# STATE OF UTTAR PRADESH v. KISHORI LAL MINOCHA - **Citation:** [1980] 2 S.C.R. 724 - **Court:** Supreme Court of India - **Decided:** 1979-12-21 - **Case number:** Civil Appeal No. 173 of 1969 - **Bench:** A. C. Gupta, V. D. Tulzapurkar, E. S. VEt • ( U. P. STATE V. KISHORILAL 725 HELD : [Per Gupta and Tulzapurkar, JJ.] 1. The ~uit must be dismissed as there was no concluded contI\1'Ct between the parties, nor \Vas there any statutory rule permitting recovery of the deficiency on re-sale from the respcncient. [728 BJ 2. The last part of the 5th clause to Rule 357 providing that in case of default, i£ the .J?ricc fetched at the re-sale was less than the bid at the first sale the difference would be recovered from the defaulter had not b'een published. [729 CJ 3. Assur.1ing that the different clauses of Rule 357 barring the last part of the 5th clause embody the conditions of sale, .-it isl clear from the 2nd clause that iri the absence of the final sanction of the Excise Commissioner the bid cannot be said to have been finally accepted. Jn the instant case it is not claimed that the bid offered by the respondent \Vas sanctioned by the Excise Commissioner. [729 E] There v1as thus no concluded contract between the parties to make the respondent liable for the alleged loss. [729 F] Union of India and others v. Mis-. Bhin1sen Walaiti Rani [1970] 2 S.C.R. 594 referred to. (Per Ven ## Text _Characters 0–39,737 of 60,842. This is a partial read: ask again with offset=39737 for what follows._ 724 A STATE OF UTTAR PRADESH v. KISHORI LAL MINOCHA December 21, 1979 :B [A. C. GUPTA, V. D. TULZAPURKAR AND E. S. VEt • ( U. P. STATE V. KISHORILAL 725 HELD : [Per Gupta and Tulzapurkar, JJ.] 1. The ~uit must be dismissed as there was no concluded contI\1'Ct between the parties, nor \Vas there any statutory rule permitting recovery of the deficiency on re-sale from the respcncient. [728 BJ 2. The last part of the 5th clause to Rule 357 providing that in case of default, i£ the .J?ricc fetched at the re-sale was less than the bid at the first sale the difference would be recovered from the defaulter had not b'een published. [729 CJ 3. Assur.1ing that the different clauses of Rule 357 barring the last part of the 5th clause embody the conditions of sale, .-it isl clear from the 2nd clause that iri the absence of the final sanction of the Excise Commissioner the bid cannot be said to have been finally accepted. Jn the instant case it is not claimed that the bid offered by the respondent \Vas sanctioned by the Excise Commissioner. [729 E] There v1as thus no concluded contract between the parties to make the respondent liable for the alleged loss. [729 F] Union of India and others v. Mis-. Bhin1sen Walaiti Rani [1970] 2 S.C.R. 594 referred to. (Per Venkataramiah J, dissenting) 1. The respondent should be made liable for the sum claimed and the decree made by the trial court shoulc\ be restored. [745 G] in the suit; 2. The respondent was liable for the claim made by the State Government -even though no contracts were formally entered into between the respondent and the State Government. [745 B] In the instant case cin the pleadings and evidence jt has to be assumed that the respondent knew that he was under un obligation to deposit with the officer -holding the nuction 1/6th of the bid amount and that if he committed any default in doing so, the excise licences in question were to be resold and that he would be liable to pay any loss suffered by the State Government on such re~sale. (733 El A B c D E 3. Condition No. 5 in the sale proclamation which provides that if the price at the re-saJe be less than that at the first sale, the· difference will be recovered F ~£rom the defaulter negatives the contention of the respondent that in the absence "',of the approval of the Excise Commissioner, he would not be liable to make good the loss. [;33 H, FJ 4. There was no disapproval of the Excise Commissioner of the bids offered by the respondent. On the other hand, the excise authorities requested the respondent to perforn1 his part of the obligation under the sale proclamation. G [734 El 5. In Uniou of India & Ors. v. Mis. Bhimsen Walaiti Rain, [1970] 2 S.C.R. 594, this Court proceeded on the basis that the liability of the bidder could arise ,only aS ~ con!'