Holding

The appeal is dismissed because no concluded contract existed between the State and the respondent and no statutory provision authorized recovery of the resale deficiency.

Summary

The State of Uttar Pradesh sued Kishori Lal for the shortfall of Rs 20,100 that arose when the excise licences he won at a public auction were resold at a lower price because he failed to deposit one‑sixth of the bid amount as required by the Excise Rules. The respondent argued that no contract was completed under Article 299 of the Constitution, that the relevant clause of Rule 357 was not a valid law because it had not been published, and that the State could not recover the loss. The High Court held that a breach of the deposit condition justified resale and recovery, but dismissed the suit on the ground that the contract was not valid under Article 299. The Supreme Court, by majority, held that there was no concluded contract between the parties and that no statutory rule permitted recovery of the resale deficiency, thus dismissing the appeal and restoring the trial court decree. A dissenting judge held that the respondent was liable under the statute and in tort for his default. The Court emphasized that liability could arise from statutory provisions even without a formal contract, but the majority found no such provision applicable here.

Issues considered

Whether a contract between the State and the respondent was concluded despite the lack of compliance with Article 299 of the Constitution.
Whether the respondent is liable for the loss incurred on resale of the licences due to his failure to deposit the required one‑sixth advance.
Whether the fifth clause of Rule 357, which provides for recovery of the resale deficiency, is a valid statutory rule despite not being published.
Whether liability can arise under the U.P. Excise Act or other statutes independent of a completed contract.

Legislation cited

Constitution of Indias. Article 299
Indian Penal Code, 1860s. Section 185
Kerala Abkari Acts. Section 28
Revenue Recovery Acts. Section 6, s. Section 62
U.P. Excise Act, 1910s. Section 21, s. Section 24, s. Section 39, s. Section 77
U.P. Excise Manual (Rule 357)

Subjects

Excise auctionContract under Article 299Statutory liabilityResale deficiencyDeposit requirementPublic revenueTort liabilityRule 357U.P. Excise Act

Judgment

724

A STATE OF UTTAR PRADESH
v. > •
KISHORI LAL MINOCHA
December 21, 1979
:B [A. C. GUPTA, V. D. TULZAPURKAR AND E. S. VEt<KATARAMIAll, JJ.J

(;onstitution of India 1950, Article 299 and U.P. Excise Act 1910, S. 39-
Rule 357( 5) of Excise Manual requiring purchaser at excise auction to depi,;sit
one-sixth of annual fee on conclusion of sale-Purchaser not making deposit-
Rrsale by excise authorities fetching lesser price-Original purchaser whefher
liable to pay tlcficiency in price.
·C
U.P. Excise Act 1910, S. 77 & Excise ·Manual R11lc 35?-R11le not p11blislitd
as required-Whether has the force of Ia'w.

The respondent who was a bidder at the annual excise auction offered the
highest bid for two groups of country liquor shops, and \Vhich were knocked down
in his favour. He affixed his signature to the respectiYe bid sheets in token of his
D acceptance and also in the register of Settlement Record. He, however, did not
deposit 1/6th of the bid amounts on conclusion of the sales as required under
the Excise Rules but took time for deposit. In spite of repeated reminders he
did not pay the advance deposits. The Excise Authorities resold the excise
privileges in respect of the two groups of shops and in the re-auction the shops
fetched a lesser !amount than what the respondent had offered. The State Gov-
ernment, appellant directed the respondent to make good the loss. Since be failed,
E a suit for recovery was instituted by the appellant. The suit was contested, the
respondent pleading (1) that there were no completed contracts between the State
Governm'ent and himself and consequently there could be no breach of contracts;
(2) that the entire auction proceedings, having been against the rules and instruc-
tions of the Govemn1ent were illegal and void; (3) the contracts, if any, \Yere
unenforceable as they did not satisfy the conditions ment_ipned in Article 299 of
the Constitution; and ( 4) that the State Government having accepted his prayer
F
to be relieved from the bids made by him and subsequently re-auctioning the
groups of shops to others \Vas estopped from fixing any civil liability on 1'.:m.
The trial court decreed the suit.

On appeal, the Jligh Court dismissed the suit on the vie\\" that there was no
valid contract \'Vhich could be enforced by the appellant as the ·requirements of
G Article 299(1) of the Constitution had not been complied with. It, however, held
that the failure to deposit 1/6 of the bid amount did not make the proposal in-
complete and that the absence of the approval of the Excise Commissioner which
was in the nature of a power vested in him to reverse the acceptance of a bid made
by the officer holding the auction did not in any way exeonerate the respondent
from the liability if he was otherwise liable.

H In the appeal to this Court on the question whether the respondent v...·ould
not be liable to make good the loss even though no contract in writing had been
executed in accordance with Article 299 of the Constitution.
U. P. STATE V. KISHORILAL 725

HELD : [Per Gupta and Tulzapurkar, JJ.] A
1. The ~uit must be dismissed as there was no concluded contI\1'Ct between the
parties, nor \Vas there any statutory rule permitting recovery of the deficiency
on re-sale from the respcncient. [728 BJ
2. The last part of the 5th clause to Rule 357 providing that in case of
default, i£ the .J?ricc fetched at the re-sale was less than the bid at the first sale
the difference would be recovered from the defaulter had not b'een published. B
[729 CJ
3. Assur.1ing that the different clauses of Rule 357 barring the last part of the
5th clause embody the conditions of sale, .-it isl clear from the 2nd clause that iri
the absence of the final sanction of the Excise Commissioner the bid cannot be said
to have been finally accepted. Jn the instant case it is not claimed that the bid
offered by the respondent \Vas sanctioned by the Excise Commissioner. [729 E] c
There v1as thus no concluded contract between the parties to make the res-
pondent liable for the alleged loss. [729 F]
Union of India and others v. Mis-. Bhin1sen Walaiti Rani [1970] 2 S.C.R. 594
referred to.
(Per Venkataramiah J, dissenting)
D
1. The respondent should be made liable for the sum claimed in the suit;
and the decree made by the trial court shoulc\ be restored. [745 G]
2. The respondent was liable for the claim made by the State Government
-even though no contracts were formally entered into between the respondent and
the State Government. [745 B]
In the instant case cin the pleadings and evidence jt has to be assumed that E
the respondent knew that he was under un obligation to deposit with the officer
-holding the nuction 1/6th of the bid amount and that if he committed any default
in doing so, the excise licences in question were to be resold and that he would
be liable to pay any loss suffered by the State Government on such re~sale. (733
El
3. Condition No. 5 in the sale proclamation which provides that if the price
at the re-saJe be less than that at the first sale, the· difference will be recovered F
~£rom the defaulter negatives the contention of the respondent that in the absence
"',of the approval of the Excise Commissioner, he would not be liable to make
good the loss. [;33 H, FJ
4. There was no disapproval of the Excise Commissioner of the bids offered
by the respondent. On the other hand, the excise authorities requested the res-
pondent to perforn1 his part of the obligation under the sale proclamation. G
[734 El
5. In Uniou of India & Ors. v. Mis. Bhimsen Walaiti Rain, [1970] 2 S.C.R.
594, this Court proceeded on the basis that the liability of the bidder could arise
,only aS ~ con!'~1uence of the breach of a completed contract. No attention ap-
pears to haVe been given in the case to the question whether the act of the offering
of the highest bid which was accepted by the officer holding the auction and which
.resulted in the closure of the auction could by itself become a source of liability H
when the highest bidder failed to comply with the conditions stipulated in the
(
sale proclamation. [734 Fl
72li SUPREME CUURT REPORTS [1980) 2 S.C.R.
•
A 6. In section 39, the words "all excise revenue, including all amounts due to
the Govern1nent by any person on account of any contract relating to the excise-
revenue, may be recovered from the persons primarily liable to pay the same·~
show that the Government is entitled to recover from a person any amount due·
by him on account of any contract reltating to the excise revenue. The words ''on
account of any contract relating to the exc:i!e revenue" include within their scape
not merely any compensation which a person may be liable to pay on account of
the breach of contract con1mitted by him afteri the contra<."1: is completed but also
any other an1ount that may become due on account of a contract which would
come into existence if all the formalities are completed, having regard to the
scheme and manner in which the excise privilege is disposed of by the excise
authorities. [735 E-F]

