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2010 DIGILAW 2989 (ALL)

PREM NATH MAHROTRA v. STATE OF U. P.

2010-09-27

PANKAJ MITHAL

body2010
JUDGMENT Hon’ble Pankaj Mithal, J.—The State of U.P. was having eight Zamindari Abolition Compensation Bonds of the face value Rs. 5,000/-. The State of U.P. directed the Collector, Farrukhabad to sell the aforesaid bonds by public auction at the market value. On the direction of the Collector, Naib Tehsildar issued sale proclamation for public auction and the bonds were put to auction on 12.8.1969. The plaintiff participated in the auction and offered highest bid of Rs. 3,020/-. His bid was accepted and he deposited 1/4th of the bid amount. The Naib Tehsildar submitted report to the Sub-Divisional Officer concerned and the plaintiff’s bid was approved by the Sub-Divisional Officer. He was directed to deposit the balance amount which he duly deposited. However, when the bonds were forwarded to the Collector for endorsement of the name of the plaintiff as the purchaser, the Collector refused to make the endorsement and directed for a fresh auction as he was of the opinion that the auction was not proper. The bonds were re-auctioned and were sold for a sum of Rs. 4,700/- to some other person. The Collector made endorsement of transfer of the bonds in favour of the aforesaid auction purchaser. 2. In view of aforesaid factual matrix the plaintiff filed Original Suit No. 83 of 1970 for recovery of the aforesaid bonds and alternatively for recovery of Rs. 4,678/- as the market value of the bonds and an for amount of Rs. 1,722/- as damages. 3. The suit on contest was decreed by the Court of first instance vide judgment and order dated 24.9.1971 for a sum of Rs. 6,400/- with costs. 4. Aggrieved by the decree of the Court below, the State of U.P. preferred Civil Appeal No. 46 of 1972. The appellate Court partly allowed the appeal and the judgment, order and decree of the Court below was modified. The decree for recovery of the auction amount/deposited by the plaintiff of Rs. 3,020/- with pendite lite and future interest at the rate of 9% per annum with effect from 21.2.1970 was maintained and that for damages was reversed. 5. It is against the aforesaid decree of the lower appellate Court that the plaintiff has filed this second appeal which was admitted as far back as on 3.12.1977. 6. 3,020/- with pendite lite and future interest at the rate of 9% per annum with effect from 21.2.1970 was maintained and that for damages was reversed. 5. It is against the aforesaid decree of the lower appellate Court that the plaintiff has filed this second appeal which was admitted as far back as on 3.12.1977. 6. I have heard learned counsel holding brief of Sri M.M.Sahai on behalf of the plaintiff-appellant and learned Standing Counsel for the respondents State of U.P. and others. 7. Only one substantial question of law has been raised in this second appeal which is as under : Whether the auction sale in favour of the plaintiff stood completed with the acceptance of the bid and its approval by the Sub-Divisional Officer as contemplated by Section 64 of the Sales of Goods Act so as to entitle the plaintiff to receive damages under Section 73 of the Indian Contract Act ? 8. The auction sale of moveable properties are ordinarily covered by the provisions of Section 64 of the Sale of Goods Act, 1930 (hereinafter referred to as “the Act). It provides that sale by auction is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner and until such announcement is made any bidder may retract his bid. In short, meaning thereby that the sale by auction is complete as soon as the bid is accepted. It indicates the closure of auction and signifies the intention to finalise the contract at the highest bid. However, in certain cases under the auction conditions the acceptance of the bid is made subject to approval by the competent authority. In such cases the contract get completed on getting the approval. Thereafter auction is not liable to be cancelled, more so by unilateral and secret action and that too without affording opportunity to the highest bidder. 9. Section 73 of the Contract Act provides for compensation for the loss or damages suffered by any of the party by the breach of contract, though such compensation is not be extended for any remote or indirect loss or damage sustained by reason of such breach. 10. 9. Section 73 of the Contract Act provides for compensation for the loss or damages suffered by any of the party by the breach of contract, though such compensation is not be extended for any remote or indirect loss or damage sustained by reason of such breach. 