~1uence of the breach of a completed contract. No attention appears to haVe been given in the case to the question whether the act of the offering of the highest bid which was accepted by the officer holding the auction and which .resulted in the closure of the auction could by itself become a source of liability when the highest bidder failed to comply with the conditions stipulated in the sale proclamation. [734 Fl H A c D E F G H 72li SUPREME CUURT REPORTS [1980) 2 S.C.R. 6. In section 39, the words "all excise revenue, including all amounts due to the Govern1nent by any person on account of any contract relating to the exciserevenue, may be recovered from the persons primarily liable to pay the same·~ show that the Government is entitled to recover from a person any amount due· by him on account of any contract reltating to the excise revenue. The words ''on account of any contract relating to the exc:i!e revenue" include within their scape not merely any compensation which a person may be liable to pay on account of the breach of contract con1mitted by him afteri the contra<."1: is completed but also any other an1ount that may become due on account of a contract which would come into existence if all the formalities are completed, having regard to the scheme and manner in which the excise privilege is disposed of by the excise authorities. [735 E-F] 7. A reading of clauses 1 and 2 of Rule 357 of the Excise Manual show that the officer holding the sale was empowered to accept the bid and that his acceptance \Vas only subject to the sanction of the Excise Commissioner. They mean that the po\ver which had ·been reserved to the Excise Commissioner, only enabled him to set a.Side the acceptance already made by the officer conducting the sale. If it was not set aside by him, the acceptance of the officer conducting the sal~ would be effective. [737 R) In the instant case the Excise Commisdoner had not refused to sanction the acceptance of the highest bids offered by the rc.-;pondent. The liri.·bility of the highest bidJer to deposit a sum equivalent to 1 /6th of the bid offered by him arises as a consequence of his offer1ng the highest bid with the knowledge of the conditions of the auction, immediately on the conclusion of the sale for the day in his favour and if he does not make such deposit, the officer holding the same is entitled to put the excise privilege for re-sa]e either immediately or on a subsequent clay with liberty to re.cover from the defaulter any loss tha! n1ay he occasion'ed to the Government by such re-sale. [737 C-D] 8. The completion of the contract or the execution of a contract in accordance with Atticle 299 of the Constitution arises only after the highest bidder has deposited 1/6th of the bid offered by him on the eonclusion of the sale which is a condition precedent for the completion of the contract or for execution ef a formal document inaccordance v.rith Article 299 of the Constitution. It is not, therefore, correct to detern1ine the liability of a defaulting bidder on the basis of a completed contract or a formal document to be executed under Article 299. [737 E-F] 9. In the interest of public revenue, exci:.e privileges, privileges of cutting and removing timber front Government forests, occupancy rights over Government lands and building sites etc. are disposed of in public auction by the Central Government. State Governments. statutory boards and local authorities and in almost every such auctiun, there is invariably a condition that the acceptance of the highest bid at the 11uction is subject to the sanction of some superior officer or statutory authority or the appropriate Government. If the liability of such a bidder is to he founded only on the ba~is of a completed contract then in the case of ancti0ns held by or on behalf of the· Central or State Governments, no liability can arise even it such sanction is accorded, unless it is followed up by a formal document exc.,uted under Article 299 of the Constitution ¥1hich alone amounts to a completed contract where Government is a party. [737 H-738 A. 738 DJ ' ' • .. ' • ·,-.r ' ·' ------ u. P. STATE v. KISHORILAL (Gupta, !.) 727 In the instant case the respondent by his own conduct in not depositing 1/6th of the bids offered by him made it impOMib1e for the excise authorities to con~ elude the contract. The question may have been different if the respondent had done all that he had to do under the conditioru of the auction but the excil!t authorities had not intiinated him that he could exploit the excise privilege!! i11 accordance with law. [7~4 E] l 0. The liability of the respondent arie:e1 under the statute and it also arises as the result of a civil wrong or a tort committed by him, in offering the highest bid with open eyea and in not fulfilling the obligations arising therefrom. The · latter source of liability may appear to be novel but if justice requires, the Court should not hesitate to impose it on the person who has committed the wrong to secure justice for the innocent injured party. [745 C] A. Damodaran & Anr. v. State of Kuala & Ors. [1976] 3 S.C.R. 780; Cafldlar v. Crane C!irist111as & Co. [1951] 2 K.B. 164 at p. 178 referred to. K. P. CJ;owdhary v. State of Madhya Prad.,/i & Ors. [1966] 3 S.C.R. 919 disti•guished. