Full Judgment Text
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PETITIONER:
K.P. PERIANNAN
Vs.
RESPONDENT:
GOVERNMENT OF TAMIL NADU AND ORS.
DATE OF JUDGMENT20/04/1990
BENCH:
REDDY, K. JAYACHANDRA (J)
BENCH:
REDDY, K. JAYACHANDRA (J)
PANDIAN, S.R. (J)
CITATION:
1990 AIR 2003 1990 SCR (2) 609
1990 SCC Supl. 368 JT 1990 (3) 499
1990 SCALE (1)122
ACT:
Tamil Nadu Toddy and Arrack Shops (Disposals in Auction
Rules, 1981: Rules3-6, 8, 10, 12, 14-16, 20 and 21. Auction
of Arrack shop--Successful bid found inadequate and not
confirmed--Shop re-auctioned and bid provisionally confirmed
but bidder failed to comply with requirements--Shop again
re-auctioned--Notional loss between original sale and re-
sale--Held not recoverable from original successful bidder.
HEADNOTE:
The appellant gave the highest bid at the auction of an
arrack shop but his bid was considered inadequate. The shop
was re-auctioned and the bid of ’C’ was provisionally ac-
cepted. ’C’ failed to comply with certain requirements and
the shop was again re-auctioned in which the bid offered was
lower than that offered by the appellant in the original
sale. The respondent sought recovery of the difference
between the original sale amount and the resale amount from
the appellant, under Rule 21 of the Tamil Nadu Toddy and
Arrack Shops (Disposal in Auction) Rules, 1981. The appel-
lant challenged the recovery by filing a writ petition in
the High Court which was dismissed by a Single Judge and the
decision was confirmed by a Division Bench on appeal.
In the appeal to this Court it was contended on behalf
of the appellant that since his bid was not confirmed under
the rules, no recovery can be made from him and that ’C’,
whose bid was provisionally accepted, was liable for the
notional loss. The respondent however contended that since
’C’ failed to comply with Rule 15, his bid was not provi-
sionally accepted and hence he was not liable for the re-
sultant loss.
Allowing the appeal, this Court,
HELD: 1. Normally it may be correct to say that the sale
officer under Rule 16 accepts provisionally the bid after
there is compliance of Rule 15; but in the instant case, the
Court is concerned with the re-auction and about the liabil-
ity of the original highest bidder in the light of Rule
20(4). [616D-E]
610
2. In view of the document dated 19th June, 1981 it must
be held that the bid of ’C’ was accepted provisionally by
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the Sale Officer and by virtue of Rule 20 sub-Rule (4) when
once the bid of ’C’ was accepted provisionally as the high-
est bid, the bid with which the sale began namely the bid of
the appellant, got lapsed and consequently the appellant
cannot be held liable for the resultant loss. [616C-D]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1932
of 1990.
From the Judgment and Order dated 4.7.1989 of the Madras
High Court in Writ Appeal No. 1153 of 1983.
R. Mohan and R. Ayyamperumal for the Appellant.
V. Krishnamurthy for the Respondents.
The Judgment of the Court was delivered by
K. JAYACHANDRA REDDY, J. Leave granted. Heard both the
sides.
The right to conduct arrack sale in Tamil Nadu was
auctioned on 28.5.1981 for the excise year 1981-82. Shop No.
49 in Koneripatti village in Sankari Taluk District Salem
was auctioned for the excise year 1981-82. Inrespect of the
auction of this shop, the appellant was the successful
bidder and the bid amount was Rs.6550 per month. As per the
terms, the appellant paid the caution deposit of Rs.1000 and
a half month’s rent on the same day.
Since the bid amount was found to be inadequate there
was a re-auction on 11.6.1981 but there was no bidder on
that day. Therefore again on 19.6.1981 the same shop was
re-auctioned and one Mr. Chellamuthu was successful bidder
at Rs.6575 per month but he failed to comply with certain
requirements. Therefore it was re-auctioned on 27.6.81 but
there were no bidders and the shop was re-auctioned again on
17.8.1981 when the bid was only Rs.3000 by one Doraisamy.