7. A reading of clauses 1 and 2 of Rule 357 of the Excise Manual show
c that the officer holding the sale was empowered to accept the bid and that his
acceptance \Vas only subject to the sanction of the Excise Commissioner. They
mean that the po\ver which had ·been reserved to the Excise Commissioner, only
enabled him to set a.Side the acceptance already made by the officer conducting
the sale. If it was not set aside by him, the acceptance of the officer conducting
the sal~ would be effective. [737 R)

In the instant case the Excise Commisdoner had not refused to sanction the
D
acceptance of the highest bids offered by the rc.-;pondent. The liri.·bility of the
highest bidJer to deposit a sum equivalent to 1/6th of the bid offered by him
arises as a consequence of his offer1ng the highest bid with the knowledge of the
conditions of the auction, immediately on the conclusion of the sale for the day
in his favour and if he does not make such deposit, the officer holding the same
.
is entitled to put the excise privilege for re-sa]e either immediately or on a
E subsequent clay with liberty to re.cover from the defaulter any loss tha! n1ay he
occasion'ed to the Government by such re-sale. [737 C-D]

8. The completion of the contract or the execution of a contract in accordance
with Atticle 299 of the Constitution arises only after the highest bidder has
deposited 1/6th of the bid offered by him on the eonclusion of the sale which
is a condition precedent for the completion of the contract or for execution ef a
formal document inaccordance v.rith Article 299 of the Constitution. It is not,
F
therefore, correct to detern1ine the liability of a defaulting bidder on the basis
of a completed contract or a formal document to be executed under Article 299.
[737 E-F]

9. In the interest of public revenue, exci:.e privileges, privileges of cutting and
removing timber front Government forests, occupancy rights over Government
lands and building sites etc. are disposed of in public auction by the Central
G Government. State Governments. statutory boards and local authorities and in
almost every such auctiun, there is invariably a condition that the acceptance of
the highest bid at the 11uction is subject to the sanction of some superior officer
or statutory authority or the appropriate Government. If the liability of such
a bidder is to he founded only on the ba~is of a completed contract then in the
case of ancti0ns held by or on behalf of the· Central or State Governments, no
liability can arise even it such sanction is accorded, unless it is followed up by
H a formal document exc.,uted under Article 299 of the Constitution ¥1hich alone
amounts to a completed contract where Government is a party. [737 H-738 A.
738 DJ ' '
'
u. P. STATE v. KISHORILAL (Gupta, !.) 727

In the instant case the respondent by his own conduct in not depositing 1/6th A
of the bids offered by him made it impOMib1e for the excise authorities to con~
elude the contract. The question may have been different if the respondent had
done all that he had to do under the conditioru of the auction but the excil!t
authorities had not intiinated him that he could exploit the excise privilege!! i11
accordance with law. [7~4 E]

l 0. The liability of the respondent arie:e1 under the statute and it also arises B
as the result of a civil wrong or a tort committed by him, in offering the highest
bid with open eyea and in not fulfilling the obligations arising therefrom. The

•
· latter source of liability may appear to be novel but if justice requires, the Court
should not hesitate to impose it on the person who has committed the wrong to
·,-.r secure justice for the innocent injured party. [745 C]
'
·'
A. Damodaran & Anr. v. State of Kuala & Ors. [1976] 3 S.C.R. 780;
Cafldlar v. Crane C!irist111as & Co. [1951] 2 K.B. 164 at p. 178 referred to.
c
K. P. CJ;owdhary v. State of Madhya Prad.,/i & Ors. [1966] 3 S.C.R. 919
disti•guished.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 173 of 1969.
From the Judgment and Order dated 2-4-1968 o! the Allahabad D
High Court in First Appeal No. 5/62.
G. N. Dikshit and 0. P. Rana for the Appellant.
H. K. Puri and Miss Madhu Mulchandani and V. K. Rahal for the
Respondent.
E
The Judgment of A. C. Gupta and V. D. Tulzapurkar, JJ. was
delivered by Gupta, J. E. S. Venkataramiah, J. gave a dissenting opi-
nion.
GUPTA, J.-This appeal by certificate is from a judgment of the
Allahabad High Court, Lucknow Bench, dismissing the suit instituted
F
by the appellant, State of Uttar Pradesh, for recovery of a sum of
Rs. 20, 100 from the respondent. The facts stated in the plaint on
which the claim is based are these. The annual 'excise auctions' for
the year 1951-52 for Faizabad district were held at Faizabad on Feb-
ruary 22, 1951 "under the Excise Rules." The respondent offered the
highest bid of Rs. 73,000 and Rs. 48,000 respectively as fees for two G
groups of country liquor shop8 but as he did not deposit I/6th of the
------ aforesaid sum on conclusion of the sales as required under the Excise
Rules, the two groups of shops had to be sold again on March 30.
1951. The resale fetched respectively Rs. 65,700 and Rs. 35,200 for
the~e two groups of country liquor shops. According to the State of
Uttar Pradesh it suffered-a total loss of Rs. 20,100 which is the dif- H
ference between what the respondent had offered and the sum for which
the shops were later sold, and the respondent was liable to compensate
9-91SCI/80
728 SUPREME COURT REPORTS [1980] 2 S.C.R.

