease in favour of the 6th Resp0ndent ihat the Finance Dep.artment was not consulted before the Minister passed tl1e order on December 13, 1970, to grant the lease.

But counsel for the Government of Bihar and 6th Respondent contended that rule 10( 1), in so far as it requires prior consultation with the

Finance Department, is only directory in character and, therefore. even if there was no prior consultation, the settlement was valid.

So, the question arises whether rule 10 ( 1) which requires prior consultation with the Finance Department is mandatory or not.

Several tests have been propounded in decided cases for determining the question whether a provision in a statute, or a rule ;, mandatory or directory.

No universal rule can be laid down on this matter.

Jn each case one must look to the subject matter and consider the importance of the provision disregarqed and the relation of that provision to the general object intended to be secured.

Prohibitive or negative words can rarely be directory and are indicative of the intent that the provision is to be mandatory (see Earl T. Crawford.

The Comtructian of Statues, pp. 523-4 ).

. Where a prescription relates to performance of a public duty A und to invalidate acts done in neglect of them would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty, such prescription is generally understoOd as mere instruction for the guidance of those upon whom the duty is imposed [see Dattatreya Moreshwar. Pangerkar

v. The State of Bombay and others( 1) ].

Where, however, a power or authority is conferred with a direction !hat certain regulation or formality shall be complied with, it seems neither unjust nor incorrect to exact a rigorous observance of it as essential to acquisition of the riJ!ht or authority

(see Maxwell, Interpretation of Statutes, 6th ediuon, pp. 649-

MO).

In this case, we think that a power has been given to the Minister in charge of the Forest Department to do an act which concerns the revenue of the State and also the rights of individuals.

The negative or prohibitive language of rule 10(1) is a strong indication of the intent to make the rule mandatory. Further, rule 10~2) makes it clear that where prior consultation with the Finance Department is required for a proposal, . and the department on consultation, does not agree tQ the proposal, the department originating the proposal can take no further action on the proposal.

The cabinet alone would, be competent to take a docision.

When we see that the disagreement of the Finance Department with a proposal on consultation, deprives the department originating the proposal of the power to take further action on it, the only conclusion possible is that prior consultation is an '"sential pre-requisite to the exercise of the power.

We, therefore, think that the order passed by the Minister of Forest, Gov- <?rnment of Bihar on December 13, 1970. settling the coup in favour of the 6th Respondent was bad and we quash the order.

We allow the appeal to the extent indicated but make no order :1, to costs.

G.C.

Appeal allowed.