UNION OF INDIA v. MADDALA THATHIAH
Citation: [1964] 3 S.C.R. 774; 1963 INSC 146
Court: Supreme Court of India
Bench: K. SUBBA RAO , RAGHUBAR DAYAL, J.R. MUDHOLKAR
Judgment date:
Case summary
1963 INSC 146. Supreme Court of India judgment dated 1963-05-09. UNION OF INDIA v. MADDALA THATHIAH. Read the judgment and case details on LawSphereX.
Judgment text
774 SUPREME COURT REPORTS[l964] VOL. We therefore dismiss the appeal except in so far as it relates to the order of the High Court on the cross-objection filed by the appellant. We set aside the order dismissing the cross-objection. We order the appellants to pay the costs of the respondent throughout. UNION OF INDIA v. MADDALA THATHIAH (K. SUBBA RAO, RAGHUBAR DAYAL and J. R. MunHOLKAR JJ. ) Oontract-Con•truction--Agreement for supply-Tender- Acceptance-Formal order for •Upply-Stipulation in the contract for cancellation at any stage-If effective even after formal order for •upply had been made. The General Manager of a Railway invited tenders for the supply of jaggery to the railway grain shops. Paragraph 2 of the tender set out the quantity required and described d4tes of delivery. 'l here was a note in that para that "the Administration reserved the right to cancel the contract at any.
stage during the tenure of the contract without calling up the out· standings on the unexpired portion of the contract· " Under para 8 the successful tenderer was required to pay security deposit towards proper fulfilment of the contract. Paragraph 9 stated that a formal order for supply would be placed after the security deposit referred to in para 8 was made. The respqndent submitted his tender for the supply of 14000 maunds as mentioned in the tender, and by the letter dated January 29, 1948, the Deputy General Manager accepted the tender stating that the official order would be placed on the respondent on receipt of the remittance of security. In his letter dated February 16, 1948, the Deputy General Manager reiterated the acceptance of the tender subject to the respondents' acceptance of the t . dmillis' tration has definitely placed an order for the supply of the entire quantity of the commodity for which a tender had been called.
· · · · · In this connection we may refer to the language· of the letter of the Deputy General J\fanager dated ! \! arch 8, 1948, which informed the respondent about the cancellation of the contract. The letter states that the balance quantity of jaggery_ outstanding on date against the above order, ,i. e. , the order dated February 16, Hl48, is treated as'cancelled and the contract closed. Thls letter itself draws a distinction between the order and the contract. The contract has a reference to the agreement . consist-ing of the offer of supply of jaggery and acceptance of the offer by the Deputy General Manager. \Ve are therefore of the view that the condition mentioned in the note to para 2 of the tender or in the letter dated February 16, 1948, refers to a right. in the appellant to cancel the agreement for such supply of jaggery about which no formal order had been placed by the Deputy General Manager· with .
the respondent and does not apply to such· supplies of jaggery ·about which a formal order had been· placed specifying definite amount of jaggery to be , supplied and the definite date or definite short period for its actual delivery.. Once the order is placed for such supply on such dates. ; that order amounts to a binding contract making it incumbent on the respondent to supply jaggery in accordance with the terms of the order and also making it incumbent on the Deputy General l\fanager to accept the jaggery delivered in pursuance of that order. . We may refer to what was. said by this Court in Chatturbhuj Vithaldaa Jasani · v. jforeshwar Parashram ('), in connection with an arrangement arrived at between the Central Government and a firm of bidi manufacturers, l\:foolj i Sickka & Company. The arrangement under which the firm was to sell and the Government was to buy from the firm from time to time two brands of bid is manufac-tured by it.
The contention raised before the Court was that this arrangement amounted to a contract for the supply of goods within the meaning of that section. The contract was said to be embodied in four letters. This Court said : "But except for this the letters merely set out the terms on which the parties were ready to do business with each other if and when orders were placed and executed. As soon as an order was placed and accepted a contract arose. It is true this contract would be governed by the term set out in the letters but until an order was placed and accepted there was no contract. '' Reference may also be made to what is said in 'Law of Contract', by Cheshire & Fi foot (5th Edition) at p. 36. · "There is no doubt, of course, that the tender is an offer. The question, however, is whether its '?. cceptance' by the corporation is an acceptance in the legal sense so as to produce a •n 11954] s. c. R. 817. binding contract.