A the loss. The suit was decreed by the trial court. On appeal the
High Court dismissed the suit on the view that there was no valid con-
tract which could be enforced by the plaintiff as the requirements of
Article 299(1) of the Constitution had not been complied with. We
are also of the view that the suit must be dismissed but for a slightly
different reason; in our opinion there was no concluded contract bet-
B ween the parties, nor was there any statutory rule permitting recovery
of the deficiency on re-sale from the .respondent

The sale proclamation which is said to have contained the condi-
tions of sale was not produced. The Assistant Excise Commissioner
(P.W. 1) in his testimony referred to rule 357 of the Excise Manual.
c The relevant part of the rule is as follows :
"The following conditions shall apply to all sales under the
auction system, and will be inserted at the foot of the sale
proclamation if such proclamation is issued by the Excise
Commissioner :
D
( 1) The officer conducting the sales is not bound to ac-
cept the highest or any bid. In any case when the
highest or any bid is not proposed to be accepted,
the next highest bid should also be reported to the
Excise Commissioner.
E (2) The final acceptance of any bid is subject to the sanc-
tion of the Excise Commissioner.
( 3) Every person bidding will be held to his bid, whether
it be the highest or not.
(4)
F
( 5) A sum equal to one-sixth of the annual fees shall be
payable immediately on the conclusion of the sales
for the day, and the balance by such instalments as
are specified in the licence to be granted. If default
be made in the. payment of the advance instalment, the
G shop on farm will be resold, and if the price finally
bid at the re-sale be less than that bid at the first sale,
the difference will be recovered from the defaulter."
Section 77 of the U.P. Excise Act, 1910 states :
"All rules made and notifications issued under the Act
H shall be published in the official gazette and shall have effect
as if enacted in this Act from the date of such publication or
from such other d~te as may be specified in that behalf."
u. p, STATE v. KISHORILAL (Venkataramiah, J.) 729

The High Court found that the conditions mentioned in rule 357 had A
never been published as required and they did not, therefore, have
ihe force of Jaw. The High Court held that Part II of the Excise
Manual which includes rule 357 contained provisions which werei "com-
monfy referred 'to as rules" but were not really statutory rules and that
it was "a sort of book of guidance". Before us it was claimed on
behalf of the appellant that some of the conditions contained in rule B
357 had been published in the official gazette, but the learned counsel
for the appellant, State of Uttar Pradesh, was not in a position to
dispute that at least the last part of the 5th condition providing that
in case of default, if the pric~ fetched at the re-sale was less than the
bid at the first sale the difference would be recovered from the defaul- c
ter, had not been published. That being so it must be held that there
was no law nnder which the respondent could he asked to make
.amends for the shortfall.

The question that rem_ains .to be answered is, even if there was no
statutory provision, whether there was a concluded contract between
D
the appellant and the respondent under which the respondent was liable
to pay Rs. 20, I 00 which represents the difference between the highest
bid at the first sale and the price fetched at the, re-sale. The sale pro-
·clamation containing the conditions of sale has not been produced. As-
suming that the different clauses of rule 357 barring the last part of the
5th clause embody the conditions of sale, it is clear from the 2nd E
clause that in the absence of the final sanction of the Excise Commis-
·sioner, the bid cannot be said to have been finally accepted. It is not
claimed by the appellant that the bid offered by the respondent was
~ ·sanctioned by the Excise Commissioner. There was thus no concluded
' contract between the parties to make the respondent liable for the
alleged loss. The point appears to have been decided by this Court in
Union of India and another v. M/s. Bhimsen Walaiti Ram(I). This
was a case of an auction for the sale of licence for a country liquor
shop in Delhi for the year 1949-50. Clause 33 of the conditions of
sale provided inter alia : "All final bids will be made subject to the
~onfi.rmation by the Chief Commisisoner who may reject any bid with-
• out assiguing any reasons". This condition is similar to clause 2 of G
rule 357 in the instant case. Ramaswami J. speaking for the court in
Bhimsen' s case observed :
"It is, therefore, clear that the contract of sale was not
complete till the bid was confirmed by the Chief Commis'-
sioner and till such confirmation the person whose bid has H,
been provisionally accepted is entitled to withdraw his bid.
(I} [1970] 2 S.C.R. 594.
730 SUPREME COURT REPORTS [1980] 2 S.C.R.

A When the bid is so withdrawn before the confumation of the
>·
Chief Commissioner the bidder will not be liable fo11 damages
on account of any breach of contract or for the shortfall on
the resale. An acceptance of an offer may be either abso-
lute or conditional. If the acceptance is conditional the offer
can be withdrawn at any moment until; absolute accept-
B ance has taken place."
The appeal is dismissed but in the circumstances of the case we
make no order as to costs.
VENKATAAAMIAH, J. I have had the advantage of perusing the
judgment prepared by my learned brother, Gupta, J. I regret my in-
c ability to agree with the conclusion reached by him.
'·

Since some of the facts which are necessary for the purpose of this
case have not been set out in the judgment of my learned brother, I
have to mention them at this stage. Th~ excise auctions for the year
1951-52 were held on February 22, 1951 under the provisions of the
D U.P. Excise Act, 1910 (hereinafter referred to as 'the Act'). The
respondent offered the highest bid of Rs. 73,000 for the chowk group
shops and of Rs. 48,000 for Rakabganj group shops. At that auction,
the shops in question were knocked down for the above-mentioned
amounts in favour of the respondent who affixed his signatures -to the
respective bid sheets in token of his acceptance and also in the register
E of Settlement Record. The respondent, however, did not deposit 1/6th
of the above mentioned amounts on the aforesaid date but took time
for its depi>sit later on. In spite of repeated reminders, the respondent
did not pay the advance deposits in both the cases. The excise autho-
rities resold the excise privileges in question and on such resale, the
chowk group shops fetched Rs. 65, 700 and the Rakabganj group shop&
F
fetched Rs. 35,200. Consequently, hte State Government the appellant
herein suffered a loss of Rs. 20,100. As the respondent did not pay
the said amount of Rs. 20,100, a suit was instituted by the appellant
against him for recovery thereof before the Civil Judge, Faizabad. In
the course of bis written statement, the respondent, after a general
G denial of the allegations in the plaint, raised among others the follow-
ing additional pleas : -
" J. There was no compl.eted contract between the plaintiff
and defendant. Consequently there had been no breach
and no cause of actioI!_ for the suit.

rH 2. The entire auction proceedings having been against the
rules and instructions of the Government were illegal,
void and ineffective.
u. P. STATE v. KISHORILAL (Venkataramiah, J.) 731

3. The plaintiff himself having accepted the prayer of the A,
defendant to be relieved from the bid made by him and
subsequently re-auctioning the shops or the groups of
shops to others was now estopped from fixing any
civil liability on the defendant."