The appellant was called upon by way of a communication
dated 17.4.82 to pay the notional loss. It was claimed by
the department that the bid of the appellant was confirmed
on 28.6.81 but the appellant refused to receive the con-
firmed order and consequently the shop was reauctioned for
Rs.3,000 only and therefore the difference amount is recov-
erable from the appellant. This impugned order was ques-
tioned
611
and the learned Single Judge of the High Court dismissed the
writ petition. It was observed by the learned Judge that
records produced before him were perused and they show that
the bid by the appellant was confirmed on 28.6.81 and the
appellant can not seek any relief in the writ petition
having bidden the auction under certain conditions. In the
writ appeal filed against the order of the Single Judge, the
Division Bench agreed with the learned Single Judge. It was
also cOntended before the Division Bench that his bid was
never confirmed validly and that auction in favour of Do-
raisamy alone was the valid auction.
Learned counsel for the appellant contended before us
that the bid by the appellant was not accepted as per the
rules and it was not confirmed by the Collector and the very
fact that there was subsequent two re-auctions obviously on
the ground that the bid by the appellant was inadequate,
itself shows that the bid was not confirmed as per the rules
and therefore the question of recovery of resultant loss
from the appellant does not arise. It is also submitted that
Chellamuthu who was successful bidder in the auction that
was held on 19.6.81 should be held responsible for the
resultant loss, if any, since he was the highest bidder
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because his bid was higher than that of the appellant. To
appreciate these contentions, it becomes necessary to refer
to the relevant rules. Some of the relevant rules of the
Tamil Nadu Toddy and Arrack Shops (Disposals in Auction)
Rules, 1981 were framed under the powers conferred by Sec-
tion 4 of the Tamil Nadu Prohibition Act. Rule 3 lays down
that the privilege of selling liquor by retail shall be
granted to any person by auction and the period shall be one
excise year. Under Rule 5, a notice has to be given mention-
ing particulars as required under Rule 6. The tenders also
will be received an hour before the commencement of the
auction. Under Rule 8 every person desiring to bid in such
open auction shall deposit a sum of Rs. 1,000 as earnest
money and only the bidders who have deposited the earnest
money deposit shall be admitted into the place of auction.
Rule 10 provides for refund of such a deposit to the unsuc-
cessful bidders. Rule 12 lays down that the Sale Officer can
refuse to accept the bid under any one of the conditions
specified therein. Rule 14 similarly lays down that highest
of the bid shall be taken into consideration for acceptance.
As per Rule 15 every auction purchaser shall immediately
after the announcement or atleast before the close of the
day’s sale, deposit half a month’s rental with the Sale
Officer. If he does not do so, the earnest money deposit
made by him under Rule 8 shall be forfeited to the State
Government. For the purpose of this case Rule 16 is impor-
tant and it is in the following terms:
612
"Deposit of advance--The Sale Officer, if he accepts provi-
sionally the bid of an auction purchaser, shall issue a
notice to the auction purchaser to pay as advance, in any
case within seven days from the date of the sale, an amount
equal to three months rental in addition to the earnest
money deposit already made under rule 8 but inclusive of the
half a month’s rental paid at the close of the sale under
rule 15."
(emphasis supplied)
We will consider the scope of this rule in a detailed manner
at a later stage. Rule 17 lays down that the auction-pur-
chaser shall produce a solvency certificate issued by the
Tehsildar for the purpose of creating encumbrances and
should also execute a mortgage deed and if does not own any
properties he should deposit additional amount towards three
months’ rental or should furnish bank guarantee. Under Rule
18, the Collector should refund the deposits made by the
auctionpurchaser in case he refuses to confirm the accept-
ance of the bid. Rule 20 is another important rule and it is
necessary that it should be fully extracted:
"20. Confirmation of sale by the Collector--(1) Every bid
provisionally accepted by the Sale Officer shall be subject
to confirmation by the Collector and on such confirmation
the orders of the Collector shall be final, unless it is
revised by the Commissioner for special reasons to be re-
corded in writing. The Commissioner may on appeal or revi-
sion or suo motu, revise any order of the Collector confirm-
ing a bid provisionally accepted by the Sale Officer, after
issuing a show cause notice to the person affected and
considering his representations, if any. Any order of the
Collector confirming the sale of a shop in favour of
a--person may be cancelled by the Commissioner even subse-
quent to the grant of a licence to him for reasons to be
recorded by him and after giving an opportunity to all
persons concerned.
