Delhi High Court
Suraj Besan & Rice Mills vs Food Corporation Of India on 30 October, 1987
Equivalent citations: AIR1988DELHI224, 1987(2)ARBLR240(DELHI), 33(1987)DLT401, 1988(14)DRJ176, AIR 1988 DELHI 224, (1987) 2 ARBI L.R. 240, (1987) 33 DLT 401, (1988) 14 DRJ 176
JUDGMENT S.N. Sapra, J.
(1) Plaintiff has filed the present suit thereby claiming a decree of declaration to the effect that there is no legal, valid and binding contract for the sale and purchase of 6200 M.Ts. of damaged paddy as per acceptance telegram dated July 22, 1983 and that this does not bring about a valid, legal and binding contract.
(2) Briefly, the facts are that plaintiff firm is registered with defendant vide Registration No. 25/82 dated January 27, 1982. It is alleged that under this registration, the annual requirement of the plaintiff has been assessed at 15,000 quintals (1500 M.Ts.). As such plaintiff can quote only for this registered quantity. Regional Office of defendant at Chandigarh invited tenders for the purchase and removal of damaged foodgrains declared fit for cattle/poultry feed etc. Plaintiff submitted their tenders through Sh. Niranjan Lal in the prescribed form. the tender submitted by plaintiff, was not signed by all the partners of plaintiff firm. Tenders were submitted and opened on Jane 29, 1983. It is alleged that tender of plaintiff was neither valid nor the same could be deemed as valid for acceptance beyond the annual assessed capacity of 1500 M.Ts of stocks. Plaintiff vide letter dated July 8, 1983 informed defendant that the offer was for 1500 M.Ts of stocks and not over and above specific quantity. This, according to plaintiff, amounted to amended offer which was received by defendant Corporation on July 11, 1983. However, the tender of plaintiff was accepted and an acceptance telegram was issued by defendant on July 22, 1983 which was received by plaintiff on July 24, 1983. It is alleged in the plaint that plaintiff's offer was only for 1500 M.Ts of stocks of damaged paddy but to the surprise of plaintiff, telegram dated July 22, 1983, placed an order for stock of about 6200 M.Ts of damaged paddy for purchase. According to plaintiff, the aforesaid acceptance did not bring about a valid, legal and binding contract between the parties to purchase 6200 M.Ts of stock. In any event, it is alleged that aforesaid acceptance was a counter offer as it did not conform to the offer of the plaintiff to the extent of 1500 M.Ts. As there was no binding contract between the parties, plaintiff did not furnish the security deposit amount. There was a threat on behalf of the defendant for selling the stocks of 6200 fM.Ts of damaged paddy at the risk and cost of plaintiff and to take steps for the cancellation of the certificate and various benefits and privileges which plaintiff has been, enjoying.
(3) Defendant has filed the written statement thereby controverting the allegations made by plaintiff. Defendant has alleged that the annual requirement was no doubt assessed at 1500 M.Ts, but defendant denied that plaintiff could only quote for 1500 M.Ts Plaintiff firm through its partner Sh. Om Parkash authorised Sh. Niranjan Lal vide letter dated June 23, 1983 to sign.. and attend the tender floated by the defendant and in that authority letter the partner of the plaintiff firm undertook that the firm would be responsible for all the acts and deeds done by Sh. Niranjan Lal with regard to the tender in question. Plaintiff firm voluntarily had quoted for 13,5.884 M.Ts of damaged foodgrains. It is an after thought on the part of the plaintiff firm to back out their own offer under the garb of 1500 M.Ts when plaintiff firm realised that it might not be economically viable for plaintiff to lift the quoted quantity of damaged foodgrains. Defendant has alleged that tender submitted by plaintiff was valid. Plaintiff was issued acceptance telegram on July 22, 1983 for 6,176.790 M.Ts quantity of foodgrains. Any modification to the original offer made by plaintiff has no relevance and same is not binding on defendant. Plaintiff is prohibited to amend or modify the offer in terms of tender notice dated June 28,1983. According to defendant. Clause 5 of tender notice prohibits any amendment to the original offer by the plaintiff. It is alleged that offer of the plaintiff was open for two months i.e. up to August 29, 1983. As such, there came into existence legal, valid and binding agreement between the parties.