Four contentions were urged on behalf of the respondent in the B ,
trial court viz. ( 1) since the offers of the respondent had not been
accepted, no valic:l contracts had come into existence; (2) as the res-
pondent had withdrawn the offers before their acceptance, there could
be no enforceable contracts in existence; (3) the contracts, if any,
were unenforceable as then did not satisfy the conditions mentioned in ·
Article 299 of the Constitution and ( 4) that even though the respon- C
dent had committed the breach of the agreements he was not liable
to pay· any damages as the excise authorities had not taken any steps
to mitigate the loss by granting the excise licences in question to the
second highest bidder in each case, The trial court after rejecting the
contentiorui or the respondent made a decree for Rs. 20,100 with costs.
D
Aggrieved by the decree of the trial court, . the respondent filed an
appeal before the High Court of Allahabad. In the course of the
appeal, the High Court formulated four points for its consideration as
can be seen from the following extract from its judgment:-
> "The points now requiring consideration are (1) whether
there came into existence a contract; (2) whether by reason E
of non-deposit of one-sixth of the bid money there was a
breach of the contract on the part of the appellant; (3) whe-
ther this breach entitled the respondent to re-auction the
shops and to recover the loss on re-auction from the appel-
lant; and ( 4) whether the deficit of Rs. 20) 00 represents F .
the legal loss recoverable from the appellant."

Before tho High Court in so far as the first point was concerned,
the respondent's contention was three fold-(i) since the bids were
not accompanied by 1I6th of the bid amount, there were no completed
• proposals aud, therefore, there could be no acceptance thereof so as to G
bring into existence a contract; (ii) .as the Excise Commissioner had
not accorded his approval, there was no acceptance of the proposal and
(iii) as no agreements in writing had been execnted by the person com-
• petent to do so under Article 299 of the Constitution, no contracts
had come into existence. The High Court rejected the first two co11-1
tentions by holding that the failure to deposit l/6th of the bid amount H
did not make the proposals incomplete and that the absence of the
approval of the Excise Commissioner which was in the nature of a
732 SUPREME COURT REPORTS [1980] 2 S.C.R.

A power vested in him to reverse the acceptance of a bid by the officer
holding the auction did not in any way exonerate the respondent from >---,_
the liability if he was otherwise liable. It, however, held that since
the requirements of Article 299 of the Constitution had not been ful-
filled, the respondent was not liable to pay any damages on the ground
that he had £_ommitted a breach of contract.
B
On the second point which was formulated by the High Court for
its consideration, it observed as follows : -
"Coming to the second point of controversy, to wit, whe-
ther by reasons of 110u-deposit of one-sixth of the bid money
there was a breach of the contract on the part of the appel-
c lant, the answer must be in the affirmative for the simple
'
reason that the deposit of the money was one of the condi-
jions of the contract. This condition, as has been shown
above, follows both from the statutory provision and the
admission of the appellant himself that there was this d~posit
D to be made."

On the third point viz. whether the breach committed by the respon-
dent in each of the two cases entitled the State Government to re-
auction the shops and to recover the_ loss on such re-auction from him,
the High Court held that the right to re-auction had not been proved
E to be founded on either any statutory rule or on any express terms of
the contract but the said right was the 'natural outcome of the breach
of an accepted term of contract', when the respondent failed to deposit
the amounts in terms of the agreement. It further held that when the
respondent had failed to deposit the amounts in terms of the agree-
ment on which the bids were given and accepted the State Govern-
F ment was under an obligation for minimising the loss arising from the
breach of the contract to re-auction the shops and in case of any loss
arising therefrom, to recover the same from the respondent.

On the last point of controversy viz. the quantum of damages, the
High Court held that the extent of loss suffered by the State Govern-
G ment on account of breach on the part of the respondent was in the •
order of Rs. 20,100. The High court, however, allowed the appeal
and set aside the decree of the trial court on the ground that there were
no valid contracts which satisfied the requirements of Article 299 of •
the Constitution. Dissatisfied with the judgment of the High Court,
the State Government has, come up in appeal to this Court.
H
In the instant case, the only question which arises for consideration
is whether the respondent is J\O\ liable to pay the damage even though
u. P. STATE v. KISHORILAL (Venkataramiah, /.) 733

no contract in writing had been execnted in accordance with Article A
299 of the Constitntion. It was not the case of the respondent that
the excise authorities had no right to re-sell the excise licences· after
he had committed default in depositing l/6th of the bid amounts. His
principal pleas were (i) that there were no completed contracts between
the State Government and himself and consequently there could be
no breach of contract; (ii) that the entire auction proceedings, having B
been against the rules and instructions of the Government were illegal
and void and (iii) that the State Government, having accepted his
prayer to be relieved from the bids made by him and snbsequently
re-auctioning the groups of shops to others was estopped from fixing
any civil liability on him. It is seen from what is stated above that
no attempt was made by the respondent to make good his plea regard- c
ing the legality of the auction proceedings and the plea of estoppel.
The only plea raised ii). the written statement which ultimately appealed
t~- the High Court was that the respondent was not liable to pay any
damages as there were no completed contracts which satisfied the
requirements of Article 299 of the Constitution. The other plea that D
the offers made by the respondent had not been approved by the
• Excise Commissioner was rejected by the High Court by observing that
the power of the Excise Commissioner to accord his approva~ was only
a power which had been vested in him to set aside the acceptance
of the bid by the officer holding the auction. Having regard to the
pleadings and the evidence in this. case, it has to be assumed that the E
respondent knew that he was under an obligation to deposit with the
officer holding the auction 1/6tg of tlie bid amounts and that if he
committed any default in doing so,, the excise licences in question were
to be resold and that he would be liable to pay any loss suffered by the
State Government on such resale. The contention that in the absence
of the approval of the Excise Commissioner, he would not be liable F
to make good the loss has got to be rejected in view of condition No. 5
which according to the testimony of the Assistant Excise Commissioner
(P.W. 1), which cannot be rejected, had been mentioned in the sale
proclamation, which read thus ;

G
"5. A sum equal to one~sixth of the annual fees shall be
payable immediately on the conclusion of the sale for the day,
• and the balance by such instalments as are specified in the
licence to b"e granted. If default be made in the payment
of the advance instalment, the shop on farm will be resold,
and if the price finally bid at the resale be less than that bid H
at the first sale, the difference will be recovered from the
defaulter."
734 SUPREME COURT REPORTS [1980] 2 S.C.R,