(2) On receipt of the order of confirmation and on receipt
of an application in Form No. 2 the Excise Officer shall
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subject to the provisions in rule 17, issue a licence in
Form No. 3 under Section 17-C(2) of the Act.
(3) If the Collector considers any bid to be inadequate, he
may refuse to confirm the provisional acceptance of the
613
bid, and immediately direct the resale of the shop from the
point at which it was last left on such date and at such
time and place as may be fixed by him. The conditions of
sale shall remain unaltered unless otherwise directed by the
Collector. Any order passed by the Collector for resale
shall be given adequate publicity and shall also be notified
at the Taluk Office.
(4) Any resale ordered to be made under sub-rule (3) shall
begin with the bid provisionally accepted by the sale offi-
cer at the original sale and in the name of the individual
who offered it. If at such sale a higher bid is offered and
is provisionally accepted by the Sale Officer, the bid with
which such sale began shall lapse. But if no higher bid is
accepted by the Sale. Officer, the matter shall be reported
to the Collector who may pass orders confirming the bid
provisionally accepted at the original sale or may again
direct that the sale be continued from the point at which it
was left at the original sale, and the order of the Collec-
tor shall be final unless it is revised by the Commissioner
on appeal or revision.
(5) The provision of sub-rule (4) shall apply to any sale
the re-opening of which is directed under that sub-rule.
(6) No bid which has been provisionally accepted by the Sale
Officer shall be withdrawn before it lapses under subrule
(4) or before orders are passed confirming or refusing to
confirm it, and if the bidder commits any breach of this
condition, he shall be liable to make good the difference
between his bid and any lower bid which may be finally
accepted," (emphasis supplied)
Rule 21 lays down that on the failure of any person to make
a deposit or to comply with’ any requisition or to comply
with any formality like executing bond etc. the shop may be
resold under the orders of the Collector on a report from
the Assistant Commissioner and the same shall be resold
under this rule. It shall be at the risk of the defaulting
bidder who shall forfeit all gain, if any, that may secure
by the resale in the event of a loss by resale, the default-
ing bidder shall be required to make good the deficiency
between the total amount payable for the whole period under
the terms of the original sale and by the total
614
amount payable by the successful bidder at the resale and
the deposit already made by the defaulting bidder shall be
forfeited.
As already mentioned it is under this last rule the
action is taken against the appellant. At this stage it
would be useful to refer to some of the everments in the
affidavit and the counter-affidavit putting forward the
rival. The appellant in his affidavit has stated that his
bid was never confirmed and that he has not received any
notice and that on the other hand there was a re-auction and
there was a higher bid in the re-auction, but the said
bidder defaulted. Therefore there was again another re-
auction but on that day there were no bidders but ultimately
during the final re-auction on 27.6.1981 the bid was only
Rs.3,000 by one Doraisamy and that was confirmed. The plea
of the appellant has been that his bid was not confirmed by
the Collector as required under Rule 20 and repeated re-
auctions would itself go to show that the bid of the appel-
lant was not confirmed. In the counteraffidavit filed on
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behalf of the Government, it is admitted that the petitioner
was the highest bidder on 28.5.1981 but the Collector or-
dered resale as already mentioned and one Chellamuthu was
’the highest bidder offering Rs.6575 but he failed to comply
with the conditions. It is averred that the said Chellamuthu
though was the highest bidder in the said re-auction but did
not comply with the conditions under Rule 15 inasmuch as he
failed to deposit half a month’s rental and therefore his
bid was not accepted. Therefore subsequent bids were held.
It is further averred by the Government that the bid offered
by the appellant was confirmed by the Collector as per the
proceedings of the Collector dated 28.6.81 but the appellant
refused to receive the order of confirmation and therefore
he has to make good the resultant loss.
Learned counsel for the appellant submits that Chellamu-
thu was the highest bidder and he should be held to be a
defaulter and consequently be liable for the resultant loss.