This can be answered only by examining the language of the original invita-tion to tender. There are at least two possible cases. First, the corporation may have stated that it will definitely require a specified quan· tity of goods, no more and no less, as, for instance, where it advertises for 1,000 tons of coal to be supplied during the period January ! st to December 31st. Here the 'acceptance' o( the tender is an acceptance in the legal sense, and it creates an obligation. The trader is bound to deliver, the corporation is bound to accept, 1,000 tons, and the fact that delivery is to be by instalments as and when demanded doe1 not disturb the existence of the obligation.
" On the basis of this note, the acceptance of the res· pondent's tender by the Deputy General Manager may even amount to a contract in the strict sense of the term, but we do not consider it in that sense in view of the provisions of paragraphs 8 and 9 of the tender requiring a deposit of security and the placing of the formal order. The other case illustrated by Cheahire and Fifoot is : "Secondly, the corporation advertises that it may require articles of a specified description up to a maximum amount, as, for instance, where it invites tenders for the supply during the coming year of coal not exceeding 1,000 tons altogether, del~veries to be made if and when demanded. the effect of the so. called 'acceptance' of the tender is very different. The trader has made what is called a standing offer. Until revocation he stands ready and willing to deliver coal up to 1,000 tons at the agreed . price when the cor,poration from time to time <lemands a pl"et1se quantity.
The 'acceptance' of the tender, however, does not convert the offer into a binding contract, for a contract of sale implies that the buyer has agreed to accept the goods. In the present case the corporation has not agreed to t3,ke 1,000 tons, or indeed any quantity of coal. It has merely stated that it may require sup· plies up to a maximum limit. " "In this latter case the standing offer may be revoked at any time provided that it has not been accepted in the legal sense; and acceptance in the legal sense is complete as soon as a requisition for a definite quantity of goods is made. Each requisition by the offeree is an individual act of acceptance which creates a separate contract. " We construe the contract between the parties in the instant case to be of the second type.
The note below para 2 of the tender form, reserving a right to cancel an outstanding contract is then con-sistent with the nature of the agreement between the parties as a result of the offer of the respnndent accepted by the appellant and a similar note in the formal order dated February 16, 1948, had no reference to the actual orders but could refer only to such contemplated supplies of goods for wh:ch no orders had been placed, In view of the construction we have placrd on the contract between the parties it jg not necessary to decide the other contention urged for the appellant that the stipulation. in the not amounted to a term in the contract itself for the discharge of the contract and therefore was valid, a contention to which the reply of the respondent is that any such term in a contract which destroys the contract it! ielf according to the earlier terms is void as in that case there would be nothing in the alleged contract which would ha•e been binding on the appellant.
We are of opinion that the order of the High Court is correct and therefore dismiss the appeal with costs. Appeal dismissed. IN RE. THE BILL TO AMEND S. 20 OF THB SEA CUSTOMS ACT, 1878, AND S. 3 OF THE CENTRAL EXCISES AND SALT ACT, 1944 (B. P. SINHA c. J. , s. K. DAS, P. B. GAJENDIU. · G. olDKAR, A. K. SARKAR, K. N. WANCHOO, M. HIDAYATULLAH, K. C. DAS GUPTA, J. C. SHAJI, and N. RAJAGOPALA AYYANGAR JJ. ) Pre6ident'• Reference-Ouatom. , dutiea and dutiea of e11:ci1t- Parliamenl'• power to levy such dutiea on the property of Btolt•- Direct and indirect taxes-Distinction, if valid under 00111-titution-·Ouatoms duties and duties of exciBe, if ta:u1 Oii properly-"Taxation", Definition-Bea Oustoma Act, 1878 (8 of 1878), s 20-0entral Excises and Bait Act, 1944 (1 of 1944). •· 3 (11-Go•vernment of India Act, 1935 (25 It 25 Geo. Ii, Oh. 42), as. 154, llili-Oon•titution of India, . frll. 246, 246, 285, 289, 366 \28). As a result of a proposal to introduce in Parliament a Bill to amend s.
20 of the Sea Customs Act, 1878, ands. 3 of the Central Excises and Salt Act, 1944, with a view to apply· ing the provisions of the ·said two Acts to goods belonging to the State Governments, in regard to which certain doubts arose as to whether the provisions of the Bill were inconsistent with Art. 289 of the Constitution of India, the President of India referred under Art. 143 of the Constitution certain questio111 for the opinion of the Supreme C mrt to ascertain if the pro-posed amendment• would be constitutional. The question was whether the provisions of Art. 289 of the Constitution precluded the Union from imposing, or authorising the impo1i• tion of (a) custom• duties on the import or export, or (b) excise duties on the production or manufacture in India, of 1he
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