PETITIONER: HARIDWAR SINGH Vs. RESPONDENT: BAGUN SUMBRUI AND ORS. DATE OF JUDGMENT25/02/1972 BENCH: MATHEW, KUTTYIL KURIEN BENCH: MATHEW, KUTTYIL KURIEN HEGDE, K.S. CITATION: 1972 AIR 1242 1972 SCR (3) 629 CITATOR INFO : R 1976 SC 263 (13) ACT: Contracts--Acceptance of auction bid by Divisional Forest Officer subject to confirmation by Government does not result in concluded contracts in the absence of confirmation by Government--Rules of Executive Business of Bihar Goverment made under Art. 166(3) of Constitution--Rule 10(1) as relaxed does not prohibit grant of lease private treaty--Rule 10(1) in so far as it requires prior consultation with Finance Department is mandatory. HEADNOTE: The right to exploit a bamboo coup in the Hazaribagh district of Bihar 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. The petitioner deposited the security required and executed an agreement. The Divisional Forest Officer about the auction sale to the Conservator of Forests, Hazaribagh Circle-. As the price for which the coup was provisionally settled exceeded Rs. 50,0001- the Conservator of Forests forwarded the papers regarding the auction sale to the Deputy Secretary to the Government of Bihar, Forest Department for confirmation of the acceptance, by the Go Since provisional settlement was made for an amount less than the reserve price the matter was also referred to the Finance Department. When the matter was pending 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 viz.. 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 copy of the same to the Conservator of Forest, Bihar co the auction sale 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 appellant. On December 24, respondent No. 6 filed a petition to the Government offering to take the settlement of the coup in question for Rs. 101125/-. The Minister, by his proceedings dated December 13, 1970 cancelled the settlement of the coup with the appellant and settled the same with respondent No. 6 for Rs. 101125/-. 'The appellant filed a writ petition in the high Court contending that there was a concluded contract when the bid of the appellant was accepted by the Divisional Forest Officer though that was subject to the confirmation by the Government and when the Government confirmed acceptance by its proceedings dated number 27, 1970 it was no longer within the Dower of the Government to make the settl ement of the coup upon the 6th respondent. It was also contended that the settlement of the coup in favour of the 6th respondent was invalid because (a) rule 10(1) of the Rules of Executive Business made under Art. 166(3) of the- Constitution as relaxed by the letter of. the Deputy Secretary to the Government dated November 27, 1967 pro- hibited the grant of lease by private treaty and (b) the requirement of 12--L1031SupCI/72 630 prior consultation in r. 10(1) 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 acceptance of the appellant's offer was subject to confirmation by the Government and in the absence of such confirmation them 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 confirmation by the Government. The proceeding of the Minister dated November 27, 1970 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 the Division 31 Forest Officer but 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/. There was, there for, 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 offer contained in the communication of the appellant dated October 26, 1970 it could not be said that there was any communication 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 not even put in course of transmission to the appellant; and so even assuming that acceptance need not come to the knowledge of the offer or, the appellant could not contend that there was a concluded contract on the basis of his offer contained in his communication dated October 26, 1970, as the acceptance of that offer was not put in the course of transmission. Apart from that the appellant himself revoked 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. There was, thus no concluded contract between the appellant and the government. [635B-D] The Rajanagaram Village Cooperative Society, v. Veeraswami Mudaly, [1950] 11 M.L.J. 486, distinguished. Somasundaram Pillai v. Provincial Government of Madras, A.I.R. 1947 Madras, 366, applied. (ii)Rule 10(1) in so far as it was relevant to the present case only says that no department shall without prior consultation with the Finance Department authorise by any order the lease of license of mineral or forests. The rule read in the context of its relaxation as mentioned in the letter of the Deputy Secretary would only show that consultation with the Finance Department is not necessary for a lease if lease is of land of the value of more than Rs. 50,0001- and 'is granted in pursuance of public auction held in conformity with the conditions mentioned in the letter of the Deputy Secretary. The rule where before or after relaxation 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 that the Finance Department was not consulted before the Minister passed the order on December 13, 1970. to grant lease. It could not be said that rule 10(1) in so far Is it requires prior consultation with the Finance Department is only drirectory and therefore even if there was no, prior consultation the settlement 631 was valid. 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 to the proposal, the department originating the proposal can take no further action on the proposal. The Cabinet alone would be competent to take a decision. Prick consultation is, therefore, an essential prerequisite to the exercise of power. The, order passed by the Minister of Forest, Government of Bihar on December 13, 1970 settling the coup in favour of the 6th respondent was, therefore bad and the order must be quashed. [637EF; 638D-F] Dattatreya Moreshwar Pangerkar v. The State of Bombay and Others. [1952] 2 S.C.R. 612 applied. JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1807 of 1971.
Appeal by special leave from the judgment and order dated
May 6, 1971 of the, Patna High Court in C.W.J.C. No. 41 of
197 1.
L. M. Singhvi, S. C. Dingra and U. P. Singh, for the
appellant.