A It is no donbt true that in Union of India & Ors. v. M/s. Bhim~n
Walaiti Ram,(') this Court held that the contract of sale was not com-
plete till the bid was confirmed by the Chief Commissioner and till
such confirmation the person whose bid had been provisionally accept-
ed was entitled to withdraw his bid and that when the bid was so
withdrawn before the confirmation of the Chief Commissioner, the
B bidder was not liable for damages on account of any breach of contract
or for the shortfall on the resale. Those observations were made by
this Court in that case in the context of the disapproval of the bid
by the Chief Commissioner a!!d this is borne out by the following
observations of this Court at pajle 598 : -
c "It is not disputed that the Chief Commissioner had dis-
approved the bid offered by the respondent. If the Chief
Commissioner had granted sanction under cl. 33 of Ex. D-23
the auction sale in favour of the respondent would have been
a completed transaction and he would have been liable for
any shortfall on the resale. As the essential pre-requisites
D of a completed sale are missing in this case there is no liability
imposed on the respondent for payment of the deficiency in
the price." •
In the case before us there was no disapproval of the Excise Com-
missioner of the bids offered by the respondent. On the other hand,
E the excise authorities requested the respondent to perform his part of
the obligation under the sale proclamation. It is also further seen
that this Court in the case of M/s. Bhimsen Walaiti Ram (supra)
proceeded on the basis that the liability of the bidder could arise ouly
as a consequence of the breach of a completed contract. No attention
appears to have been given in that case to the question whether the
F act of the offering of the highest bid which was accepted by the officer
holding the auction and which resulted in the closure of the auction
could by itself become a source of liability when the highest bidder
failed to comply with the conditions stipulated in the sale proclama-
tion.
It is necessary to refer briefly to some of the relevant provisions
G
of law governing the disposal of the excise licence by auction system
which were in fc;>rce during the relevant time. Section 21 of the Act
prohibits sale of any intoxicant without a licence by the concerned
excise authority. Section 24 of the Act authorises the grant of exclu- •
sive privilege of selling by wholesale or by retail any intoxicant within
H any specified local area. The right to sell any excisable article under
a licence issued by' .the excise authority can be acquired only by paying
(1) [1970] 2 S.C.R. 594.
u. P. STATE v. K!SHOR!LAL (Venkataramiah, J.) 735

J>uch fees or amount which may be equivalent to the highest bid offered A
at an auction when an auction is held. Section 39 of the Act which
dealS with the recovery of excise revenue reads as follows : -
"39. Recovery of excise revenue.-All excise revenue,
including all amounts due to the Government by any person
on account of any contract relating to the excise revenue, B
may be recovered from the person primarily liable to pay the

--.~
,.. same, or frgm his surety (if any) as an arrears of land
revenue or in the manner provided for the recovery of public
demands by any law for the time being in force. In case of
default made by a holder of a licence the Collector may take
7
the grant for which the licence has been given under manage- c
ment at the risk of the defaulter, or may declare the grant
forfeited and re-sell it at the risk and loss of the defaulter.
When a grant is under management under this section, the
Collector may recover as excise revenue any moneys due to
the defaulter by any lessee or assignee :
D
Provided that no licence for an exclusive privilege granted
under section 24 shall be forfeited or re-sold without the
sanction of the authority granting the licence."

In the above section, the words "all excise revenue, including all
amounts due to the Government by any person on account of any
contract relating to the excise revenue, may be recovered from th~ E
person primarily liable to pay the same" show that tho Government
is entitled to recover from a person any amount due by him on account
of any contract relating to the excise revenue. The words "on account
of any contract relating to the excise revenue" include within their
scope not merely any compensation which a person may be liable to
F
pay on account of the breach of a contract committed by him after
the contract is completed but also any other amount that may become
due on account of it contract which would come into existence if all
formalities are completed having regard to the scheme and manner in
which the excise privilege is disposed of by the excise authorities. The
relevant rules governing the conduct of excise _sales are found in a G
-- notification bearing No. B. 0. No. 423/V-284-B dated September 26,
1910. The rules require the publication of a sale proclamation
announcing the dates of sale and the place where it will be held.
Before the sales for the day commence, the general conditions govern-
ing the sale which are set out in paragraph 373 of the U.P. Excise
Manual (Vol. I) shall be read out and explained to all present so that H
the competitors may clearly understand the conditions on which they
-· bid. The general conditions governing retail vend and the special
736 SUPREME COURT REPORTS [1980] 2 S.C.R •.

A conditions governing each class of licence shall also be read out iI1'
public before the sales to which they apply. Information should be·
freely given on all matters affecting the value of licence about to be
sold. The officer conducting the sales shall record the name of each
person making a bid and the amount of bid. Signature of the highest
bidder and the next two lower bidders shall also be taken on the bid.
B sheet, whether such persons have been accepted as auction-purchasers
or not. At the time of the sale the person accepted as the auction
purchaser shall be required to sign his name or affix his mark against
the relevant entry of the licence in the Record G-14, it being explained
at the time that the deposit paid in advance will be returned in the
event of the licence being subsequently refused. The final bid accepted
c shall invariably be recorded with his own hand by ·the officer conduct-
ing the sales. The treasurer of the district, or one of his recognised
assistants, shall be required to attend the sales to receive the advance
fees paid by bidders provisionally accepted. The amount that has to
be paid as advance deposit is a sum equivalent to 1/6th of the annuar
fees which shall be payable immediately on the conclusion of the sales•
D
for the day, and the balance by such instalments as are specified in·
the licence to be granted. If default be made in the payment of the
• advance instalments, the shop or farm will be resold. If the price'
finally offered at the resale be less than that at the first sale, the
difference will be recovered from the defaulter through a civil suit-
E If any person whose bid has been accepted at auction fails to make
the advance deposit or if he withdraws from his bid, the excise autho--
rity may sell the contract immediately or on any subsequent date fixed'
by him.
It is not the case of the respondent in the instant case that he was
not aware of the above conditions, which had been set out in the sale·
F proclamation and also which must have been read out at the commence-
ment of the sale, as required by the rules for the information of the
intending purchasers. The question for consideration is whether having
offered the highest bid, it was open to the respondent to avoid the
liability arising from his act of offering the highest bid merely because
the Excise Commissioner who had the power to refuse to sanction the
G
sale had not sanctioned it. It is no doubt true that one of the condi-
tions of the auction was that the acceptance of any bid by the officer
conducting the sale was subject to the sanction of the Excise Commis-
sioner. It, however, did not mean that the acceptance of the bid would
be complete only after the sanction was accorded by the EKcise Com-
H missioner because of the other conditions which read as under : -
"l. The officer conducting the sales is not bound to
accept the highest or any bid.
u. P. STATE v. KISHORILAL (Venkataramiah, J.) 737
•
2. The final acceptance of any bid is subject to the sanc-
tion of the Excise Commissioner.''
A reading of the two clauses refep:ed to above shows that the offi-
cer holding the sale was empowered to accept the bid and that his
acceptance was only subject to the sanction of the Excise Commissioner ..
They meant that the power which had been reserved to the Excise B
Commissioner only enabled him to set aside the acceptance already
made by the officer conducting the sale. If it was not so set aside by
him, the acceptance of the officer conducting the sale would be effective.
As mentioned earlier, in this case, the Excise Commissioner had not
refused to sanction the acceptance of the highest bids offered by the
respondent. The liability of the highest bidder to deposit a sum c·
equivalent to 1/6th of the bid offered by him arises as a consequence
of his offering the highest bid with the knowleCJge of the conditions
referred to above immediately on the conclusion of the sale for the
day in his favour and if he does not make such deposit, the officer
holding the sale is entitled to put up the excise privilege for resale
either immediately. or on a subsequent day with liberty to recover from D·
the defaulter any loss that may be occasioned to the Government on
' ' such resale. In a case like this, no question of waiting till the contract
either being completed on a formal document coming into existence in '
accordance with Article 299 of the Constitution can arise. The com-
pletion of the contract or the execution of a contract in accordance with
Article 299 of the Constitution arises only after the highest bidder has E
deposited !/6th of the bid offered by him on the conclusion of the
sale which is a condition precedent for the completion of the contract
or for execution of a formal document in accordance with Article 299
of the Constitution. It is not, therefore, correct to determine the liabi-
lity of a defaulting bidder on the basis of a completed contract or a
F
formal document t<;> be executed under Article 299. If the contention
urged on behalf of the respondent is accepted, it will make every public
auction held by a Government a mockery. A man without a pie in
his pocket may offer the highest bid at an auction thus scaring away
other bona fide bidders who have assembled at the auction to offer
' their bids and then claim that he is not liable to pay any damages only G
because a completed contract or an agreement in writing in accord-
ance with Article 299 of the Constitution has not come into existence.
We should remember that, in the interest of public revenue excise pri-
vileges, privileges of cutting and removing timber {fom Government
forests, occupancy rights over Government lands and building sites
etc. are disposed of in public auction by the Central Government, State B
Governments, statutory boards and local authorities and in almost
every such auction, there is invariably a condition that hte acceptance
738 SUPREME COURT REPORTS [1980] 2 S.C.R.