(4) On the pleadings of the parties, following issues were framed :- Issues:
1. Whether the contract entered between the parties as per the tender dated 28-6-83 is valid and binding on the plaintiff ? If so, to what effect ? Opp 2. Whether the plaintiff could quote only for the registered quantity of 1500 metric tonnes ? What is the effect of capacity assured for registration on the contract entered into between the parties ? Opp 3. Whether the contract was executed by an authorised person on behalf of the plaintiff ? If not, to what effect ? Opd 4. Relief.
Parties have produced oral as well as documentary evidence. Issue No. I:
(5) Mr. Mukul Rohtagi appearing on behalf of plaintiff contends that before the acceptance of the offer made by plaintiff, plaintiff under law was at liberty to withdraw the same. He submits that under Section 4 of the Indian Con tract Act, plaintiff could modify or withdraw their offer at any time before the communication of acceptance was complete as against plaintiff. In the present case, plaintiff vide letter dated July 8, 1983 received by defendant on July 1 1, 1983 modified their offer. He urges that Clause D of the tender conditions gives right to the defendant to accept or reject any tender without any reason including the higher tender. No doubt, it provides that tender shall be irrevocable and shall remain open for acceptance for two months from the date of opening of tender. These two months expired on August 29, 1983. Further, right has been reserved by the defendant to extend by another fifteen days unilaterally. The contention of Mr. Rohtagi is that keeping open the offer for two months is not an absolute term either in law or in facts of the present case. Factually, Clause E(1) provides for payment of earnest money for performance and for keeping offer open. In the present case, no earnest money was paid. The second contention made by Mr. Rohtagi is that plaintiff varied their offer by restricting the quantity to 1500 M.Ts thus superseding their original offer before accepta¢nce. If the varied offer of plaintiff was not accepted then the position is that original offer stands withdrawn before acceptance. Till acceptance plaintiff has a right to withdraw or do anything they like because unless there is acceptance there is no concluded contract between the parties. Reliance has been placed on a Division Bench Judgment of this Court in R.F.A. 24-D/1960 Union of India v. Sh. Rajendra Prasad Jain, decided on May 23,1967, T. Linga Gowder v. The State of Madras, A.I.R. 1971 Mad 28, Rajendra Kumar Verma v. State of Madhya Pradesh and others, , and Vishal Builders (P) Ltd. v. Delhi Development Authority, 2nd (1977) I Delhi page 724.
(6) Third point urged by Mr. Rohtagi is that in any event acceptance by defendant thereby placing an order of 6,176,790 M.Ts. was not absolute and unqualified. In fact, this amounted to counter offer. In the first instance the original offer of the plaintiff was for 13,576,884 M.Ts. This was not open to the defendant to accept the part of the offer.
(7) Mr. Vijender Jain, learned counsel for defendant, contends that der condition D of the tender, tender in question was irrevocable. Once rates for food stocks/damaged foodgrains were quoted by the tenderer, then he cannot withdraw his rates. The clause is in consonance with public policy. The offer of the plaintiff in the present case was open for a period of two months commencing from the date of opening of the tender. Plaintiff under law and in fact was not entitled to either withdraw the offer or to modify the same prior to the expiry of the period of two months. Mr. Vijender Jain further contends that defendant was at liberty to accept the offer of the plaintiff in part. The acceptance thus did not amount to counter offer.
(8) To appreciate the arguments of the learned counsel for the parties, it is necessary to quote the provisions as contained in Sections 4, 5 and 7 of the Indian Contract Act, which are as under :- "4.Communication when complete.-The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. The communication of an acceptance is complete, as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor ; as against the acceptor, when it comes to knowledge of the proposer. The communication of a revocation is complete,- as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it ; as against the person to whom it is made, when it comes to his knowledge. 5-Revocation of proposals and acceptances-A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. 7-Acceptance must be absolute-In order to convert a proposal into a promise, the acceptance must- (1) be absolute and unqualified ; (2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise ; but, if he fails to do so, he accepts the acceptance."
(9) Judgment given by the Division Bench of this Court in R.F.A. 24-D/1960 (Supra) is applicable to the facts and circumstances of the present case. In that case it was contended by Union of India that there was a clear stipulation in the condition that the tenderer was being given the tender documents and was permitted to tender in consideration of his agreement to the stipulation therein. It was further contended that by submitting his tender, the offer made wherein was unconditionally to remain open till 26th October, 1953. Counsel for Union of India in that case thus submitted that plaintiff not only agreed to purchase on the conditions and at the price mentioned in the tender documents, but he also agreed to hold its tender open for acceptance till 26th October, 1953. It was held as under :- "IN view of the above discussion it hardly seems necessary to refer to a large number of cases which have been cited by the learned counsel for the respondent in support of the proposition that the advertisement notice (Ex. D-1) was no more than a mere invitation to tender, the only offer in this case being the tender (Ex. D-2) submitted by the plaintiff and this offer, it was open to the plaintiff to revoke at any time before it was accepted by the D.G.S. & D. on behalf of the President of India."