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 173 of 1969. From the Judgment and Order dated 2-4-1968 o! the Allahabad High Court in First Appeal No. 5/62. G. N. Dikshit and 0. P. Rana for the Appellant. H. K. Puri and Miss Madhu Mulchandani and V. K. Rahal for the Respondent. The Judgment of A. C. Gupta and V. D. Tulzapurkar, JJ. was delivered by Gupta, J. E. S. Venkataramiah, J. gave a dissenting opinion. GUPTA, J.-This appeal by certificate is from a judgment of the Allahabad High Court, Lucknow Bench, dismissing the suit instituted by the appellant, State of Uttar Pradesh, for recovery of a sum of Rs. 20, 100 from the respondent. The facts stated in the plaint on which the claim is based are these. The annual 'excise auctions' for the year 1951-52 for Faizabad district were held at Faizabad on February 22, 1951 "under the Excise Rules." The respondent offered the highest bid of Rs. 73,000 and Rs. 48,000 respectively as fees for two groups of country liquor shop8 but as he did not deposit I/6th of the aforesaid sum on conclusion of the sales as required under the Excise Rules, the two groups of shops had to be sold again on March 30. 1951. The resale fetched respectively Rs. 65,700 and Rs. 35,200 for the~e two groups of country liquor shops. According to the State of Uttar Pradesh it suffered-a total loss of Rs. 20,100 which is the difference between what the respondent had offered and the sum for which the shops were later sold, and the respondent was liable to compensate 9-91SCI/80 A B c D E F G H A B c D 728 SUPREME COURT REPORTS [1980] 2 S.C.R. the loss. The suit was decreed by the trial court. On appeal the High Court dismissed the suit on the view that there was no valid contract which could be enforced by the plaintiff as the requirements of Article 299(1) of the Constitution had not been complied with. We are also of the view that the suit must be dismissed but for a slightly different reason; in our opinion there was no concluded contract between the parties, nor was there any statutory rule permitting recovery of the deficiency on re-sale from the .respondent The sale proclamation which is said to have contained the conditions of sale was not produced. The Assistant Excise Commissioner (P.W. 1) in his testimony referred to rule 357 of the Excise Manual. The relevant part of the rule is as follows : "The following conditions shall apply to all sales under the auction system, and will be inserted at the foot of the sale proclamation if such proclamation is issued by the Excise Commissioner : ( 1) The officer conducting the sales is not bound to accept the highest or any bid. In any case when the highest or any bid is not proposed to be accepted, the next highest bid should also be reported to the Excise Commissioner. E (2) The final acceptance of any bid is subject to the sancF G H tion of the Excise Commissioner. ( 3) Every person bidding will be held to his bid, whether it be the highest or not. (4) ( 5) A sum equal to one-sixth of the annual fees shall be payable immediately on the conclusion of the sales for the day, and the balance by such instalments as are specified in the licence to be granted. If default be made in the. payment of the advance instalment, the shop on farm will be resold, and if the price finally bid at the re-sale be less than that bid at the first sale, the difference will be recovered from the defaulter." Section 77 of the U.P. Excise Act, 1910 states : "All rules made and notifications issued under the Act shall be published in the official gazette and shall have effect as if enacted in this Act from the date of such publication or from such other d~te as may be specified in that behalf." u. p, STATE v. KISHORILAL (Venkataramiah, J.) 729 The High Court found that the conditions mentioned in rule 357 had never been published as required and they did not, therefore, have ihe force of Jaw. The High Court held that Part II of the Excise Manual which includes rule 357 contained provisions which werei "commonfy referred 'to as rules" but were not really statutory rules and that it was "a sort of book of guidance". Before us it was claimed on behalf of the appellant that some of the conditions contained in rule 357 had been published in the official gazette, but the learned counsel for the appellant, State of Uttar Pradesh, was not in a position to dispute that at least the last part of the 5th condition providing that in case of default, if the pric~ fetched at the re-sale was less than the bid at the first sale the difference would be recovered from the defaulter, had not been published. That being so it must be held that there was no law nnder which the respondent could he asked to make .amends for the shortfall. The question that rem_ains .to