This appeal by the defendant, the Rajanagaram Co-operative Society, is against the decree for specific performance of a contract of sale granted in favour of the plaintiff by the lower appellate Court. The only question that has to be considered is whether there was a concluded contract in favour of the plaintiff for the sale of the property by the defendant to the plaintiff.
The property in dispute was purchased on the 29th May 1941 by the defendant-society at an auction sale for a sum of Rs. 300 vide Ex. P. 1. In 1943 the defendant wanted to dispose of this property by public auction. The terms of the auction sale are contained in Ex. D.1 dated 17-6-1943. Under Cl. 1 it is stated “the sale will be knocked down in favour of the highest bidder subject to the approval of the Mahasabha (the defendant) and the Chittoor District Bank.” There were also other conditions which have been laid down but it is unnecessary to refer to them as nothing turns on those conditions. The sale took place on the 23rd June 1943 and the plaintiff became the highest bidder of the property for a sum of Rs. 700. He deposited Rs. 175 on the date of sale with the sale officer and the balance of the price of Rs. 525 was deposited by him with the defendant on the 29th June 1943. The Chittoor District Central Bank took up the matter for consideration at the meeting of its executive committee on the 29th July 1943 and approved the sale (vide Ex. P. 4). This resolution however was not communicated to the plaintiff and no sale deed was executed by the bank in favour of the plaintiff. The plaintiff, by his notice dated the 14th December 1943, Ex. P. 3, called upon the defendant to execute a conveyance in his favour. Thereupon the Bank cancelled its previous resolution and directed a resale of the property by its proceedings of 15th December 1943. The plaintiff instituted the suit therefore for enforcing the sale on the basis that there was a concluded contract in his favour. This was denied by the defendant in the written statement.
The main contention urged on behalf of the defendant was that the contract did not become final and complete as the approval of the Chittoor District Central Bank was not communicated to the defendant. Under S. 4 of the Contract Act it is claimed that even the approval should have been communicated like acceptance as according to the contention of the defendant that constitutes a final acceptance of the contract. This position was accepted by the trial Court and the suit was dismissed. On appeal the decision of the District Munsif was reversed and the appellate Court granted a decree for specific performance of the contract in favour of the plaintiff.
In this second appeal the same question has been strenuously argued on behalf of the defendant appellant by Mr. Somasundaram. His contention is that the approval constitutes acceptance of the offer by the defendant and unless that was communicated to the plaintiff there was no concluded contract. The question is whether this contention is sound.
The defendant appointed a sale officer who, under the terms of Ex. D. 1 was authorised to knock down in favour of the highest bidder the property subject of course to the approval of the Mahasabha and the Chittoor District Central Bank. No point was raised in the Courts below, and indeed it could not be raised before me, that this sale officer had no authority to accept any bid on behalf of the defendant. Further there was also no plea anywhere that there was no approval of the sale by the Mahasabha, that is the defendant. The defendant should have known if there was no such approval and should have put that matter in the forefront of the case if really there is any substance in that contention which is sought to be raised for the first time though faintly in the second appeal. The matter therefore for consideration is whether the sale officer, in knocking down the bid subject to the approval of the Bank, had or had not, accepted the offer of the plaintiff subject to the condition of approval. Ever since the well known decision of Payne v. Cave(1) it has been established that the position of an auctioneer is that of an agent of the vendor and that until the bid is knocked down, there is no concluded contract in favour of the bidder and the bidder was at liberty to withdraw his offer before it was accepted. To a similar effect is also the decision in Cooke v. Oxley(2). If there is no further condition of an approval or confirmation, ordinarily if the bid is knocked down, the acceptance is communicated by the acceptance of the bid in the presence of the bidder and no further communication would be necessary. If however the acceptance was conditional, the condition being that it is subject to the approval or confirmation by some other person, what is the position? The acceptance in such circumstances in my opinion is conditional acceptance and that has to be communicated. Nobody suggests that in order to make the contract enforceable it is not necessary to have the approval of the person indicated in the conditions of the auction sale. The question is whether the approval also in such circumstances, should be communicated to the bidder in order to conclude the contract. In my opinion the acceptance contemplated may be absolute or may be conditional and when once that conditional acceptance is communicated, there is no need or necessity for a further communication of the fulfilment of the condition where the acceptance is a conditional acceptance. The communication of the acceptance twice is not needed. That is once when the conditional acceptance is made and again when the condition is fulfilled. That is the difference, in my opinion, between the line of cases of which Chitibobu Adenna v. Garimalla Jaggarayudu(3), is an example and cases where the acceptance itself is postponed or is entrusted to some other person than who receives the bids, the receiver of the bids having no authority to accept the bids and knock down the sale. The latter category of cases are illustrated by the decisions in