Case Note & Summary
The dispute concerned a contract for purchase of Tendu leaves between the appellant-firm and the State of Madhya Pradesh. The appellant had entered into an agreement dated November 30, 1968 for Unit No. 14, Chowki in South Division for three years ending December 31, 1970, with terms providing for yearly renewal. The lease was to commence each year on February 1 and end on January 31 of the next year; the appellant's agreement commenced on March 2, 1968 and was to end on January 31, 1969. Under the agreement, the appellant had to opt for renewal within 15 days prior to December 31 and the lease was to be renewed within 15 days from the date of issue of renewal order. The appellant offered renewal on December 7, 1968. The Government accepted the offer on January 31, 1969 and sent communication on February 7, 1969, but the appellant refused to receive it. On February 9, 1969, the appellant sent a telegram withdrawing the offer. The Divisional Officer resent the communication on February 12, 1969, received on February 17, 1969. Subsequently, on May 20, 1970, the State sent a letter demanding Rs. 93,821.23 towards loss caused by non-execution of the renewal deed and non-collection of Tendu leaves. The appellant challenged the demand by filing a writ petition in the Madhya Pradesh High Court, which dismissed it on January 24, 1979, holding that the Government had accepted the offer before the appellant's withdrawal. In the Supreme Court, the appellant contended that since the communication of acceptance was not sent before January 31, 1969, the appellant was entitled to withdraw the offer and had duly withdrawn it on February 9, 1969. He relied on a previous decision of the same High Court in Shiv Saran Lal v. State of M.P. & Ors., AIR 1980 M.P. 93, which held that absence of communication before the deadline absolved the contractor. The Court analyzed Clause 2 of the agreement, which provided that the agreement would commence from March 2, 1968 and remain in force up to December 31, 1968 unless earlier determined, and that there would be yearly renewal by January 31 each year by issue of a written order by Government if conditions were fulfilled, with loss recoverable from the previous purchaser if fresh agreement not executed within 15 days. The Court accepted that the word 'issue' implies service of notice and the date of receipt is the date of issue. However, it held that in a continuing three-year contract, the contractor is not absolved of liability merely because communication was not received before the deadline, as long as the Government had accepted the offer within time and the contract had not been terminated. The Court found that the Government accepted the offer on January 31, 1969, the appellant withdrew only after communication on February 7, 1969, and the defect in communication was not substantial; the appellant took undue advantage of a typographical error. The Court distinguished the earlier High Court decision as not considering the continuing contract aspect. On the second issue, the Court considered Section 155 of the M.P. Land Revenue Code and Sections 3 and 4(2) of the Revenue Recovery Act, 1890, and held that all moneys falling due to the State Government under any grant, lease or contract which provides they shall be recoverable as arrears of land revenue may be recovered in the same manner. The Court concluded that the Government was empowered to recover the arrears as land revenue from the appellant-contractor. It noted that the appellant had already furnished a bank guarantee, and the Government was at liberty to enforce it and recover any shortfall. The appeal was dismissed without costs.
Headnote
A) Contract Law - Renewal Offer and Acceptance - Binding Effect of Acceptance Prior to Withdrawal - Tendu Leaves Agreement dated November 30, 1968, Clause 2 - In a continuing three-year contract for purchase of Tendu leaves, the contractor offered renewal on December 7, 1968; Government accepted on January 31, 1969 before the renewal deadline, though communication was sent on February 7, 1969 and refused; the word 'issue' in the renewal clause implies service of notice and date of receipt is date of issue, but in a continuing contract the contractor is not absolved from liability for non-execution if acceptance was made within time and the contract was not terminated; withdrawal by telegram on February 9, 1969 after acceptance communicated was ineffective. Held that appellant liable for damages for non-execution of renewal deed. B) Revenue Recovery - Recovery of Contractual Dues as Arrears of Land Revenue - M.P. Land Revenue Code, Section 155; Revenue Recovery Act, 1890, Sections 3 and 4(2) - All moneys falling due to State Government under any grant, lease or contract which provides they shall be recoverable as arrears of land revenue may be recovered in the same manner as arrears of land revenue; a certificate from the Collector is conclusive proof of matters stated therein; remedy available by way of protest and suit. Held that Government empowered to recover arrears of dues as land revenue from appellant-contractor for loss caused by non-collection of Tendu leaves; bank guarantee may be enforced and shortfall recoverable.
Issue of Consideration
Whether the appellant-contractor was entitled to withdraw his offer for renewal of Tendu leaves contract due to non-communication of acceptance before January 31, 1969, and whether the State could recover the resultant loss as arrears of land revenue under the M.P. Land Revenue Code and Revenue Recovery Act, 1890.
Final Decision
The Supreme Court dismissed the appeal, upholding the High Court's order. The Court held that the Government had accepted the offer on January 31, 1969 within time, and the appellant's withdrawal on February 9, 1969 was ineffective because the acceptance had already been communicated. The appellant was liable to pay damages for non-execution of the renewal deed. The Court further held that the Government was empowered to recover the arrears as land revenue from the appellant under Section 155 of the M.P. Land Revenue Code and Sections 3 and 4(2) of the Revenue Recovery Act, 1890. The Government was at liberty to enforce the bank guarantee already furnished by the appellant and recover any shortfall. The appeal was dismissed with these directions and without costs.
Law Points
- The word 'issue' in contractual renewal clause implies service of notice
- date of receipt is date of issue
- In a continuing contract
- acceptance of renewal offer by Government before deadline binds contractor even if communication reached after deadline
- Withdrawal of offer after acceptance communicated is ineffective
- Arrears due from lessee-contractor recoverable as arrears of land revenue under Section 155 M.P. Land Revenue Code and Sections 3 and 4(2) Revenue Recovery Act
- 1890