be answered is, even if there was no statutory provision, whether there was a concluded contract between the appellant and the respondent under which the respondent was liable to pay Rs. 20, I 00 which represents the difference between the highest bid at the first sale and the price fetched at the, re-sale. The sale pro- ·clamation containing the conditions of sale has not been produced. Assuming that the different clauses of rule 357 barring the last part of the 5th clause embody the conditions of sale, it is clear from the 2nd clause that in the absence of the final sanction of the Excise Commis- ·sioner, the bid cannot be said to have been finally accepted. It is not claimed by the appellant that the bid offered by the respondent was ~ ·sanctioned by the Excise Commissioner. There was thus no concluded • ' contract between the parties to make the respondent liable for the alleged loss. The point appears to have been decided by this Court in Union of India and another v. M/s. Bhimsen Walaiti Ram(I). This was a case of an auction for the sale of licence for a country liquor shop in Delhi for the year 1949-50. Clause 33 of the conditions of sale provided inter alia : "All final bids will be made subject to the ~onfi.rmation by the Chief Commisisoner who may reject any bid without assiguing any reasons". This condition is similar to clause 2 of rule 357 in the instant case. Ramaswami J. speaking for the court in Bhimsen' s case observed : "It is, therefore, clear that the contract of sale was not complete till the bid was confirmed by the Chief Commis'- sioner and till such confirmation the person whose bid has been provisionally accepted is entitled to withdraw his bid. (I} [1970] 2 S.C.R. 594. A B c D E G H, A B c D E F G rH 730 SUPREME COURT REPORTS [1980] 2 S.C.R. When the bid is so withdrawn before the confumation of the Chief Commissioner the bidder will not be liable fo11 damages on account of any breach of contract or for the shortfall on the resale. An acceptance of an offer may be either absolute or conditional. If the acceptance is conditional the offer can be withdrawn at any moment until; absolute acceptance has taken place." The appeal is dismissed but in the circumstances of the case we make no order as to costs. VENKATAAAMIAH, J. I have had the advantage of perusing the judgment prepared by my learned brother, Gupta, J. I regret my inability to agree with the conclusion reached by him. Since some of the facts which are necessary for the purpose of this case have not been set out in the judgment of my learned brother, I have to mention them at this stage. Th~ excise auctions for the year 1951-52 were held on February 22, 1951 under the provisions of the U.P. Excise Act, 1910 (hereinafter referred to as 'the Act'). The respondent offered the highest bid of Rs. 73,000 for the chowk group shops and of Rs. 48,000 for Rakabganj group shops. At that auction, the shops in question were knocked down for the above-mentioned amounts in favour of the respondent who affixed his signatures -to the respective bid sheets in token of his acceptance and also in the register of Settlement Record. The respondent, however, did not deposit 1/6th of the above mentioned amounts on the aforesaid date but took time for its depi>sit later on. In spite of repeated reminders, the respondent did not pay the advance deposits in both the cases. The excise authorities resold the excise privileges in question and on such resale, the chowk group shops fetched Rs. 65, 700 and the Rakabganj group shop& fetched Rs. 35,200. Consequently, hte State Government the appellant herein suffered a loss of Rs. 20,100. As the respondent did not pay the said amount of Rs. 20,100, a suit was instituted by the appellant against him for recovery thereof before the Civil Judge, Faizabad. In the course of bis written statement, the respondent, after a general denial of the allegations in the plaint, raised among others the following additional pleas :- " J. There was no compl.eted contract between the plaintiff and defendant. Consequently there had been no breach and no cause of actioI!