In order to see whether the appellant’s liability in any
manner continued consequently making him liable for the
resultant loss, we have to examine Rules 20(3) and 20(4)
carefully, in the context of the facts of this case. As
extracted above Rule 20(3) states that if the Collector
considers any bid to be inadequate, he may refuse to confirm
the provisional acceptance of the bid and immediately direct
the resale of the shop from the point it was last left. As
per sub-Rule 4 any resale ordered to be made under sub-rule
(3) shall begin with the bid provisionally accepted by the
Sale Officer at the original sale and if at such
615
sale a higher bid is offered and is provisionally accepted
by the Sale Officer, the bid with which such sale began
shall lapse. This part of the rule is very significant. If
the record shows that the bid offered by Chellamuthu has
been provisionally accepted by the Sale Officer, the bid
with which the sale began, i.e. the bid offered by the
appellant lapses but if, on the other hand, such a bid
during the re-auction is not’ accepted by the Sale Officer
then the subsequent steps for further reauction or for
confirmation of the original bid i.e. that of the appellant
would take place. In this context it is once again necessary
to note that as per the Department, bid of Chellamuthu was
not even provisionally accepted. As laid down in Rule 16 if
the record shows that his bid has been provisionally accept-
ed by the Sale Officer then as provided under Rule 20(4) the
bid of the appellant gets automatically lapsed. For our own
satisfaction we called for the record and perused the file
concerning the auction. So far as the bid made by Chellamu-
thu is concerned, we find a document in the record which
authentically shows that his bid being highest was provi-
sionally accepted and announced by the Sale Officer. This
document reads as under:
"Second resale of toddy/arrack shops in Sankari Taluk.
(1.7.1981 to 30.6.1982)
Shop No. 49 Place: Koneripatti
Name and full address of Tender amount
the tenderer.
Nil
Highest tender amount Rs. nil by Thiru
Highest bid amount Rs.6575 by Thiru
The highest of these two, that is Rs.6575 (Rupees Six Thou-
sand five hundred seventy five only) by Thiru Sellamuthu s/o
Nachimuthu of Kumaranpalayam Village the highest
bidder/tenderer is provisionally accepted and announced.
Sd/-19/6/81
Sale officer
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&
Sub Collector/Sankari."
616
As per Rule 16 when there is such provisional acceptance
then the Sale, Officer issues a notice to the highest bidder
to pay as advance three months rental. But according to the
respondents namely the Department, the said Chellamuthu
though was the highest bidder, did not deposit half a
month’s rental as required under Rule 15, therefore the
question of accepting his bid did not arise even provision-
ally.
Consequently the highest bid of the appellant was subse-
quently confirmed. Since we find a genuine doubt about the
liability of the appellant, we went through the rest of the
file also. No doubt there is a note here and there to the
effect that Chellamuthu did not deposit the |5 days rental
on that day. But in view of the document mentioned above it
must be deemed that the Chellamuthu’s bid was accepted
provisionally by the Sale Officer and by virtue of Rule 20,
sub-rule (4) when once the bid of Chellamuthu was accepted
provisionally as the highest bid, the bid with which such
sale began namely the bid of the appellant, got lapsed. We
do not want to go into the question whether under Rule 16
the provisional acceptance of the bid by the Sale Officer
should necessarily be preceded by the fulfilment of the
condition of deposit of half a month’s rental by the auc-
tion-purchaser under Rule 15. Perhaps normally it may be
correct to say that the Sale Officer under Rule 16 accepts
provisionally the bid after there is compliance of Rule 15;
but in the instant case we are concerned with the re-auction
and about the liability of the original highest bidder in
the light of Rule 20(4). The document mentioned above clear-
ly shows that the Chellamuthu’s bid was provisionally ac-
cepted and therefore Sub-Rule (4) of Rule 20 comes into
force and consequently the bid of the appellant lapsed. At
any rate after a due consideration of the contents of the
declaration issued by the Sale Officer accepting the bid of
Chellamuthu provisionally, a genuine doubt arises about the
liability of the appellant. Having given our earnest consid-
eration, we are of the view that the bid by the appellant
got lapsed by virtue of the acceptance of the bid by Chella-
muthu provisionally by the Sale Officer and consequently the
appellant cannot be held liable for the resultant loss. The
appeal is accordingly allowed.
T.N.A. Appeal
allowed.
617