S. V. Gupte and B. P. Singh, for respondents 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 of 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 Bihar advertised
for settlement of the right to exploit the COUP by Public
auction’ The auction was held in the Office, of the
Divisional Forest Officer on August 7, 1970. Five persons
including the appellant participated in the auction. Though
the reserve price fixed in the tender notice was Rs.
95,000/-, the appellant’s bid of Rs. 92,001/-, being the
highest, was accepted by the Divisional Forest Officer. The
petitioner thereafter deposited the security amount of Rs.
23,800/- and executed an agreement. The Divisional Forest
officer reported about the auction We servator of Forests,
Hazaribagh Circle, by his letter dated August 25, 1970. As
the price for which the coup was provisionally,
632
settled exceeded Rs. 50,0001-, the Conservator of Forests
forwarded the papers regarding the auction sale to the
Deputy Secretary to Government of Bihar, Forest Department,
for coation of the acceptance by the Government. 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, 1 970. submitted his
explanation for the provisional settlement at an amount
below the reserve price. When the matter was pending 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, confirming
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 cormmunicate the
proceedings of the Minister to the appellant. One Md.
Yakub, 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 telegram dated November 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 proceedings dated December 13, 1970, cancelled the
settlement of the coup with appellant and 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 and the Divisional Forest Officer
informing them that the coup had been settled with
Respondent No. 6. The Divisional Forest Officer. by his
letter dated December- 23, 1970, directed Respondent No. 6
to deposit the security amount and to pay the first
instalment. Respondent No. 6 deposited the same and
executed an agreement.
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
Respondent was in violation of statutory rules and,
therefore, in any event, that settlement was invalid.
As already indicated, the High Court negatived these conten-
tions 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. 5,0001-, that acceptance of a bid of
more than Rs. 5,0001- by him is subject to confirmation by-
the Chief Conservator of Forests and the Forest Department
of the Bihar Goverment, that an auction sale for an amount
of more than Rs. 5,0001- would not 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 Forest Officer shall be binding on the bidder for
two months from the date of auction or till the date of
rejection by the competent authority, whichever is earlier.
Counsel for the appellant contended that there was a condi-
tional 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 communicated to the appellant. In
support 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 bidder, the condition being that it is subject
to approval or confirmation by some other person, the
acceptance, though conditional, has to be communicated and
when that is communicated, there is no further need to
communicate the approval or confirmation which is the
fulfillment 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
confirmation by the person indicated, that he cannot resile
from the contract or withdraw the offer, and if there is
approval. or confirma-
(1) [1950] 11 M.L.J.486.
634
tion, the contract becomes concluded and enforceable. This
decision was considered in Somasudaram Pillai v. provincial
Government of Madras(1) 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 counteroffer and rejection of the
original offer; in the second case there is no
counter-officer, since there is no assent to
enter into an immediate bargain. There is, 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 sti-
pulated event 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
conditional 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 Goverment. The proceedings. of
the Minister dated November 27, 1970, would show that he did
not confirm the acceptance of the
(1) A.I.R. 1947,34 Madras, 366.
(2) Williston On Contracts, Vol. I, 3rd Ed. Section 77A,
635
offer by 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 communication dated October 26, 1970, that
he would take the coup for the reserved price of Rs.
95,000/-. There was, therefore, no confirmation of the
acceptance of the bid to take the 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 appel-
lant. The telegram sent to the Conservator of Forest,
Hazaribagh, by the Government on November 28, 1970, cannot
be considered as a communication of the acceptance of that
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 was a concluded contract on the basis of his offer
contained in his communication dated October 26, 1970, as
the acceptance of that offer was not put in the course of
transmission. Quite apart from that, the appellant himself
revoked 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 takes us to the question whether the settlement in
favour of the 6th Respondent was in violation of any
statutory rule. The appellant’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 any 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.
** *** ** ***
636
(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 10(1) 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. 50,0001-. That letter
reads as under :
“Subject : Revision of procedure in issuing
any order 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,
I am directed to say that in relaxation of
rule 10 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. 50,0001- (rupees
fifty thousand) each, subject to the following
conditions that –
(1) 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 the 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
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 it 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(1) 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. In
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 consultation with the
Finance Department is not necessary for a lease, if the
lease is of 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). It is clear from the records relating to the
proceedings for the grant of the lease in favour of the 6th
Respondent that the Finance Department was not consulted
before the Minister passed the 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 is mandatory or directory. No universal rule, can
be laid down on this matter. In each case one must look to
the subject matter and consider the importance of the
provision disregarded 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 Construction of Statues, pp. 523-4).
638
Where a prescription relates to performance of a public duty
and 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 that 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 right or authority (see Maxwell,
Interpretation of Statutes, 6th edition, pp. 649650).
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 to the proposal, the department originating
the proposal can take no further action on the proposal.
The cabinet alone would be competent to take a decision.
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 essential pre-requisite to the exercise
of the power. We, therefore, think that the order passed by
the Minister of Forest, Government 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 as to costs.
G.C. Appeal allowed.
(1) [1952] S.C.R. 612 at p. 624.
639