_ for the suit. 2. The entire auction proceedings having been against the rules and instructions of the Government were illegal, void and ineffective. >· '· > • • u. P. STATE v. KISHORILAL (Venkataramiah, J.) 731 3. The plaintiff himself having accepted the prayer of the defendant to be relieved from the bid made by him and subsequently re-auctioning the shops or the groups of shops to others was now estopped from fixing any civil liability on the defendant." Four contentions were urged on behalf of the respondent in the trial court viz. ( 1) since the offers of the respondent had not been accepted, no valic:l contracts had come into existence; (2) as the respondent had withdrawn the offers before their acceptance, there could A, B , be no enforceable contracts in existence; (3) the contracts, if any, were unenforceable as then did not satisfy the conditions mentioned in · Article 299 of the Constitution and ( 4) that even though the responC dent had committed the breach of the agreements he was not liable to pay· any damages as the excise authorities had not taken any steps to mitigate the loss by granting the excise licences in question to the second highest bidder in each case, The trial court after rejecting the contentiorui or the respondent made a decree for Rs. 20,100 with costs. Aggrieved by the decree of the trial court, . the respondent filed an appeal before the High Court of Allahabad. In the course of the appeal, the High Court formulated four points for its consideration as can be seen from the following extract from its judgment:- "The points now requiring consideration are (1) whether there came into existence a contract; (2) whether by reason of non-deposit of one-sixth of the bid money there was a breach of the contract on the part of the appellant; (3) whether this breach entitled the respondent to re-auction the shops and to recover the loss on re-auction from the appellant; and ( 4) whether the deficit of Rs. 20) 00 represents the legal loss recoverable from the appellant." Before tho High Court in so far as the first point was concerned, the respondent's contention was three fold-(i) since the bids were D E F . not accompanied by 1I6th of the bid amount, there were no completed proposals aud, therefore, there could be no acceptance thereof so as to G bring into existence a contract; (ii) .as the Excise Commissioner had not accorded his approval, there was no acceptance of the proposal and (iii) as no agreements in writing had been execnted by the person competent to do so under Article 299 of the Constitution, no contracts had come into existence. The High Court rejected the first two co11-1 tentions by holding that the failure to deposit l/6th of the bid amount H did not make the proposals incomplete and that the absence of the approval of the Excise Commissioner which was in the nature of a 732 SUPREME COURT REPORTS [1980] 2 S.C.R. A power vested in him to reverse the acceptance of a bid by the officer holding the auction did not in any way exonerate the respondent from >---,_ B c D E F G H the liability if he was otherwise liable. It, however, held that since the requirements of Article 299 of the Constitution had not been fulfilled, the respondent was not liable to pay any damages on the ground that he had £_ommitted a breach of contract. On the second point which was formulated by the High Court for its consideration, it observed as follows :- "Coming to the second point of controversy, to wit, whether by reasons of 110u-deposit of one-sixth of the bid money there was a breach of the contract on the part of the appellant, the answer must be in the affirmative for the simple reason that the deposit of the money was one of the condijions of the contract. This condition, as has been shown above, follows both from the statutory provision and the admission of the appellant himself that there was this d~posit to be made." On the third point viz. whether the breach committed by the respondent in each of the two cases entitled the State Government to reauction the shops and to recover the_ loss on such re-auction from him, the High Court held that the right to re-auction had not been proved to be founded on either any statutory rule or on any express terms of the contract but the said right was the 'natural outcome of the breach of an accepted term of contract', when the respondent failed to deposit the amounts in terms of the agreement. It further held that when the respondent had failed to deposit the amounts in terms of the agreement on which the bids were given and accepted the State Government was under an obligation for minimising the loss arising from the breach of the contract to re-auction the shops and in case of any loss arising therefrom, to recover the same from the respondent. On the last point of controversy viz. the quantum of damages, the High Court held that the extent of loss suffered by the State Government on account of breach on the part of the respondent was in the order of Rs. 20,100. The High court, however, allowed the appeal and set aside the decree of the trial court on the ground that there were no valid contracts which satisfied the requirements of Article 299 of the Constitution. Dissatisfied with the judgment of the High Court, the State Government has, come up in appeal to this Court. In the instant case, the only question which arises for consideration is whether the respondent is J\O\ liable to pay the damage even though ' • • • • u. P. STATE v. KISHORILAL (Venkataramiah, /.) 