.A of the highest bid at the auction is subject to the sanction of some
superior officer or a statutory authority or the appropriate Govern-
ment. If the contention urged on behalf of the respondent is accepted
then a person who offers the highest bid in any such auction can
always absolve himself of all his liability flowing from his act of
offering the highest bid by writing a letter immediately after the con-
clusion of sale to the concerned authority expressing his intention to
withdraw from the bid or. by resiling from it in any other manner. The
result will be that on the one hand the other bona fide bidders who
have come to offer the bids would not be entitled to claim the privi-
lege or property that is put up for sale and on the other the defaulting
bidder would also be not liable to carry out his obligation flowing from
his act of offering the highest bid. If the liability of such a bidder is
to be founded only on the basis of a completed contract then in the
case of auctions held by or on behalf of the Central or State Govern-
ments, no liability can arise even if such sanction is accorded, nnless
it is followed up by a formal docui:n-ent executed under Article 299 of
the Constitution-which alone amounts to a completed contract where
Government is a party. Judged from the foregoing, I am of the view
that the acceptance of the conclusion reached by my learned brother ,
.would lead to enormous public prejudice and instead of advancing the
cause of justice would hamper it. This case is an illustration of what
prejudice is likely to be caused to the public revenue when default is
E committed by the highest bidder. The documents produced before the
Court in the present case show that the second highest bid in the case
of chowl:: group shops offered by some other bidder was Rs. 72,500
and in the case of Rakabganj group shops was Rs. 47,000. If the
respondent had not offered his bids Government could have realised
Rs. 1,19,500 from both the groups i.e. only Rs. 1,500 less than what
F the respondent offered. By the intervention of the respondent's bids
and the default committed by him, tho Government could realise on·
resale only Rs. 1,00,900 thus resulting in a loss of Rs. 20,100. Can
it be said that in such a case where legal injury is sustained, there is
no remedy available to the State Government ?

G In a somewhat similar but not identical situation, this Court in A. •
Damodaran & Anr. v. State of Kera/a & Ors.(') was called upon to
decide whether the highest bidder at an excise auction was liable to be
proceeded with for recovery of excise dues in the absence of an agree-
ment executed in• accordance with Article 299. In that case, the
. appellants offered the highest bid at the auction sales held in ~espect
H of some toddy shops. The conditions of the sales, notified in pursu-

(!) [1976] 3 S.C.R. 780.
u. P. STATE v. KISIIORILAL (Venkataramiah, J.) 739

ance of the statutory provisions were : ( 1) that it was incumbent upon A
the bidder to pay imm,ediately 10% of the amount due, (2) that the
successful bidder had to deposit 30% of the amount payable on
demand by the Assistant Commissioner and to execute agreements
before getting the necesMry licences and (3) that if the contract could
not be executed, the whole amount was to be forfeited and th~ shop
itself was to be resold. The appellants deposited the necessary amount B
on demand and .were allowed to start business even before agreements
were executed or liceuces were issued. But the appellants failed to pay
the balance due to the State. The amounts were sought to be recovered
under section 28 of the Kerala Abkari Act (Act No· 1 of 1967)
which was more or less similar to section 39 of the Act. The High
Court of Kerala held that the amounts were recoverable from the
c
appellants. In the appeal before this Court, the appellants contended
that as no agreement was executed between the appellants and the
Government in the manner prescribed by Article 299 of the Constitu-
tion, they had not become the 'grantees' of any privilege and hence
were not liable to pay the amounts sought to be recovered. Dismissing D
the appeal, this Court held that the absence of an agreement executed
in accordance with the provisions of Article 299 of the Corn•titution
could not be a bar for recovering the excise dues in view of section 28
of the Kerala Act. The Court held that the liability was one which
arose under the statute and therefore was enforceable. In taking that
• view, this Court o~erved at pages 782-783 thus : E

"The appellants iubmit that they had not become
"grantee" of any privilege without the execution of con-
tracts complyini with the requirements of Article 299 of the
Constitution. The learned Judge of the Kerala High Court
F
relied on Madhavan v. Assistant Excise Commissioner, Pal-
gluit (I.L.R. (1969) 2 Kerala 71), affirmed by a Division
Bench in Damodaran v. State. of Kera/a (1969) Kerala Law
Times 587. It appears that, although the Division Bench
did hot specifically consider whether a bidder at an auction
of the kind befop~ us was the "grantee" of a privilege within G
the meaning of sectio"n 26 of the Act, yet, it held that the
liability to satisfy the dues arising out of a bid was enforce-
able under section 28 of the Act quite apart from any con-
tractual liability. Reference was also made, in this connec-
tion, to the decision of this Court in Union of India v.
A. L. Ralia Ram (A.I.R. 1963 S.C. 1685), for contending D
that the absence of f0rmal contract is not fatal in all cases
so as to make the whole transaction null and void ab initio.
740 SUPREME COURT REPORTS [1980] 2 S.C.R.

