Case BriefsSupreme Court

Supreme Court: The Bench of Navin Sinha and Indira Banerjee*, JJ., has held that when the acceptor puts in a new condition while accepting the contract already signed by the proposer, the contract is not complete until the proposer accepts that condition.

Setting aside the concurrent findings of the Trial Court and the High Court of Judicature at Hyderabad in a case relating to conclusiveness of the contract for supply of Wooden Sleepers, the bench said,

“Both the Trial Court and the High Court over-looked the main point.”

Background

On 17-7-1990, the respondent floated a tender for supply of Wooden Sleepers. The main dispute was related to Clauses 15 and 16 of the tender, which are extracted herein below:

“15. The purchaser will not pay separately for transit insurance and the supplier will be responsible till the entire stores contracted for arrive in good condition at destination. The consignee will as soon as but not later than 30 days of the date of arrival of stores at destination notify the supplier of any loss, or damage to the stores that may have occurred during transit.

16. In the event of the supplies being found defective in any matter the right to reject such materials and return the same to the supplier and recover the freight by the Port is reserved.”

Pursuant to the aforesaid tender, the appellant submitted its offer with a specific condition of the offer that inspection of the Sleepers, contrary to the requirement of the respondent, had to be conducted only at the depot of the appellant, thereby making a counter proposal. The appellant deposited Rs.75,000/- towards earnest deposit, along with its quotation while reiterating that if the respondent required inspection at the site of the respondent, the appellant would charge 24% above the rate quoted by him for the supply of goods. Though the respondent agreed that the goods would be inspected at the site of the appellant, a further condition was imposed that the final inspection would be made at the General Stores of the respondent and the respondent also requested to extend the delivery period of the sleepers until 15-11-1990. The Appellant rejected the proposal of the Respondent and requested that the deposited earnest money be returned to it.

The respondent contended that, by reason of refusal of the appellant to discharge its obligation of supplying the requisite number of sleepers, it had been constrained to invoke the risk purchase clause as contained in Paragraph 16 of the Special Conditions of purchase and had to purchase the wooden sleepers at a higher rate from a third party, incurring losses, for which the respondent was entitled to claim damages.

The Trial Court and the High Court held that since the appellant had committed breach of its obligations under a concluded contract; the respondent was entitled to damages.

Observations and Decision

Noticing that both the Trial Court and the High Court over-looked the question as to whether the acceptance of a conditional offer with a further condition results in a concluded contract, irrespective of whether the offeror accepts the further condition proposed by the acceptor, the Court observed that Section 7 of the Contract Act, 1872 which emphasises that acceptance must be absolute.

“It is a cardinal principle of the law of contract that the offer and acceptance of an offer must be absolute. It can give no room for doubt. The offer and acceptance must be based or founded on three components, that is, certainty, commitment and communication.”

However, when the acceptor puts in a new condition while accepting the contract already signed by the proposer, the contract is not complete until the proposer accepts that condition.

The Court cited Haridwar Singh v. Bagun Sumbrui (1973) 3 SCC 889, wherein it was held that an acceptance with a variation is no acceptance. It is, in effect and substance, simply a counter proposal which must be accepted fully by the original proposer, before a contract is made.

The Court further relied on Union of India v. Bhim Sen Walaiti Ram, (1969) 3 SCC 146, where a three-Judge Bench of this Court had held that,acceptance of an offer may be either absolute or conditional. If the acceptance is conditional, offer can be withdrawn at any moment until absolute acceptance has taken place.”

It was, hence, held that the Trial Court and the High Court over-looked the main point that, in response to the tender floated by the respondent, the appellant had submitted its offer conditionally subject to inspection being held at the Depot of the Appellant and the said condition was not accepted by the respondent unconditionally. The respondent had agreed to inspection at the Depot of the appellant, but it imposed a further condition that the goods would be finally inspected at the showroom of the respondent. This Condition was not accepted by the Appellant.

It could not, therefore, be said that there was a concluded contract. Therefore, there could be no question of any breach on the part of the appellant or of damages or any risk purchase at the cost of the appellant.

The Court, while setting aside impugned judgments and orders held that the appellant was entitled to refund of earnest money deposited with the respondent within four weeks with interest at 6% per annum from the date of institution of suit No.450 of 1994 till the date of refund.

[Padia Timber Company (P) Ltd. v. Visakhapatnam Port Trust, 2021 SCC OnLine SC 1, decided on 05-01-2021]


*Justice Indira Banerjee has penned this judgment

Know Thy Judge| Justice Indira Banerjee

Case BriefsSupreme Court

Supreme Court: A bench comprising of A.M. Sapre and Indu Malhotra, JJ. allowed an appeal filed against the judgment of Delhi High Court wherein it upheld the order of the trial court convicting the appellant under Sections 7,13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988.

The appellant was an employee of the Delhi Electricity Supply Undertaking, working on the post of Inspector at the time relevant. An FIR was filed against him and one Rajinder Kumar, another employee of DESU, wherein it was alleged that the appellant had demanded Rs 4000 for installation of electricity connection in complainant’s factory. On the basis of FIR, the CBI formed a raiding party and the whole procedure was followed. On the scene, the appellant asked the complainant to hand over the money to Rajinder Kumar. As soon as Rajinder Kumar accepted the money, the raiding party came in and the accused were caught. The trial court convicted the appellant as aforestated. However, Rajinder Kumar was acquitted from all the charges. It is pertinent to note that both the accused were acquitted of the charge under Section 120-B IPC (criminal conspiracy). The appellant filed an appeal to the High Court which was dismissed.

The Supreme Court, sitting in appeal, perused the record and noted that the case of the prosecution was that the appellant conspired with Rajinder Kumar to accept illegal gratification from the complainant. The Court was of the opinion that once Rajinder Kumar and the appellant stood acquitted of the charge of conspiracy and further, Rajinder Kumar was acquitted of the charges under PC Act, the charged against the appellant must also fall on the ground. Furthermore, in order to prove its case against the appellant, it was necessary for the prosecution to prove twin requirements of demand and acceptance of the bribe amount by the appellant. It was the case of the prosecution that the money was accepted by Rajinder Kumar and since the accused were acquitted of the charge of conspiracy, it could not be said that Rajinder Kumar accepted the money as illegal gratification for it on behalf of the appellant. In such circumstances, there was no evidence to prove that the appellant accepted the money from the complainant. Resultantly, the Court held that the judgment impugned requires interference which was accordingly set aside. The appeal was. allowed and the appellant was acquitted of all the charges. [Dashrath Singh Chauhan v. CBI, 2018 SCC OnLine SC 1841, decided on 09-10-2018]