733 no contract in writing had been execnted in accordance with Article 299 of the Constitntion. It was not the case of the respondent that the excise authorities had no right to re-sell the excise licences· after he had committed default in depositing l/6th of the bid amounts. His principal pleas were (i) that there were no completed contracts between the State Government and himself and consequently there could be no breach of contract; (ii) that the entire auction proceedings, having been against the rules and instructions of the Government were illegal and void and (iii) that the State Government, having accepted his prayer to be relieved from the bids made by him and snbsequently re-auctioning the groups of shops to others was estopped from fixing any civil liability on him. It is seen from what is stated above that no attempt was made by the respondent to make good his plea regarding the legality of the auction proceedings and the plea of estoppel. The only plea raised ii). the written statement which ultimately appealed t~-the High Court was that the respondent was not liable to pay any damages as there were no completed contracts which satisfied the requirements of Article 299 of the Constitution. The other plea that the offers made by the respondent had not been approved by the Excise Commissioner was rejected by the High Court by observing that the power of the Excise Commissioner to accord his approva~ was only a power which had been vested in him to set aside the acceptance of the bid by the officer holding the auction. Having regard to the pleadings and the evidence in this. case, it has to be assumed that the respondent knew that he was under an obligation to deposit with the officer holding the auction 1/6tg of tlie bid amounts and that if he committed any default in doing so,, the excise licences in question were to be resold and that he would be liable to pay any loss suffered by the State Government on such resale. The contention that in the absence of the approval of the Excise Commissioner, he would not be liable to make good the loss has got to be rejected in view of condition No. 5 which according to the testimony of the Assistant Excise Commissioner (P.W. 1), which cannot be rejected, had been mentioned in the sale proclamation, which read thus ; "5. A sum equal to one~sixth of the annual fees shall be payable immediately on the conclusion of the sale for the day, and the balance by such instalments as are specified in the licence to b"e granted. If default be made in the payment of the advance instalment, the shop on farm will be resold, and if the price finally bid at the resale be less than that bid at the first sale, the difference will be recovered from the defaulter." A B c D E F G H A B c D E F G H 734 SUPREME COURT REPORTS [1980] 2 S.C.R, It is no donbt true that in Union of India & Ors. v. M/s. Bhim~n Walaiti Ram,(') this Court held that the contract of sale was not complete till the bid was confirmed by the Chief Commissioner and till such confirmation the person whose bid had been provisionally accepted was entitled to withdraw his bid and that when the bid was so withdrawn before the confirmation of the Chief Commissioner, the bidder was not liable for damages on account of any breach of contract or for the shortfall on the resale. Those observations were made by this Court in that case in the context of the disapproval of the bid by the Chief Commissioner a!!d this is borne out by the following observations of this Court at pajle 598 :- "It is not disputed that the Chief Commissioner had disapproved the bid offered by the respondent. If the Chief Commissioner had granted sanction under cl. 33 of Ex. D-23 the auction sale in favour of the respondent would have been a completed transaction and he would have been liable for any shortfall on the resale. As the essential pre-requisites of a completed sale are missing in this case there is no liability imposed on the respondent for payment of the deficiency in the price." In the case before us there was no disapproval of the Excise Commissioner of the bids offered by the respondent. On the other hand, the excise authorities requested the respondent to perform his part of the obligation under the sale proclamation. It is also further seen that this Court in the case of M/s. Bhimsen Walaiti Ram (supra) proceeded on the basis that the liability of the bidder could arise ouly as a consequence of the breach of a completed contract. No attention appears to have been given in that case to the question whether the act of the offering of the highest bid which was accepted by the officer holding the auction and which resulted in the closure of the auction could by itself become a source of liability when the highest bidder failed to comply with the conditions stipulated in the sale proclamation. It is necessary to refer briefly to some of the relevant provisions of law governing the disposal of the excise licence by auction system which were in fc;>rce during the relevant time. Section 21 of the Act prohibits sale of any intoxicant without a licence by the concerned excise authority. Section 24 of the Act authorises the grant of exclusive privilege of selling by wholesale or by retail any intoxicant within any specified local area. The right to sell any excisable article under a licence issued by' .the excise authority can be acquired only by paying (1) [1970] 2 S.C.R. 594. • • ,.. --.