Statutory duties and liabilities may be enforced in accor-
dance with statutory provisions. Equitable obligation may
also arise and be enforced by decrees of Courts quite apart
from the requiremen!s of article 299 of the Constitution.
Muk1mchand v. State of Madhya Pradesh (1968) 2 S.C.R.
214 affords an instance where on a claim for compensation
B or restitution under section 70 of the Contract Act, this
Court relied upon the principle stated in Nelson v. Harbolt
(1948) 1 K.B. 30 as follows at p. 222 : -
"It is no longer appropriate to draw a distinction between
law and equity. Principles have not to be stated in the
light of their combined effect. Nor is it necessary to can-
vass the niceties of the old forms of action. Remedies now
depend on the substance of the right, not on whether they
can be fitted fnto a particular framework. The right here
is not peculiar to equity or contract or tort, but falls natu-
rally within the important category of cases where the Court
:D orders restitution if the justice of the case so requires."
In the case before us, we are concerned with the legality
of proceedings under section 28 quoted above of the Act.
It is evident that these proceedings can be taken in respect
of "all amounts due to the Government by any grantee of
a privilege or by any farmer under this Act or by any per-
son on account of any contract relating to the Abkari Reve- .
nue". It is clear that dues may also be "recovered from
the person primarily liable to pay the same or from his
surety (if any)". It is not a condition precedent to recovery
of an amount due and recoverable that it should be due
F under a formally drawn up and executed contract."

In reaching the above conclusion, this Court approved the obser-
vation made by Mathew, J. in Madhavan v. Assistant Excise Com-
missioner, Palghat(') which ran as follows : -
"It was contended on behalf of the petitioners in some
G of these cases that no agreements were executed by them,
and therefore, the Government are not entitled to recover
any amount by way of rental. Reliance was placed upon
the decisions of the Supreme Court in H. P. Chowdhry v.
State of M.P. (AIR 1967 SC 203) and Mulamchand v.
State of M.P. (1969(II) S.C.W.R. 397), for the proposition
that unless there is an agreement executed in accordance
(I) l.L.R. (1969) 2 Kerala 71.
u. P. STATE v. KISHORILAL (Venkataramiah, /.) 741

with the provisions of Article 299 of the Constitntion, the A
petitioners in the case where no agreements have been exe-
cuted, would not be liable to pay rental. The argument was
... that the liability to pay rental arises only out of the agree-
ment, and if there is no agreement. then there is no liability
to be enforced. As I have indicated the liability to pay
the ren'.al arises not only by virtue of the agreement but B
also by the provisions of section 28 of the Act. The deci-
sion of the Supreme Court in H. P. Chowdhry v. State of
M.P. would make it clear that if thtre are provisions in the
Act, the liability to pay the rental can be enforced. I
think that even if no agreement has been executed, there
was the liability under section 28 of the Act, and that the
c
liability would be enforced under the provisions of the Reve-
nue Recovery Act. (See Sections 6 and 62 of the T.C.
Act)''.

Chandrashekhar, J. (as he the'n was) has also taken more or less
D
the same view in-State of Mysore v. Dasappa Naidu( 1 ). In that case,
the plaintiff who was a licensee for sale of ga'nja had executed a
•• counterpart agreement as required by section 25 of the Mysore Excise
Act but no formal deed was executed by both the plaintiff and th~
State Government as required by Article 299 of the Constitution.
When the period of contract expired, rental for four months was in E
arrears. When the Governme'nt sought to bring the licen~ee's proper-
ties to sale for recovery of the arrears, the plaintiff executed a mort-
gage in favour of the State to secure payment of the arrears under-
taking to pay the arrears in monthly instalments. As he defaulted. in
payment of the instalments, the Assistant Commissioner issued a sale
proclamation for sale of the mortgaged properties. In the suit he F
qw~stio'ned the said sale proceedings on the ground that the counter-
part of the agreement and the mortgage deed executed by him were
void for non-fulfilment of the requirements of Article 299 of the
Constitution. The learned Judge held that the absence of a document
-conforming to Article 299 was not a bar in view of the statutory pro-
visions contained in the Mysore Excise Act. G

The Rajanagaram Village Co-operative Society by its Secretary,
Parrhasarathi Pillai v. P. Veerasami Mudaly(') wa~ a reverse case
and the facts involved in it were these: The defendant Co-operative
Society put up a property belonging to it for sale at .a public auction.
H
(I) (1968) I Mys. L.J. 69.
(2) A.I.R. 1951 Mad. 322.
74 2 SUPREME COURT REPORTS [1980] 2 S.C.R.

The auction was held by a sale officer. One of the conditions of
the auction sale was that the sale would be knocked down in favour ·
. of the highest bidder subject to the approval of the defendant Co-
operative Society and the Chittoor District Bank. The plaintiff was
the highest bidder at the auction and the sale was knocked down
in his favour by the sale officer. He.deposited 011 the date of the
8 sale with the sale officer the amount which he had to deposit under
the conditions of the sale and also deposited the balance with
the defendant within the stipulated period. The Chittoor District
Bank took yp the matter for consideration at its meeting held 011 a t
~·
'·
date subsequent to the date of the sale and approved the sale. This
resolution was, however, not communicated to the plaintiff and no
c sale deed was executed in favour of him. The plaintiff by his notice
called npon the defendant to execute a conveyance in his favour. There-
upon the Bank cancelled its previous resolution and directed a re-sale
of the property. The plaintiff thereafter instituted a suit for enforc:
ing the sale on the basis that there was a concluded contrac1 in his
D favour which was denied by the defendant in the written statement.
The main contention urged on behalf of the .defendant was that the
contract did not recome final and complete as the approval of the
.Chittoor District Bank was not communicated to the plaintiff. Under
section 4 of the Contract Act, it was claimed, that even the approval
should have been communicated like accepta'nce as according to the
E contention of the defendant that cons:ituted a final acceptance of the
contract. The trial court accepted the contention of the defendant
and dismissed the suit. The first appellate court reversed the deci·
sion of the trial court a'nd granted a decree for specific performance
of the contract in favour of th~ plaintiff. While affirming the Judg-
ment of the first appellate court, the High Court observed in the above
F decision as follows :-
"The defendant appointed a sale officer who, under the
terms of Ex. D. I was authorised to knock down in favour
of the highest bidder the property subject of course to the
approval of Mahasabha and the Chittoor District Central
G Bank. No point was raised in the courts below, and indeed
it could not be raised before me, that this sale officer had •
no authority to accept any bid on behalf of the defendant.
Further there was also no plea any where that there was no
·-
approval of the sale by the Mahasabha, that is the defendant.
The defendant should have known if there was no such app-
H roval and should have put that matter i'n the forefront of
the case if really there is any substance in that contention
which is souiht to be raised for the first time thouih faintly
u. P. STATE v. K!SHORI LAL (Venkataramiah, J.) 743

