Case Summary: Haridwar Singh v. Bagun Sumbrui & Ors. (1972) | Acceptance

The case underscores the necessity of communication in contractual agreements. Without proper communication, even a confirmed decision may fail to bind the parties involved.

Case Title: Haridwar Singh v. Bagun Sumbrai & Ors.

Case Citation: 1972 AIR 1242, 1972 SCR (3) 629

Court: Supreme Court of India

Bench: Justice Mathew, Justice K.S. Hegde

Date of Judgment: February 25, 1972

Facts of the Case

The dispute concerned the auction and subsequent settlement of a bamboo coup in the Hazaribagh district, Bihar. The Forest Department conducted an auction on August 7, 1970, to lease the right to exploit the bamboo coup. The reserve price for the auction was set at Rs. 95,000. The Petitioner, Haridwar Singh, made the highest bid at Rs. 92,001, which was provisionally accepted by the Divisional Forest Officer (DFO). Following this, Singh deposited the required security amount and executed an agreement.

However, since the provisional settlement exceeded Rs. 50,000 and was below the reserve price, the matter required confirmation from the Bihar Government and consultation with the Finance Department. The Finance Department raised concerns about accepting the bid below the reserve price and sought clarification from the DFO. In the interim, Singh expressed willingness to match the reserve price of Rs. 95,000 via a communication dated October 26, 1970.

On November 27, 1970, the Minister for Forests directed the settlement of the coup with Singh at the reserve price. A telegram was sent on November 28, 1970, confirming the sale, but it was not communicated to Singh. Meanwhile, on December 4, 1970, another bidder, Mohammed Yakub (Respondent No. 6), offered Rs. 1,01,125 for the coup. The Minister cancelled Singh’s settlement and granted the lease to Yakub through proceedings dated December 13, 1970. Yakub subsequently deposited the required amounts and signed an agreement.

Haridwar Singh challenged this decision before the Patna High Court, arguing that a concluded contract had been formed with him upon the government’s confirmation on November 27, 1970. The High Court rejected his petition, prompting this appeal before the Supreme Court.

Issues

• Whether there was a concluded contract between Haridwar Singh and the Bihar Government.
• Whether the cancellation of Singh’s settlement and the subsequent settlement with Yakub violated Rule 10(1) of the Bihar Government’s Rules of Executive Business.

Arguments

Appellant (Haridwar Singh)

Concluded Contract:

• Singh argued that a concluded contract arose once the Government confirmed the provisional acceptance of his bid on November 27, 1970. Communication of this acceptance was not necessary for the contract to be binding.
• He contended that the subsequent cancellation and settlement with Respondent No. 6 were invalid.

Violation of Rules:

• The settlement with Respondent No. 6 violated Rule 10(1), which required prior consultation with the Finance Department.
• He asserted that the rule was mandatory, and non-compliance rendered the settlement void.

Respondents (Government of Bihar and Respondent No. 6)

• They argued that no concluded contract existed with Singh since the confirmation of the bid by the Government was not communicated to him.
• Rule 10(1) was a directory, not mandatory, and its non-compliance did not invalidate the settlement.

Judgment

I) On Concluded Contract:

Provisional Nature of Acceptance:

The Supreme Court held that Singh’s bid of ₹92,001 was provisionally accepted, subject to Government confirmation. The Minister's proceedings on November 27, 1970, accepted Singh’s subsequent offer of ₹95,000 but did not confirm the original bid of ₹92,001.

No communication of the acceptance of the ₹95,000 offer was made to Singh, nor was it put into transmission. Thus, no concluded contract arose.

Revocation of Offer:

Singh’s letter dated November 3, 1970, where he reiterated his request for settlement at ₹92,001, was deemed a revocation of his offer of October 26, 1970, to pay ₹95,000.

As a result, the Court concluded that there was no binding contract between Singh and the Government.

II) On Violation of Rule 10(1):

Mandatory Nature of Rule 10(1):

Rule 10(1) requires prior consultation with the Finance Department before granting leases involving financial implications.

The Court analyzed the language of the rule, noting its prohibitive and mandatory phrasing. Further, Rule 10(2) restricts action on proposals opposed by the Finance Department, underscoring the necessity of consultation.

Non-Compliance by the Government:

The Court found that the Finance Department was not consulted before the lease was granted to Respondent No. 6. This omission rendered the settlement invalid.

The Court emphasized the importance of strict adherence to Rule 10(1) to prevent arbitrary decisions in matters affecting state revenue and individual rights.

The Supreme Court quashed the Minister’s order dated December 13, 1970, granting the lease to Yakub. The Court held that:

• There was no concluded contract between Haridwar Singh and the Bihar Government.
• The lease granted to Yakub violated Rule 10(1) of the Rules of Executive Business.
• The appeal was allowed to the extent of invalidating Yakub’s settlement, but no costs were awarded.

Key Takeaways

Conditional Acceptance: The Court reaffirmed that conditional acceptance subject to approval or confirmation does not create a binding contract until confirmation is communicated to the offeror.

Mandatory Compliance: Rules governing administrative procedures, especially those involving financial implications, must be strictly followed. Prohibitive language in such rules often indicates mandatory compliance.

Procedural Fairness: The Court’s decision underscores the importance of adhering to procedural requirements to ensure transparency and accountability in government transactions.

Click Here to Read the Official Judgment