~ 7 -- -· u. P. STATE v. K!SHOR!LAL (Venkataramiah, J.) 735 J>uch fees or amount which may be equivalent to the highest bid offered A at an auction when an auction is held. Section 39 of the Act which dealS with the recovery of excise revenue reads as follows :- "39. Recovery of excise revenue.-All excise revenue, including all amounts due to the Government by any person on account of any contract relating to the excise revenue, may be recovered from the person primarily liable to pay the same, or frgm his surety (if any) as an arrears of land revenue or in the manner provided for the recovery of public demands by any law for the time being in force. In case of default made by a holder of a licence the Collector may take the grant for which the licence has been given under management at the risk of the defaulter, or may declare the grant forfeited and re-sell it at the risk and loss of the defaulter. When a grant is under management under this section, the Collector may recover as excise revenue any moneys due to the defaulter by any lessee or assignee : Provided that no licence for an exclusive privilege granted under section 24 shall be forfeited or re-sold without the sanction of the authority granting the licence." In the above section, the words "all excise revenue, including all amounts due to the Government by any person on account of any contract relating to the excise revenue, may be recovered from th~ person primarily liable to pay the same" show that tho Government is entitled to recover from a person any amount due by him on account of any contract relating to the excise revenue. The words "on account of any contract relating to the excise revenue" include within their scope not merely any compensation which a person may be liable to pay on account of the breach of a contract committed by him after the contract is completed but also any other amount that may become due on account of it contract which would come into existence if all formalities are completed having regard to the scheme and manner in which the excise privilege is disposed of by the excise authorities. The relevant rules governing the conduct of excise _sales are found in a notification bearing No. B. 0. No. 423/V-284-B dated September 26, 1910. The rules require the publication of a sale proclamation announcing the dates of sale and the place where it will be held. Before the sales for the day commence, the general conditions governing the sale which are set out in paragraph 373 of the U.P. Excise Manual (Vol. I) shall be read out and explained to all present so that the competitors may clearly understand the conditions on which they bid. The general conditions governing retail vend and the special B c D E F G H A B c D • E F G H 736 SUPREME COURT REPORTS [1980] 2 S.C.R •. conditions governing each class of licence shall also be read out iI1' public before the sales to which they apply. Information should be· freely given on all matters affecting the value of licence about to be sold. The officer conducting the sales shall record the name of each person making a bid and the amount of bid. Signature of the highest bidder and the next two lower bidders shall also be taken on the bid. sheet, whether such persons have been accepted as auction-purchasers or not. At the time of the sale the person accepted as the auction purchaser shall be required to sign his name or affix his mark against the relevant entry of the licence in the Record G-14, it being explained at the time that the deposit paid in advance will be returned in the event of the licence being subsequently refused. The final bid accepted shall invariably be recorded with his own hand by ·the officer conducting the sales. The treasurer of the district, or one of his recognised assistants, shall be required to attend the sales to receive the advance fees paid by bidders provisionally accepted. The amount that has to be paid as advance deposit is a sum equivalent to 1/6th of the annuar fees which shall be payable immediately on the conclusion of the sales• for the day, and