Case Note & Summary
The dispute concerned the settlement of a bamboo coup known as Bantha Bamboo coup in Chatra North Division of Hazaribagh district, Bihar. The Forest Department of the Government of Bihar advertised a public auction for the right to exploit the coup. The appellant, Haridwar Singh, participated in the auction held on August 7, 1970, and his bid of Rs.92,001 was the highest, though below the reserve price of Rs.95,000. The Divisional Forest Officer accepted the bid subject to confirmation by the Government. The appellant deposited the security amount of Rs.23,800 and executed an agreement. The Divisional Forest Officer reported the auction to the Conservator of Forests, Hazaribagh Circle, by letter dated August 25, 1970. Since the provisional settlement exceeded Rs.50,000, the Conservator forwarded the papers to the Deputy Secretary to the Government of Bihar, Forest Department, for confirmation. Because the provisional settlement was below the reserve price, the matter was also referred to the Finance Department. While the matter was pending, the appellant by communication dated October 26, 1970, expressed willingness to take the settlement at the reserve price of Rs.95,000. He later filed an application on November 3, 1970, praying for settlement of the coup on the basis of his highest bid. The Minister of Forest, by proceedings dated November 27, 1970, directed that the coup may be settled with the highest bidder at the reserve price. A telegram was sent to the Conservator of Forests, Hazaribagh Circle, on November 28, 1970, but no intimation was received by the Divisional Forest Officer, and the proceedings were not communicated to the appellant. Subsequently, respondent No.6 filed a petition offering to take the settlement for Rs.101,125. The Minister, by proceedings dated December 13, 1970, cancelled the settlement with the appellant and settled the coup with respondent No.6 for Rs.101,125. The appellant filed a writ petition in the Patna High Court contending that there was a concluded contract when his bid was accepted by the Divisional Forest Officer and confirmed by the Government on November 27, 1970, and that the subsequent settlement with respondent No.6 was invalid because Rule 10(1) of the Rules of Executive Business as relaxed prohibited grant of lease by private treaty and required mandatory prior consultation with the Finance Department, which was not complied with. The High Court dismissed the writ petition on May 6, 1971. The appellant appealed by special leave to the Supreme Court. The Supreme Court held that no concluded contract arose between the appellant and the Government because the Divisional Forest Officer's acceptance was subject to confirmation, and the Minister's November 27, 1970 order was not a confirmation of that acceptance but an acceptance of a fresh offer made on October 26, 1970; that fresh acceptance was not communicated to the appellant and the offer was revoked by the appellant's November 3, 1970 application. However, the Court held that Rule 10(1) of the Rules of Executive Business, due to its negative language and Rule 10(2), made prior consultation with the Finance Department mandatory, not directory. The Minister's order dated December 13, 1970 settling the coup in favour of respondent No.6 was passed without such consultation, and therefore was invalid. The Court also held that the relaxed rule did not prohibit grant of lease by private treaty. The Supreme Court allowed the appeal, set aside the High Court's order, and quashed the Minister's order dated December 13, 1970.
Headnote
A) Contract Law - Government Contracts - Acceptance of Auction Bid Subject to Confirmation - No specific Act cited - The appellant's highest auction bid was accepted by the Divisional Forest Officer subject to confirmation by the Government, and the Minister's later direction to settle at reserve price was treated as acceptance of a fresh offer made on October 26, 1970, not confirmation of the auction acceptance; that fresh acceptance was never communicated to the appellant and the offer was revoked by the appellant's November 3, 1970 communication - Held that no concluded contract arose between the appellant and the Government (Paras 634-G-635B, 635B-D). B) Administrative Law - Rules of Executive Business - Scope of Rule 10(1) as Relaxed - Constitution of India, 1950, Article 166(3); Rules of Executive Business of Bihar Government, Rule 10(1) - The relaxed rule only dispensed with prior consultation with the Finance Department for leases exceeding Rs.50,000 granted by public auction conforming to specified conditions, and did not prohibit grant of lease by private treaty - Held rule did not prohibit private treaty settlement (Para 637C). C) Administrative Law - Mandatory Consultation with Finance Department - Prior Consultation under Rule 10(1) is Mandatory - Constitution of India, 1950, Article 166(3); Rules of Executive Business of Bihar Government, Rule 10(1), Rule 10(2) - The negative or prohibitive language of Rule 10(1) and the provisions of Rule 10(2) indicated that prior consultation with the Finance Department was an essential prerequisite before authorizing a lease or licence of forests; the Minister's order dated December 13, 1970 settling the coup in favour of respondent No.6 was passed without such consultation - Held order invalid and quashed (Paras 637E-F, 638D-F).
Issue of Consideration
Whether a concluded contract arose between the appellant and the Government when the Divisional Forest Officer accepted the appellant's bid subject to confirmation by the Government; whether the Minister's proceedings dated November 27, 1970 constituted confirmation; whether Rule 10(1) of the Rules of Executive Business of Bihar Government as relaxed prohibited grant of lease by private treaty; whether prior consultation with the Finance Department under Rule 10(1) was mandatory and whether non-compliance rendered the Minister's order dated December 13, 1970 invalid
Final Decision
The Supreme Court allowed the appeal, set aside the judgment of the Patna High Court, and quashed the order of the Minister of Forest, Government of Bihar dated December 13, 1970 settling the bamboo coup in favour of respondent No.6. The Court held that no concluded contract had arisen between the appellant and the Government because the conditional acceptance was neither confirmed nor communicated, but the impugned order was invalid for violating the mandatory requirement of prior consultation with the Finance Department under Rule 10(1) of the Rules of Executive Business.
Law Points
- Acceptance of auction bid subject to government confirmation does not create a concluded contract absent confirmation and communication
- Prior consultation with Finance Department under Rule 10(1) of Bihar Rules of Executive Business is mandatory
- Rule 10(1) as relaxed does not prohibit grant of lease by private treaty
- Acceptance must be communicated or put in course of transmission
- Offer can be revoked before acceptance is communicated