10. A conjoined reading of Section 64 of the Act and Section 73 of the Contract Act demonstrates that where in a complete contract breach occurs the other party may claim damages for the loss so sustained on account of such breach. 11. On this aspect of the matter, the Court of first instance had formulated issue No. 1 as to whether there was a complete sale with regard to the disputed bonds in favour of the plaintiff. The said issued was decided in favour of the plaintiff. However, the lower appellate Court simply for the reason that there was no approval of the Collector, held it to be otherwise and accordingly declined to grant the damages by reversing the decree of the Court below. 12. On record documentary evidence was brought which proved that the sale proclamation was duly issued for the sale of the bonds and as no bidder turned up initially, the sale was adjourned and a second proclamation was duly issued in which the bid of the plaintiff was highest and was accepted. On the second occasion four persons participated in the auction. The plaintiff on acceptance of the bid deposited 1/4 of the auction amount. A report was submitted to the Sub Divisional Officer, Sadar regarding the auction sale and acceptance of bid and the same was approved by the Sub-Divisional Officer on 19.2.1970 as per Ext. A - 1. The approval was granted by the Sub-Divisional Officer, Sadar as per the directions of the Collector himself as is established by Ext. 13. All the documents in this connection were duly proved by the Naib Tehsildar concerned as D.W.1 and D.W.2 Clerk, Civil Suits. The Sub-Divisional Officer happened to be the supervising authority of the Tehsildar and Naib Tehsildar who conducted the auction. Therefore, he was the competent authority to approve or disapprove the same and not the Collector. No material or evidence was brought on record to establish that actually the Collector alone was competent to grant approval to the auction sale. The Sub-Divisional Officer happened to be the supervising authority of the Tehsildar and Naib Tehsildar who conducted the auction. Therefore, he was the competent authority to approve or disapprove the same and not the Collector. No material or evidence was brought on record to establish that actually the Collector alone was competent to grant approval to the auction sale. The conditions of auction sale nowhere provided that the auction would be subject to approval by the Collector. In fact none of the documents concerning the terms and conditions of the auction sale provided that the auction of the bonds has to be approved by the Collector. In such a situation, the auction sale of the bonds stood completed with the approval of the Sub-Divisional Officer and its cancellation by the Collector by refusing to endorse the name of the plaintiff on the bonds was certainly a breach of a concluded contract. 13. Sri Sirish Chandra, learned Standing Counsel appearing for the respondents relied upon a decision of the Supreme Court in Consolidated Coffee Ltd. and another v. Coffee Board, Banglore and other, 1980(3) SCC 358 , connected petitions to contend where the contract is incomplete the property in the goods will not pass. True it is and there is no dispute to the above preposition. However, completion of contract is one thing and transfer of goods on completion of contract is another. The two have to be distinguished. 14. The lower appellate Court mixed the two issues of completion of contract and transfer of the goods and in view of the fact that transfer of the bonds was not complete mistook the contract as incomplete. The contract stood completed with the acceptance of the highest bid and its approval, but the transfer remained incomplete as the Collector refused endorsement on the bonds. However, that was not material and the breach of the completed contract coupled with the proof of loss sustained on account of such breach entitled the plaintiff for damages in law. 15. In view of aforesaid facts and circumstances, it is held that auction sale was complete in favour of the plaintiff even though the goods/bonds may not have been actually transferred in his favour and, as such, the plaintiff became entitle for damages under Section 73 of the Contract Act. The substantial question of law is answered accordingly. The appeal as such succeeds. The substantial question of law is answered accordingly. The appeal as such succeeds. The judgment, order and decree of the lower appellate Court dated 10.11.1976 passed in Civil Appeal No. 46 of 1972 is set aside and that of the lower Court dated 24.9.1971 in Original Suit No. 83 of 1970 is restored and confirmed. Parties to bear their own costs. —————