the balance by such instalments as are specified in· the licence to be granted. If default be made in the payment of the advance instalments, the shop or farm will be resold. If the price' finally offered at the resale be less than that at the first sale, the difference will be recovered from the defaulter through a civil suitIf any person whose bid has been accepted at auction fails to make the advance deposit or if he withdraws from his bid, the excise autho-- rity may sell the contract immediately or on any subsequent date fixed' by him. It is not the case of the respondent in the instant case that he was not aware of the above conditions, which had been set out in the sale· proclamation and also which must have been read out at the commencement of the sale, as required by the rules for the information of the intending purchasers. The question for consideration is whether having offered the highest bid, it was open to the respondent to avoid the liability arising from his act of offering the highest bid merely because the Excise Commissioner who had the power to refuse to sanction the sale had not sanctioned it. It is no doubt true that one of the conditions of the auction was that the acceptance of any bid by the officer conducting the sale was subject to the sanction of the Excise Commissioner. It, however, did not mean that the acceptance of the bid would be complete only after the sanction was accorded by the EKcise Commissioner because of the other conditions which read as under :- "l. The officer conducting the sales is not bound to accept the highest or any bid. ' ' ' u. P. STATE v. KISHORILAL (Venkataramiah, J.) 737 • 2. The final acceptance of any bid is subject to the sanction of the Excise Commissioner.'' A reading of the two clauses refep:ed to above shows that the officer holding the sale was empowered to accept the bid and that his acceptance was only subject to the sanction of the Excise Commissioner .. They meant that the power which had been reserved to the Excise B Commissioner only enabled him to set aside the acceptance already made by the officer conducting the sale. If it was not so set aside by him, the acceptance of the officer conducting the sale would be effective. As mentioned earlier, in this case, the Excise Commissioner had not refused to sanction the acceptance of the highest bids offered by the respondent. The liability of the highest bidder to deposit a sum c· equivalent to 1 /6th of the bid offered by him arises as a consequence of his offering the highest bid with the knowleCJge of the conditions referred to above immediately on the conclusion of the sale for the day in his favour and if he does not make such deposit, the officer holding the sale is entitled to put up the excise privilege for resale either immediately. or on a subsequent day with liberty to recover from D· the defaulter any loss that may be occasioned to the Government on such resale. In a case like this, no question of waiting till the contract either being completed on a formal document coming into existence in accordance with Article 299 of the Constitution can arise. The completion of the contract or the execution of a contract in accordance with Article 299 of the Constitution arises only after the highest bidder has deposited !/6th of the bid offered by him on the conclusion of the sale which is a condition precedent for the completion of the contract or for execution of a formal document in accordance with Article 299 of the Constitution. It is not, therefore, correct to determine the liability of a defaulting bidder on the basis of a completed contract or a formal document t<;> be executed under Article 299. If the contention urged on behalf of the respondent is accepted, it will make every public auction held by a Government a mockery. A man without a pie in his pocket may offer the highest bid at an auction thus scaring away other bona fide bidders who have assembled at the auction to offer their bids and then claim that he is not liable to pay any damages only because a completed contract or an agreement in writing in accordance with Article 299 of the Constitution has not come into existence. We should remember that, in the interest of public revenue excise privileges, privileges of cutting and removing timber {fom Government forests, occupancy rights over Government lands and building sites E F G etc. are disposed of in public auction by the Central Government, State B Governments, statutory boards and local authorities and in almost every such auction, there is invariably a condition that hte acceptance ' .A E F 738 SUPREME COURT REPORTS [1980] 2 S.C.R. of the highest bid at the auction is subject to the sanction of some superior officer or a statutory authority or the appropriate Government.