1979 (12) TMI 148 - SC - Central Excise

Supreme Court dismisses suit due to lack of valid contract

The Supreme Court dismissed the suit, agreeing with the High Court that there was no valid contract due to non-compliance with constitutional requirements ... Whether the respondent is not liable to pay the damage even though no contract in writing had been executed in accordance with Article A 299 of the Constitution? Held that:- The respondent by his own conduct in not depositing the 1/6th of the bids offered by him made it impassible, for the excise authorities to conclude the contract. As the respondent did not comply with the demand, the excise authority concerned decided to conduct a resale of the excise privileges on March 21, 1951, and also to prosecute the respondent for an offence punishable under section 185 of the Indian Penal Code. Thereafter the respondent gave a representation (Exh. 7) on March 30, 1951 stating that I any action other than prosecuting him may be taken. He stated in that representation that his sole object in offering the bids was to help the Government and to help himself but when he calculated whether he would make any profit he felt that he would not do so. According to the said representation, that was the reason for not depositing 1/6th of the bid amount at the fall of the hammer. He, however, did not question the authority of the excise authorities to put up the excise privileges for resale and to claim the loss occasioned by such resale from him. In these circumstances I am of the view that it is not possible to hold that the respondent was not in law liable for the claim made by the State Government even though no contracts were formally entered into between the respondent and the State Government. The liability of the respondent in the instant case arises under the statute and it also arises as the result of a civil wrong or a tort committed by him, in offering the highest bid with open eyes and in not fulfilling the obligations arising therefrom. Thus the respondent should be made liable for the sum claimed in the suit and the decree made by the trial court should be restored. Issues Involved:1. Validity of the contract under Article 299(1) of the Constitution.2. Existence of a concluded contract.3. Statutory basis for recovery of deficiency on resale.4. Breach of contract due to non-deposit of one-sixth of the bid amount.5. Right to re-auction and recover loss.6. Quantum of damages.7. Liability under statutory provisions.Issue-wise Analysis:1. Validity of the contract under Article 299(1) of the Constitution:The High Court dismissed the suit on the grounds that the requirements of Article 299(1) of the Constitution had not been complied with, thus no valid contract existed. The Supreme Court agreed with this view but added that there was no concluded contract between the parties.2. Existence of a concluded contract:The Supreme Court held that there was no concluded contract between the parties. The sale proclamation containing the conditions of sale was not produced, and the bid offered by the respondent was not sanctioned by the Excise Commissioner. Thus, there was no final acceptance of the bid, making it impossible to hold the respondent liable for the alleged loss.3. Statutory basis for recovery of deficiency on resale:The Supreme Court found that the conditions mentioned in rule 357 of the Excise Manual were not published as required under Section 77 of the U.P. Excise Act, 1910. Therefore, they did not have the force of law. Consequently, there was no statutory rule permitting the recovery of the deficiency on resale from the respondent.4. Breach of contract due to non-deposit of one-sixth of the bid amount:The High Court held that the non-deposit of one-sixth of the bid amount constituted a breach of contract. This condition followed both from the statutory provision and the admission of the appellant. However, the Supreme Court noted that without the final sanction of the Excise Commissioner, the bid could not be said to have been finally accepted.5. Right to re-auction and recover loss:The High Court found that the right to re-auction was not founded on any statutory rule or express terms of the contract but was a natural outcome of the breach of an accepted term of contract. The Supreme Court, however, emphasized that there was no statutory rule permitting recovery of the deficiency on resale from the respondent.6. Quantum of damages:The High Court held that the extent of loss suffered by the State Government was Rs. 20,100. However, since there was no valid contract satisfying the requirements of Article 299 of the Constitution, the respondent was not liable to pay any damages.7. Liability under statutory provisions:The Supreme Court discussed the relevant provisions of the U.P. Excise Act, 1910, and noted that Section 39 allowed recovery of excise revenue from the person primarily liable. However, in this case, the liability of the respondent could not be established due to the absence of a concluded contract and the non-publication of rule 357.Separate Judgment by Venkataramiah, J.:Venkataramiah, J. disagreed with the majority judgment. He emphasized that the respondent's failure to deposit one-sixth of the bid amount drove the Department to hold a resale, resulting in a loss. He argued that the liability of the respondent arose under the statute and as a result of a civil wrong or tort committed by him. He concluded that the respondent should be made liable for the sum claimed in the suit and that the decree made by the trial court should be restored.Order:In view of the majority judgment, the appeal was dismissed with no order as to costs.