Muthu Pillai v. Secretary Of State For India-In-Council and Somasundaram Pillai v. Provincial Government of Madras. In Chitibobu Adenna v. Garimala Jaggarayudu, the bid was accepted subject to the approval and orders of the special agent. It was found that the auctioneer had full authority to accept the bids. The contention urged by Mr. S. Srinivasa Aiyangar for the respondent was that there was no concluded contract as there was no communication of the acceptance by the superior officer as required by S. 4 of the Contract Act. The acceptance therein by the sale officer of the highest bid subject to the approval of the orders of the special agent was construed as an acceptance subject to a condition and that if that condition was fulfilled, there was a contract; but that no further communication of the subsequent approval of the special agent was needed. On the other hand in Muthu Pillai v. Secretary Of State For India-In-Council, the confirmation of the sale and the acceptance of the bid were postponed till the receipt of the Collector's order on confirmation the Tahsildar who conducted the sale having no authority to accept the bids. It was therefore held that as there was no confirmation or cancellation of the bid by the Collector there was no concluded contract on the date of the auction and that the offer by the bid made by the defendant was never accepted. The decision in Chitibobu Adenna v. Garimalla Jaggarayudu, was referred to and was distinguished at page 69 where it is observed as follows:
“The facts of that case, are however, somewhat different to the present one, for when the sale was held there would appear to have been no prior stipulations as to what was going to happen, and finally the Amin who conducted the sale recorded as follows: ‘1st defendant bid the last bid for Rs. 150 and as no other bid for more than that it (the sale) has been confirmed in the name of the highest bidder, subject to the approval and orders of the Special Agent’. Subsequently apparently the sale was approved by the Special Agent. Here we see that there was a distinct statement that the sale had been confirmed and was merely subject to a subsequent approval by the special agent and in these circumstances, it was held that there was an acceptance by the principal of the offer and, therefore, the contract was concluded. In the present case, however, there has been no such communication to the 1st defendant and he was distinctly informed that the sale would not be confirmed until the orders of the Collector had been received; so that the order of the Tahsildar saying that the auction had been concluded in 1st defendant's favour cannot have the effect of altering that condition, namely, that the sale would not be confirmed until the orders of the Collector were obtained. In the present case no such orders were obtained and the sale was not confirmed. No doubt there was a very great delay on the part of the Collector in making up his mind whether the sale should be confirmed or not and it would probably have been open to the 1st defendant, after waiting for a reasonable time to refuse to be bound by the contract.”
In Somasundaram Pillai v. Provincial Government of Madras, which also related to an auction sale, the Sub-Collector who conducted the sale did not accept the bids and could not as he had no power to accept the same. Under the terms of the sale which were approved by the Board of Revenue he could only signify a kind of provisional acceptance whatever that expression might mean; but the final and actual acceptance rested with the Collector. The appellant who was the highest bidder in that case did not thereby acquire any rights under the sale as there was no concluded contract in his favour. The difference between provisional acceptance, conditional acceptance and absolute acceptance by the sale officer has been clearly pointed out by the learned Chief Justice at page 126. An absolute acceptance is where the sale officers or the auctioneer as the case may be, is given full authority to accept a bid unconditionally. A provisional acceptance means that the auctioneer had only a right to receive the bids and pass them on to his superior who is the final authority to confirm and conclude the contract. In that case the auctioneer acts merely as a sort of conduit pipe to convey the highest bid to the superior. Conditional acceptance has the effect of binding the highest bidder to the contract if finally there is the approval or confirmation by the superior person indicated in the terms of sale. He cannot resile from the contract. It is not open to him to withdraw the offer as in the case of a provisional acceptance and if there is approval the contract becomes concluded and becomes enforceable. No further communication of the approval is needed as there is already a conditional acceptance when the bid was accepted. While referring to the decision in Chitibobu Adenna v. Garimalla at p. 127, this is what the learned Chief Justice says:
“The learned Advocate General has suggested that the decision of this Court in Chitibobu Adenna v. Garimalla Joggarayadu recognises that there can be in law a conditional acceptance which will constitute a contract. We have already indicated that where there is a conditional acceptance and the condition is subsequently fulfilled there is a contract and that was all that was said in that case. Certain occupancy rights in jeroyiti lands had been put for sale by public auction by the amin of the Maharaja of Vizianagaram. The amin accepted a bid subject to the approval of the special agent. The special agent gave his approval whereupon the sale became irrevocable.”
From what has been stated above it follows that the view of the lower appellate Court that there was a concluded contract in the present case and that the communication of the approval by the Central Bank was not needed, is in my opinion, perfectly correct. The decision of the lower appellate Court is therefore confirmed and this second appeal is dismissed with costs.
(Leave to appeal is refused).
N.R.R