(10) Rajendra Kumar Verma v. State of Madhya Pradesh and others '(Supra) it has been held that a person who makes an offer is entitled to withdraw his offer or tender before its acceptance is intimated to him. The Government by merely providing a clause to the contrary in the tender notice could not take away the legal rights of a person.
(11) In view of the law laid down by the Division Bench of this Court in R.F.A. 24-D/1960 Union of India v. Sh. Rajendra Prasad Jain, I hold that under law plaintiff was entitled to withdraw or modify their offer before the communication of the acceptance was complete as against the plaintiff. Thus, the letter dated July 8, 1983 amounted to the modification of the offer. I accordingly hold that acceptance issued by telegram dated July 22, 1983 did not result in a concluded agreement between the parties as there was no offer in existence at the time when defendant accepted tender of plaintiff.
(12) The second contention of Mr. Rohtagi that the acceptance by defendant of part of the original offer amounted to a counter offer has a force. It is admitted case that plaintiff has quoted for the purchase of 13,576.884 M.Ts of damaged paddy. Defendant, however, placed order by telegram dated July 22, 1983 for 6,176.790 M.Ts. The acceptance under law should be absolute and unconditional. In the present case it was neither absolute nor unconditional because defendant accepted only part of the offer of the plaintiff by placing an order for 6,176.790 M.Ts. Under the circumstances, issue No. 1 is decided in favor of plaintiff and against the defendant. Issue No. 2:
(13) Mr. Mukul Rohtagi relies on Ex. D. 3 dated January 27, 1982. According to him, under this registration certificate, the assessed capacity of plaintiff was only up to 1500 M.Ts annually. Thus, under law plaintiff could not quote for any quantity which was more than the assessed capacity of plaintiff. Plaintiff had submitted its tender for 13,576.884 M.Ts, therefore, according to Mr Rohatgi the tender was not valid. Mr. P.R. Ananda Rao D.W. I has appeared in the witness box. He has deposed that plaintiff had applied for being registered as an approved party for purchase of damaged foodgrains from the defendant in the year 1982 indicating that plaintiff is a manufacturer of cattle feeds. Along with this application plaintiff had submitted a certificate issued by District Industries Centre, Government of M.P. Raipur, for registration as Small Scale Industrial Unit indicating the annual capacity. The defendant did not assess the capacity of any of its buyers. According to defendant, plaintiff was at liberty to quote for any quantity. Contracts come into existence when an offer is accepted unconditionally by an acceptance. In the present case, plaintiff was in the trade and in my view the assessed capacity under the registration certificate placed no restriction upon plaintiff to quote beyond the annual assessed capacity of 1500 M.Ts. It has been proved that plaintiff voluntarily quoted the quantity at 13,576.884 M.Ts for purchase of damaged paddy. Thus, this issue is decided against the plaintiff and in favor of defendant. Issue No. 3:
(14) SH.OM Parkash is one of the partners of plaintiff firm and he has appeared as Public Witness . I. He has admitted that plaintiff firm authorised Sh. Niranjan Lal to submit tenders on behalf of plaintiff. The tenders were accordingly submitted by Sh. Niranjan Lal for and on behalf of plaintiff firm. Registration certificate was also given to Sh. Niranjan Lal along with a letter authorising him on behalf of the plaintiff firm and for exemption from furnishing security. The present stand has been taken by the plaintiff with a view to back out from the tender. The tenders were submitted by a duly authorised person who was Sh. Niranjan Lal in this case. This has been amply proved by the documents on recordThus, this issue is decided against the plaintiff. Relief:
(15) In view of my findings on issue No. I, the suit filed by the plaintiff is decreed. I pass a decree of declaration in favor of plaintiff against defendant to the effect that there is no legal, valid and binding contract for sale and purchase of 6,176.790 M.Ts. of damaged paddy as per acceptance telegram dated July 22, 1983 and this telegram did not bring about a legal, valid and binding contract. Looking to the circumstances of the case, no order as to costs.