in the second appeal. The matter, therefore, for consi- A
-.,-- deration is whether the sale officer, in knocking down the
bid subject to the approval of the Bank, had or had not
accepted the offer of the plaintiff subject to the condition of
• approval. Ever since the well-known decision of Payne v.
Cave, (1789) 3 T.R. 148: 100 E.R. 502, it has been
established that the position of an auctioneer is that of an B
agent of the vendor and that until the bid is knocked down,
then~ is no concluded co'ntract in favour of the bidder and
the bidder was at liberty to withdraw his offer before it was
accepted. To a similar effect is also the decision Cook v.
Oxley, (1790) 3 T.R. 653 : 100 E.R. 785. If there is
. no furthoor condition of an approval or confirmmion, ordi-
c
narily if the bid is knocked down, the acceptance is commu-
nicated by the acceptance of the bid i"n the presence of the
bidder and no further communication would b;, necessary.
If, however, the acceptance was conditional, the condition
being that it is subject to the approval or confirmation by D
some other person, what is the position ? The acceptance
in such circumstances, in my opinion, is conditional accep-
tance and that has to be communicated. Nobody suggests
that in order to make the contract enforceable, it is not
necessary to have the approval of the person indicated in the
conditions of the auction sale. The question is whether the E
approval also in such circumstances, should be communica\-
ed to the bidder in order to conclude the contract. In my
opinion, the acceptance contemplated may be absolute or
may be conditional and when once that conditional accep-
tance is communicated, there is no need or necessity for a
further communication of the fulfilment of the condition F
where the acceptance is a conditional acceptance. The

-· The
communication of the acceptance twice is not needed".
correctness of this decision is doubted elsewhere.
It is not necessary in this case to decide whether the view expressed
by the High Court of Madms in the above case is correct or not for
' G
the situation in the instant case is anterior to the situation which
obtained in the said case. The officer who held the same in the pre-
sent case had the power to accept the bids though it was subject to
sanction by the Excise Commissioner. The respondent who offered
the bids after conclusion of the sale failed to make the initial deposit
and thereby drove the Department to hold the resale. It was his
H
conduct which ultimately resulted in the loss suffered by the Depart-
ment.
10-91SCl/80

"" ,,..._,. --
744 SUPREME COURT REPORTS [ 1980] 2 S.C.R.

A The decisign of this Court in K. P. Chowdhary v. State of Madhya
Pradesh & Ors.(') is not of much assistance to the respondent in
this case, since in that case the officer who held the sale was not
competent to accept the bids of the appellant therein as the bids offer-
ed were higher than what he could accept. The appellant therein
resiled from the offer made by him by raising a dispute as to the •
• marldng of the trees .even before the Chief Conservator of Forests
who was competent to accept the bids could accept them. This Court
no doubt upheld the plea of the appellant therein as there was no
acceptance of the bid by the competent officer. This case is one
falling in the category of cases where the sale officer has no power
to accept the bid and not one falling under the category of cases in-
c volving a conditional acceptance as observed in the case of The Raj-
anagaram Village Co-operlilire Society by its Secretary, Parthasarathi
Pillai (supra). It is not the case of the respondent in this appeal that
the officer who held the excise auction was not competent to accept
the bids. It is further seen that th~ question whether the appellant
in the above case was liable in any other manner also was not consi-
dered in that decision. Hence no reliance can be placed on the above
decision.
The respondent by his own conduct in not depositing the 1/6th
of the bids offered by him made it impossible for the excise authori- ,_
ties to conclude the contract. The question may have been different
E if the respondent had done all that h~ had to do under the conditions
of the auction but the excise authorities had not intimated him that
he could exploit the excise privileges in accordance with law. Tlr~
documents produced before the Court show that on February 24,
1951, the Deputy Commissioner, Faizabad wrote a letter (Exh. 5)
calling upon the respondent to make the initial deposit which he had
F
to make at the conclusion of the sale at the fall of the hammer on
the date of the sale within three days of the receipt of that Jetter and
intimating that in the absence of compliance with the said demand, the .
shops would be re-auctioned and the amount of deficiency resulting
on such re-auction would be recovered from him. That letter was
G received by the respondent on March 8, 1951- As the respondent
did not comply with the demand, the excise authority cono~rned
decided to conduct a resale of the excise privileges on March 21,
1951, and also to prosecute the respomknt for an offence punishable
under section 185 of the I'.ndian Penal Code. Thereafter the respon-
dent gave a repre&~ntation (Exh. 7) on March 30, 1951 stating that
H any action other than prosecuting him may be taken. He stated in
that representation that his sole object in offering the bids was to
(I) [1966] 3 S.C.R. 919.
u. P. STATE v. KISHORI LAL (Venkatilramiah, !.) 745

help the Government and to help himself but when he calculated A
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 B
that it is not possible to hold that the respondent was not in Jaw 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 offerin~ the hij,\hest bid with open eyes
c
and in not fulfilling th·~ obligations arisin: therefrom. The latter
source of liability in this case may appear to be novel but if justice
requires, the Court should not hesitate to impose it on the person
who has committed the wrong and secure justio~ for the innocent
injured party. The following observation of Dennini: L.J. (as he D
then was) in Candler v. Crane, Chrismas & Co.(') at page 178,
though in minority, arc apposite:-
"This argument about the novelty of th·~ action does not
appeal to me in the least. It has been put forward in all
the great cases which have been milestones of progress in
our law, and it has always, or nearly always, been rejected. E
If you read the great cases of Ashby v. White (1703) 2
Ld. Raym, 938, Pasley v. Freeman (1789) 3 Term Rep. 51
and Donoghue v. Stevenson (1932) A.C. 562, you will find
that in each of them the judges wep~ divided in opinion. On
the one side there were the timorous souls who were fearful
of allowing a new cause of action. On the other side, there F
were the bold spirits who were ready to allow it if justice
so required. It was fortunate for the common Jaw that the
progressive view prevailed."
Considering the facts and circumstances of the instant case, I am
of the view that the respondent should be made liable for the sum G
claimed in the suit and the decree made by the trial court should be
rest<'lre<l.
ORDER
In view of the majority judgment, the appeal is dismissed with
no order as to costs.
H ,
N.V.K.
----
(1) [1951] 2 K.B 164 at li8.
p.